FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


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

                  For the quarterly period ended June 30, 2000

                                       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 number: 333-93239-01

                       ENTERPRISE PRODUCTS OPERATING L.P.
             (Exact name of Registrant as specified in its charter)

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

                              2727 NORTH LOOP WEST
                                 HOUSTON, TEXAS
                                   77008-1037
               (Address of principal executive offices) (Zip code)

                                 (713) 880-6500
               (Registrant's telephone number including area code)


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

No  common  equity  securities  of  Enterprise   Products  Operating  L.P.  (the
"Company")  are held by  non-affiliates  of the  Company.  The  Company is owned
98.9899% by its Parent and Limited Partner, Enterprise Products Partners L.P. (a
publicly-traded  master  limited  partnership  under  New  York  Stock  Exchange
("NYSE")  symbol  "EPD" (SEC File No.  1-14323)),  and  1.0101%  by its  General
Partner, Enterprise Products GP, LLC.


<PAGE>
               ENTERPRISE PRODUCTS OPERATING L.P. AND SUBSIDIARIES

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                      Page
                                                                                       No.
PART I.  FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

ENTERPRISE PRODUCTS OPERATING L.P. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS:
<S>                                                                                      <C>
         Consolidated Balance Sheets,  June 30, 2000 and December 31, 1999               1

         Statements of Consolidated Operations
                  for the Three and Six Months ended June 30, 2000 and 1999              2

         Statements of Consolidated Cash Flows
                  for the Six Months ended June 30, 2000 and 1999                        3

         Notes to Unaudited Consolidated Financial Statements                            4

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS                                                           14

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                     26

PART II.  OTHER INFORMATION

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS.                                     28

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K                                               28

         Signature Page
</TABLE>

<PAGE>
                         PART 1. FINANCIAL INFORMATION.
                   ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.

                       ENTERPRISE PRODUCTS OPERATING L.P.
                           CONSOLIDATED BALANCE SHEETS
                             (Amounts in thousands)
<TABLE>
<CAPTION>
                                                                                        JUNE 30,
                                                                                          2000           DECEMBER 31,
                                      ASSETS                                           (UNAUDITED)           1999
                                                                                    -------------------------------------
CURRENT ASSETS
<S>                                                                                     <C>                 <C>
     Cash and cash equivalents                                                          $    86,394         $   5,159
     Accounts receivable - trade, net of allowance for doubtful accounts of
        $15,948 at June 30, 2000 and $15,871 at December 31, 1999                           192,569           262,348
     Accounts receivable - affiliates                                                        57,864            53,906
     Inventories                                                                            145,068            39,907
     Current maturities of participation in notes receivable from
        unconsolidated affiliates                                                                 -             6,519
     Prepaid and other current assets                                                        11,849            14,459
                                                                                    -----------------------------------
                Total current assets                                                        493,744            382,298
PROPERTY, PLANT AND EQUIPMENT, NET                                                          903,832            767,069
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES                                    287,918            280,606
INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF $3,055 AT
     JUNE 30, 2000 AND $1,345 AT DECEMBER 31, 1999                                           63,975             61,619
OTHER ASSETS                                                                                  3,898              1,120
                                                                                    -----------------------------------
                TOTAL                                                                   $ 1,753,367        $ 1,492,712
                                                                                    ===================================

                         LIABILITIES AND PARTNERS' EQUITY

CURRENT LIABILITIES
     Current maturities of long-term debt                                               $     -            $   129,000
     Accounts payable - trade                                                                44,909             69,294
     Accounts payable - affiliate                                                            24,552             64,780
     Accrued gas payables                                                                   396,545            233,360
     Accrued expenses                                                                         4,183             16,148
     Other current liabilities                                                               24,083             18,176
                                                                                    -----------------------------------
                Total current liabilities                                                   494,272            530,758
LONG-TERM DEBT                                                                              404,000            166,000
OTHER LONG-TERM LIABILITIES                                                                   6,060                296
MINORITY INTEREST                                                                             1,102              1,032
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY
     Limited Partner                                                                        844,047            791,279
     General Partner                                                                          8,613              8,074
     Parent's Units acquired by Trust                                                        (4,727)            (4,727)
                                                                                    -----------------------------------
                Total Partners' Equity                                                      847,933            794,626
                                                                                    -----------------------------------
                TOTAL                                                                   $ 1,753,367        $ 1,492,712
                                                                                    ===================================

</TABLE>
            See Notes to Unaudited Consolidated Financial Statements

                                       1
<PAGE>
                       ENTERPRISE PRODUCTS OPERATING L.P.
                      STATEMENTS OF CONSOLIDATED OPERATIONS
                                   (UNAUDITED)
                             (Amounts in Thousands)

<TABLE>
<CAPTION>
                                                                 THREE MONTHS                      SIX MONTHS
                                                                ENDED JUNE 30,                   ENDED JUNE 30,
                                                           ----------------------------  --------------------------------
                                                                 2000            1999             2000            1999
                                                           ----------------------------  --------------------------------
REVENUES
<S>                                                          <C>            <C>              <C>              <C>
Revenues from consolidated operations                        $  592,913     $  174,599       $ 1,339,194      $  321,913
Equity income in unconsolidated affiliates                       11,097          2,880            18,540           4,443
                                                           ----------------------------  --------------------------------
         Total                                                  604,010        177,479         1,357,734         326,356
                                                           ----------------------------  --------------------------------
COST AND EXPENSES
Operating costs and expenses                                    546,306        153,410         1,219,212         287,219
Selling, general and administrative                               7,658          3,000            13,042           6,000
                                                           ----------------------------  --------------------------------
         Total                                                  553,964        156,410         1,232,254         293,219
                                                           ----------------------------  --------------------------------
OPERATING INCOME                                                 50,046         21,069           125,480          33,137
OTHER INCOME (EXPENSE)
Interest expense                                                 (8,070)        (2,129)          (15,844)         (4,392)
Interest income from unconsolidated affiliates                       94            292               202             689
Dividend income from unconsolidated affiliates                    2,761              -             3,995               -
Interest income - other                                           1,358            148             2,973             432
Other, net                                                          (62)           (30)             (425)             45
                                                           ----------------------------  --------------------------------
          Other income  (expense)                                (3,919)        (1,719)           (9,099)         (3,226)
                                                           ----------------------------  --------------------------------
INCOME BEFORE MINORITY INTEREST                                  46,127         19,350           116,381          29,911
MINORITY INTEREST                                                   (33)           (24)              (70)            (51)
                                                           ----------------------------  --------------------------------
NET INCOME                                                   $   46,094     $   19,326       $   116,311      $   29,860
                                                           ============================  ================================
</TABLE>
            See Notes to Unaudited Consolidated Financial Statements


                                       2
<PAGE>
                        ENTERPRISE PRODUCTS OPERATING L.P
                      STATEMENTS OF CONSOLIDATED CASH FLOWS
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                                            SIX MONTHS ENDED
                                                                                                JUNE 30
                                                                                   ---------------------------------
                                                                                          2000              1999
                                                                                   ---------------------------------
OPERATING ACTIVITIES
<S>                                                                                    <C>               <C>
Net income                                                                             $  116,311        $   29,860
Adjustments to reconcile net income to cash flows provided by
      (used for) operating activities:
      Depreciation and amortization                                                        18,347             9,790
      Equity in income of unconsolidated affiliates                                       (18,540)           (4,443)
      Leases paid by EPCO                                                                   5,324             5,332
      Minority interest                                                                        70                51
      Loss on sale of assets                                                                2,303               124
      Net effect of changes in operating accounts                                          53,195           (26,447)
                                                                                   ---------------------------------
Operating activities cash flows                                                           177,010            14,267
                                                                                   ---------------------------------
INVESTING ACTIVITIES
Capital expenditures                                                                     (154,246)           (2,483)
Proceeds from sale of assets                                                                   52                 7
Collection of notes receivable from unconsolidated affiliates                               6,519             7,369
Unconsolidated affiliates:
      Investments in and advances to                                                       (3,040)          (40,432)
      Distributions received                                                               14,268             3,991
                                                                                   ---------------------------------
Investing activities cash flows                                                          (136,447)          (31,548)
                                                                                   ---------------------------------
FINANCING ACTIVITIES
Long-term debt borrowings                                                                 464,000            85,000
Long-term debt repayments                                                                (355,000)          (30,000)
Parent's Units acquired by consolidated Trust                                                   -            (4,607)
Cash distributions to minority interest                                                         -               (71)
Cash distributions to partners                                                            (68,328)          (53,256)
                                                                                   ---------------------------------
Financing activities cash flows                                                            40,672            (2,934)
                                                                                   ---------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                                    81,235           (20,215)
CASH AND CASH EQUIVALENTS, JANUARY 1                                                        5,159            24,103
                                                                                   ---------------------------------
CASH AND CASH EQUIVALENTS, JUNE 30                                                     $   86,394         $   3,888
                                                                                   =================================
</TABLE>
            See Notes to Unaudited Consolidated Financial Statements


                                       3
<PAGE>
                       ENTERPRISE PRODUCTS OPERATING L.P.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   GENERAL

In the opinion of  Enterprise  Products  Operating  L.P.  (the  "Company"),  the
accompanying unaudited consolidated financial statements include all adjustments
consisting of normal recurring accruals necessary for a fair presentation of the
Company's  consolidated  financial  position as of June 30,  2000,  consolidated
results of  operations  for the three and six month  periods ended June 30, 2000
and 1999 and  consolidated  cash flows for the six month  periods ended June 30,
2000 and 1999.  Although the Company believes 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 generally accepted accounting
principles have been condensed or omitted  pursuant to the rules and regulations
of the Securities and Exchange Commission.  These unaudited financial statements
should be read in  conjunction  with the financial  statements and notes thereto
included in the Company's  Special Financial Report pursuant to Section 15(d)(2)
on Form 10-K (File No.  333-93239-01)  for the year ended  December 31, 1999. In
addition,  these unaudited  financial  statements  should be read in conjunction
with the Annual Report on Form 10-K of the Company's Parent, Enterprise Products
Partners L.P. (File No. 1-14323) for the year ended December 31, 1999.

The results of  operations  for the three and six month  periods  ended June 30,
2000 are not  necessarily  indicative of the results to be expected for the full
year.

Certain reclassifications have been made to prior years' financial statements to
conform to the presentation of the current period financial statements.

Dollar amounts presented in the tabulations within the notes to the consolidated
financial  statements  are stated in  thousands  of  dollars,  unless  otherwise
indicated.


2.   INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

At June 30, 2000, the Company's significant  unconsolidated affiliates accounted
for by the equity method included the following:

Belvieu  Environmental  Fuels ("BEF") - a 33.33%  economic  interest in a Methyl
Tertiary Butyl Ether ("MTBE") production facility located in southeast Texas.

Baton Rouge  Fractionators LLC ("BRF") - an approximate 31.25% economic interest
in a natural gas liquid ("NGL")  fractionation  facility located in southeastern
Louisiana.

Baton Rouge Propylene Concentrator,  LLC ("BRPC") - a 30.0% economic interest in
a propylene  concentration  unit located in  southeastern  Louisiana that became
operational in July 2000.

EPIK Terminalling L.P. and EPIK Gas Liquids, LLC (collectively,  "EPIK") - a 50%
aggregate  economic  interest  in a  refrigerated  NGL marine  terminal  loading
facility located in southeast Texas.

Wilprise  Pipeline  Company,  LLC ("Wilprise") - a 33.33% economic interest in a
NGL pipeline system located in southeastern Louisiana.

Tri-States  NGL  Pipeline LLC  ("Tri-States")  - an  aggregate  33.33%  economic
interest  in a NGL  pipeline  system  located  in  Louisiana,  Mississippi,  and
Alabama.

Belle Rose NGL Pipeline LLC ("Belle Rose") - a 41.7% economic  interest in a NGL
pipeline  system  located in south  Louisiana.



                                       4
<PAGE>

K/D/S Promix LLC ("Promix") - a 33.33% economic  interest in a NGL fractionation
facility and related storage facilities located in south Louisiana.

The Company's  investments  in and advances to  unconsolidated  affiliates  also
includes  Venice Energy  Services  Company,  LLC  ("VESCO")  and Dixie  Pipeline
Company ("Dixie"). The VESCO investment consists of a 13.1% economic interest in
a LLC owning a natural gas processing plant, fractionation facilities,  storage,
and gas gathering  pipelines in Louisiana.  The Dixie investment  consists of an
11.5%  interest in a corporation  owning a 1,301-mile  propane  pipeline and the
associated  facilities  extending  from Mont Belvieu,  Texas to North  Carolina.
These investments are accounted for using the cost method.

During the third quarter of 1999, the Company acquired the remaining interest in
Mont  Belvieu  Associates,  51%,  ("MBA")  and Entell NGL  Services,  LLC,  50%,
("Entell").  Accordingly,  after the acquisition of the remaining interests, MBA
terminated  and Entell  became a wholly owned  subsidiary  of the Company and is
included as a consolidated entity from that point forward.

The  following  table  shows  investments  in  and  advances  to  unconsolidated
affiliates at:

                                                 JUNE 30,       DECEMBER 31,
                                                  2000              1999
                                      -------------------------------------
Accounted for on equity basis:
    BEF                                      $   67,665         $   63,004
    Promix                                       50,991             50,496
    BRF                                          30,767             36,789
    Tri-States                                   27,808             28,887
    EPIK                                         16,869             15,258
    Belle Rose                                   11,926             12,064
    BRPC                                         19,707             11,825
    Wilprise                                      9,185              9,283
Accounted for  on cost basis:
    VESCO                                        33,000             33,000
    Dixie                                        20,000             20,000
                                      -------------------------------------
Total                                        $  287,918         $  280,606
                                      =====================================


The following table shows equity in income (loss) of  unconsolidated  affiliates
for the three and six months ended June 30, 2000 and 1999:

                   For Three Months Ended               For Six Months Ended
                          June 30,                            June 30,
                 ----------------------------   -----------------------------
                         2000          1999             2000           1999
                 ----------------------------   -----------------------------
BEF                  $   8,307     $   1,936       $   10,812      $   2,237
MBA                          -           424                -          1,184
BRF                        208          (143)             737           (286)
BRPC                       (29)            -              (19)             -
EPIK                       178          (220)           1,970            177
Wilprise                    74             -              162              -
Tri-States                 843             -            1,521              -
Promix                   1,546             -            3,208              -
Belle Rose                 (30)            -              149              -
Other                        -           883                -          1,131
                 ----------------------------   -----------------------------
Total                $  11,097     $   2,880       $   18,540      $   4,443
                 ============================   =============================


                                       5
<PAGE>

BEF

BEF is a partnership  that owns the MTBE production  facility located within the
Company's Mont Belvieu  complex.  The production of MTBE is driven by oxygenated
fuels  programs  enacted under the federal Clean Air Act  Amendments of 1990 and
other legislation. Any changes to these programs that enable localities to elect
not to participate in of these programs,  lessen the requirements for oxygenates
or favor the use of  non-isobutane  based oxygenated fuels reduce the demand for
MTBE and could have an adverse effect on the Company's results of operations.

In recent years,  MTBE has been detected in water supplies.  The major source of
the ground  water  contamination  appears to be leaks from  underground  storage
tanks.  Although  these  detections  have been limited and the great majority of
these  detections  have been well below levels of public health  concern,  there
have been actions calling for the phase-out of MTBE in motor gasoline in various
federal and state governmental agencies.

In light of these  developments,  the Company is formulating a contingency  plan
for use of the BEF  facility  if MTBE were  banned or  significantly  curtailed.
Management  is exploring a possible  conversion  of the BEF  facility  from MTBE
production  to  alkylate  production.  At  present  the  forecast  cost  of this
conversion would be in the $20 million to $25 million range,  with the Company's
share being $6.7 million to $8.3 million.


3.  ACQUISITIONS

Effective  August 1, 1999, the Company  acquired Tejas Natural Gas Liquids,  LLC
("TNGL")  from a subsidiary  of Tejas  Energy,  LLC, now Coral  Energy,  LLC, an
affiliate  of Shell  Oil  Company  ("Shell")  for $166  million  in cash and the
issuance of 14.5 million non-distribution bearing,  convertible Special Units of
the Limited Partner, Enterprise Products Partners L.P.. All references hereafter
to "Shell", unless the context indicates otherwise,  shall refer collectively to
Shell Oil Company, its subsidiaries and affiliates.  TNGL engages in natural gas
processing  and NGL  fractionation,  transportation,  storage and  marketing  in
Louisiana  and  Mississippi.   TNGL's  assets  include  a  20-year  natural  gas
processing  agreement  with Shell  ("Shell  Processing  Agreement")  and varying
interests  in eleven  natural  gas  processing  plants,  four NGL  fractionation
facilities;  four  NGL  storage  facilities  and  approximately  1,500  miles in
pipelines.

In  addition  to  the   Special   Units,   Shell  may  be  granted  6.0  million
non-distribution  bearing,  convertible Contingency Units of the Limited Partner
provided that certain  performance  criteria are met in calendar  years 2000 and
2001. Under the terms of an agreement with Shell, the Limited Partner will issue
3.0 million  Contingency Units in 2000 and an additional 3.0 million Contingency
Units in 2001 provided the performance tests are successfully completed. On June
28, 2000, Shell met the performance criteria outlined for calendar year 2000 and
in accordance with its agreement with Shell,  the Limited Partner issued the 3.0
million  Contingency  Units  (deemed  "Special  Units"  once they are issued) on
August 1, 2000.

The value of these new Special  Units is currently  estimated  at $55.2  million
using present value techniques. In August 2000, the purchase price and the value
of the natural gas processing agreement will be increased by the estimated $55.2
million value of the Units. If the remainder of the Contingency Units are issued
in 2001 (or at such later date as agreed to by the parties),  the purchase price
and value of the natural gas processing agreement will be adjusted accordingly.

Effective July 1, 1999, the Company  acquired  Kinder Morgan  Operating LP "A"'s
25% indirect ownership interest and Enterprise  Products Company's ("EPCO") 0.5%
indirect  ownership  interest  in a  210,000  barrel  per day NGL  fractionation
facility located in Mont Belvieu,  Texas for  approximately  $42 million in cash
and the assumption of approximately $4 million in debt.

Both  acquisitions  were accounted for using the purchase  method of accounting,
and  accordingly,  the purchase  price of each has been  allocated to the assets
purchased and  liabilities  assumed based on their  estimated  fair value at the
effective date of each transaction.




                                       6
<PAGE>

PRO FORMA EFFECT OF ACQUISITIONS

The following table presents  unaudited pro forma  information for the three and
six months ended June 30, 1999 as if the  acquisition of TNGL from Shell and the
Mont Belvieu NGL  fractionation  facility  from Kinder  Morgan and EPCO had been
made as of January 1, 1999:

                                    Three Months          Six Months
                                       Ended                Ended
                                      June 30,             June 30,
                                        1999                 1999
                                 -------------------  -------------------
Revenues                            $  343,990           $  644,500
                                 ===================  ===================
Net income                          $   27,166           $   40,540
                                 ===================  ===================
Allocation of net income to
      Limited partners              $   26,892           $   40,131
                                 ===================  ===================
      General Partner               $      274           $      409
                                 ===================  ===================


4.   LONG-TERM DEBT

GENERAL. Long-term debt at June 30, 2000 was comprised of $350 million in 5-year
public Senior Notes (the "$350 Million  Senior Notes") issued by the Company and
a 10-year $54 million  loan  agreement  with the  Mississippi  Business  Finance
Corporation  ("MBFC" and the "$54 Million MBFC Loan").  The issuance of the $350
Million  Senior  Notes  represented  a  partial  takedown  of the  $800  million
universal shelf registration (the "Registration  Statement") that was filed with
the Securities  and Exchange  Commission in December 1999. The proceeds from the
$350 Million  Senior Notes and the $54 Million MBFC Loan were used to extinguish
all  outstanding  balances owed under the $200 Million Bank Credit  Facility and
the $350 Million Bank Credit Facility.

The following table summarizes long-term debt at:

                                                   JUNE 30,         DECEMBER 31,
                                                     2000                1999
                                              ----------------------------------
Borrowings under:
     $200 Million Bank Credit Facility                               $   129,000
     $350 Million Bank Credit Facility                                   166,000
     $350 Million Senior Notes                  $   350,000
     $54  Million MBFC Loan                          54,000
                                              ----------------------------------
              Total                                 404,000              295,000
Less current maturities of long-term debt                 -              129,000
                                              ----------------------------------
              Long-term debt                    $   404,000          $   166,000
                                              ==================================

At June 30, 2000,  the Company had a total of $40 million of standby  letters of
credit available of which  approximately  $13.3 million were  outstanding  under
letter of credit agreements with the banks.

$200 MILLION BANK CREDIT FACILITY. In July 1998, the Company entered into a $200
million  bank  credit  facility  that  included a $50  million  working  capital
facility and a $150 million revolving term loan facility. On March 15, 2000, the
Company used $169 million of the proceeds  from the issuance of the $350 Million
Senior Notes to retire this credit  facility in  accordance  with its  agreement
with the banks.

$350 MILLION BANK CREDIT FACILITY. In July 1999, the Company entered into a $350
Million  Bank  Credit  Facility  that  includes a $50  million  working  capital
facility  and a $300  million  revolving  term loan  facility.  The $300 million


                                       7
<PAGE>

revolving  term loan facility  includes a sublimit of $40 million for letters of
credit.  Borrowings  under  the $350  Million  Bank  Credit  Facility  will bear
interest  at  either  the  bank's  prime  rate or the  Eurodollar  rate plus the
applicable  margin as defined in the facility.  The Company elects the basis for
the interest rate at the time of each borrowing.

This  facility  is  scheduled  to expire in July 2001 and all  amounts  borrowed
thereunder  shall be due and  payable  at that  time.  There  must be no  amount
outstanding  under the working capital facility for at least 15 consecutive days
during each fiscal  year.  In March 2000,  the Company  used $179 million of the
proceeds from the issuance of the $350 Million Senior Notes and $47 million from
the $54  Million  MBFC Loan to payoff the  outstanding  balance  on this  credit
facility. No amount was outstanding on this credit facility at June 30, 2000.

As amended on July 28,  1999,  the credit  agreement  relating to this  facility
contains a prohibition  on  distributions  on, or purchases or  redemptions  of,
Units of the Limited Partner if any event of default is continuing. In addition,
this bank credit facility  contains various  affirmative and negative  covenants
applicable  to the  ability of the Company to,  among  other  things,  (i) incur
certain additional indebtedness,  (ii) grant certain liens, (iii) sell assets in
excess of certain limitations, (iv) make investments, (v) engage in transactions
with affiliates and (vi) enter into a merger,  consolidation  or sale of assets.
The bank  credit  facility  requires  that the  Company  satisfy  the  following
financial covenants at the end of each fiscal quarter: (i) maintain Consolidated
Tangible  Net Worth (as  defined in the bank credit  facility)  of at least $250
million,  (ii)  maintain  a ratio of  EBITDA  (as  defined  in the  bank  credit
facility)  to  Consolidated  Interest  Expense  (as  defined in the bank  credit
facility)  for the  previous  12-month  period  of at least 3.5 to 1.0 and (iii)
maintain a ratio of Total  Indebtedness (as defined in the bank credit facility)
to EBITDA of no more than 3.0 to 1.0. The Company was in  compliance  with these
restrictive covenants at June 30, 2000.

$350 MILLION  SENIOR NOTES.  On March 13, 2000,  the Company  completed a public
offering of $350 million in principal  amount of 8.25%  fixed-rate  Senior Notes
due March 15,  2005 at a price to the public of 99.948%  per  Senior  Note.  The
Company received  proceeds,  net of underwriting  discounts and commissions,  of
approximately  $347.7  million.  The  proceeds  were used to pay the entire $169
million  outstanding  principal balance on the $200 Million Bank Credit Facility
and $179 million of the $226 million  outstanding  principal balance on the $350
Million Bank Credit Facility.

The $350 Million  Senior Notes are subject to a make-whole  redemption  right by
the  Company.  The notes are an  unsecured  obligation  of the  Company and rank
equally with its existing and future unsecured and  unsubordinated  indebtedness
and senior to any future subordinated indebtedness.  The notes are guaranteed by
the Limited Partner through an unsecured and  unsubordinated  guarantee and were
issued  under an  indenture  containing  certain  restrictive  covenants.  These
covenants  restrict  the ability of the Company  and the Limited  Partner,  with
certain  exceptions,  to incur  debt  secured  by liens  and  engage in sale and
leaseback  transactions.  The Company and the Limited Partner were in compliance
with the restrictive covenants at June 30, 2000.

Settlement  was  completed on March 15,  2000.  The issuance of the $350 Million
Senior  Notes was a takedown  under the  Company's  and Limited  Partner's  $800
million Registration  Statement;  therefore,  the amount of securities available
under the Registration Statement has been reduced to $450 million.

$54 MILLION  MBFC LOAN.  On March 27, 2000,  the Company  executed a $54 million
loan  agreement  with the MBFC which was funded with  proceeds  from the sale of
Taxable  Industrial Revenue Bonds ("Bonds") by the MBFC. The Bonds issued by the
MBFC are  10-year  bonds with a maturity  date of March 1, 2010 and bear a fixed
rate interest coupon of 8.70%.  The Company  received  proceeds from the sale of
the Bonds, net of underwriting discounts and commissions, of approximately $53.6
million.  The proceeds were used to pay the  remaining  $47 million  outstanding
principal  balance on the $350  Million  Bank  Credit  Facility  and for working
capital and other general partnership  purposes. In general, the proceeds of the
Bonds were used to reimburse  the Company for costs  incurred in  acquiring  and
constructing the Pascagoula, Mississippi natural gas processing plant.

The Bonds were issued at par and are subject to a make-whole redemption right by
the  Company.  The  Bonds are  guaranteed  by the  Limited  Partner  through  an
unsecured and  unsubordinated  guarantee.  The loan agreement  contains  certain
covenants  including   maintaining   appropriate  levels  of  insurance  on  the
Pascagoula natural gas processing  facility and restrictions  regarding mergers.
The Company was in compliance with the restrictive covenants at June 30, 2000.




                                       8
<PAGE>

5.       CAPITAL STRUCTURE AND DISTRIBUTIONS

The Limited Partner owns 98.9899% of the Company with the General Partner owning
the remaining 1.0101%. For purposes of maintaining partner capital accounts, the
partnership  agreement generally specifies that items of income or loss shall be
allocated  among the  partners in  accordance  with their  respective  ownership
percentages.  Net losses are first  allocated to the partners in accordance with
their respective percentages to the extent that the allocations do not cause the
Limited Partner to have a deficit balance in its capital  account.  Any net loss
not allocated to the Limited Partner is allocated to the General Partner. Normal
allocations  of net income  according  to  percentage  interests  are done only,
however,  after giving effect to any priority income  allocations to the General
Partner in an amount equal to any aggregate  net losses  incurred by the General
Partner for all previous years. For the three and six months ended June 30, 2000
and year ended December 31, 1999, the allocation of earnings was based solely on
the  respective  ownership  interests  of the partners  with no priority  income
allocations being necessary.

The  partnership  agreement  requires  the  Company  to  distribute  100% of the
"Available  Cash" (as defined in the  partnership  agreements)  to the  partners
within 45 days  following  the end of each calendar  quarter in accordance  with
their respective ownership  interests.  Available Cash consists generally of all
cash receipts of the Company, less all of its cash disbursements, net of changes
in reserves. The Company's cash distributions to its partners were $68.3 million
and $53.3 million for the six months ended June 30, 2000 and 1999, respectively.

LIMITED  PARTNER UNITS ACQUIRED BY TRUST.  During the first quarter of 1999, the
Company  established  a  revocable  grantor  trust (the  "Trust") to fund future
liabilities  of a long-term  incentive  plan.  At June 30,  2000,  the Trust had
purchased a total of 267,200  Common  Units of the Limited  Partner  (the "Trust
Units") which are accounted for in a manner  similar to treasury stock under the
cost method of  accounting.  The Trust Units receive  dividends from the Limited
Partner.


6.   SUPPLEMENTAL CASH FLOW DISCLOSURE

The net effect of changes in operating assets and liabilities is as follows:

                                                       SIX MONTHS ENDED
                                                           JUNE 30,
                                               --------------------------------
                                                      2000               1999
                                               --------------------------------
(Increase) decrease in:
      Accounts receivable                        $   65,821        $    (6,575)
      Inventories                                  (105,161)           (37,952)
      Prepaid and other current assets                2,610                970
      Other assets                                   (4,287)                 -
Increase (decrease) in:
      Accounts payable                              (64,613)              (164)
      Accrued gas payable                           163,185             22,864
      Accrued expenses                              (11,965)            (1,948)
      Other current liabilities                       5,907             (3,642)
      Other liabilities                               1,698                  -
                                               --------------------------------
Net effect of changes in operating accounts      $   53,195        $   (26,447)
                                               ================================

Capital  expenditures  for the first six  months  of 2000  were  $154.2  million
compared to $2.5 million for the same period in 1999.  Capital  expenditures  in
2000 included $99.6 million for the purchase of the Lou-Tex  Propylene  Pipeline


                                       9
<PAGE>

and related  assets,  $39.2  million in  construction  costs for the Lou-Tex NGL
Pipeline,  and $4.4 million in construction costs for the Neptune gas processing
facility.

The purchase of the Lou-Tex  Propylene  Pipeline and related  assets from Concha
Chemical Pipeline Company,  an affiliate of Shell, was completed on February 25,
2000.  The  effective  date of the  transaction  was March 1, 2000.  The Lou-Tex
Propylene  Pipeline is a 263-mile,  10" pipeline that transports  chemical grade
propylene from Sorrento, Louisiana to Mont Belvieu, Texas. Also acquired in this
transaction  was 27.5 miles of 6" ethane  pipeline  between  Sorrento and Norco,
Louisiana, and a 0.5 million barrel storage cavern at Sorrento, Louisiana.


7.   RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1999, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standard ("SFAS") No. 137,  "Accounting for Derivative
Instruments  and  Hedging  Activities-Deferral  of the  Effective  Date  of FASB
Statement No.  133-an  amendment of FASB  Statement  No. 133" which  effectively
delays the application of SFAS No. 133  "Accounting  for Derivative  Instruments
and Hedging  Activities"  for one year, to fiscal years beginning after June 15,
2000.  In June 2000,  the FASB  issued  SFAS No.  138,  "Accounting  for Certain
Derivative  Instruments  and Certain  Hedging  Activities - an amendment of FASB
Statement No. 133" which amends and supercedes various sections of SFAS No. 133.
Management  is  currently  studying  SFAS No. 133 and its  amendments  for their
possible impact on the consolidated  financial  statements when they are adopted
in January 2001.


8.   FINANCIAL INSTRUMENTS

The  Company  enters  into swaps and other  contracts  to hedge the price  risks
associated with inventories,  commitments and certain anticipated  transactions.
The Company does not currently hold or issue  financial  instruments for trading
purposes.  The swaps and other contracts are with  established  energy companies
and major  financial  institutions.  The  Company  believes  its credit  risk is
minimal  on these  transactions,  as the  counterparties  are  required  to meet
stringent credit standards. There is continuous day-to-day involvement by senior
management in the hedging decisions,  operating under resolutions adopted by the
board of directors.

INTEREST RATE SWAPS. The Company's  interest rate exposure results from variable
rate borrowings from commercial banks and fixed rate borrowings  pursuant to the
$350 Million Senior Notes and the $54 Million MBFC Loan. The company manages its
exposure to changes in interest  rates in its  consolidated  debt  portfolio  by
utilizing  interest rate swaps. An interest rate swap, in general,  requires one
party to pay a fixed rate on the  notional  amount  while the other party pays a
floating rate based on the notional amount.

In March 2000,  after the  issuance  of the $350  Million  Senior  Notes and the
execution of the $54 Million MBFC Loan, 100% of the Company's  consolidated debt
were fixed rate  obligations.  To maintain a balance  between  variable rate and
fixed rate exposure, the Company entered into interest rate swap agreements with
a notional amount of $154 million by which the Company  receives  payments based
on a fixed  rate and pays an amount  based on a  floating  rate.  The  Company's
consolidated  debt portfolio  interest rate exposure was 62 percent fixed and 38
percent  floating,  after  considering  the  effect  of the  interest  rate swap
agreements.  The notional amount does not represent exposure to credit loss. The
Company  monitors its  positions and the credit  ratings of its  counterparties.
Management  believes the risk of incurring a credit related loss is remote,  and
that if incurred, such losses would be immaterial.


                                       10
<PAGE>

The effect of these swaps  (none of which are  leveraged)  was to  decrease  the
Company's  interest  expense by $3.2 million for the three months ended June 30,
2000 and $3.5  million  for the six months  ended June 30,  2000.  Following  is
selected  information on the Company's  portfolio of interest rate swaps at June
30, 2000:

INTEREST RATE SWAP PORTFOLIO AT JUNE 30, 2000 (1) :
(Dollars in millions)
                                                 Early             Fixed /
  Notional                                    Termination         Floating
   Amount            Period Covered             Date (2)          Rate (3)
--------------------------------------------------------------------------------

      $ 50.0 March 2000 - March 2005        March 2001         8.25% / 6.9500%
      $ 50.0 March 2000 - March 2005        March 2001         8.25% / 6.9550%
      $ 54.0 March 2000 - March 2010        March 2003         8.70% / 7.2575%

Notes:
(1)  All swaps outstanding at June 30, 2000 were entered into for the purpose of
     managing the Company's exposure to fluctuations in market interest rates.
(2)  In each case,  the  counterparty  has the option to terminate  the interest
     rate swap on the Early Termination Date
(3)  In each case, the Company is the  floating-price  payor.  The floating rate
     was the rate in effect as of June 30, 2000.


9.  SEGMENT INFORMATION

The Company has five reportable  operating  segments:  Fractionation,  Pipeline,
Processing,   Octane   Enhancement   and  Other.   Fractionation   includes  NGL
fractionation,  polymer grade propylene  fractionation and butane  isomerization
(converting  normal  butane  into  high  purity  isobutane)  services.  Pipeline
consists of pipeline,  storage and import/export  terminal services.  Processing
includes  the  natural gas  processing  business  and its  related NGL  merchant
activities.   Octane  Enhancement  represents  the  Company's  33.33%  ownership
interest in a facility that produces motor gasoline  additives to enhance octane
(currently  producing MTBE).  The Other operating  segment consists of fee-based
marketing services and other plant support functions.

Operating  segments are components of a business about which separate  financial
information  is  available  that is evaluated  regularly by the chief  operating
decision  maker  in  deciding  how  to  allocate   resources  and  in  assessing
performance.  Generally, financial information is required to be reported on the
basis that it is used internally for evaluating segment performance and deciding
how to allocate resources to segments.

The  management of the Company  evaluates  segment  performance  on the basis of
gross  operating  margin.  Gross  operating  margin  reported  for each  segment
represents  earnings  before   depreciation  and  amortization,   lease  expense
obligations retained by EPCO, gains and losses on the sale of assets and general
and  administrative  expenses.  In addition,  segment gross operating  margin is
exclusive of interest expense,  interest income (from unconsolidated  affiliates
or others), dividend income from unconsolidated  affiliates,  minority interest,
extraordinary charges and other income and expense  transactions.  The Company's
equity  earnings from  unconsolidated  affiliates  are included in segment gross
operating margin.

Segment  assets  consists of  property,  plant and  equipment  and the amount of
investments  in  and  advances  to  unconsolidated   affiliates.  The  principal
reconciling item between consolidated property,  plant and equipment and segment
assets  is  construction-in-progress.   Segment  assets  are  defined  as  those
facilities and projects that generate segment gross margin amounts. Since assets
under construction do not generally contribute to segment earnings, these assets
are not included in the segment totals until they are deemed operational.

Segment gross  operating  margin is inclusive of  intersegment  revenues.  These
revenues have been eliminated from the consolidated totals.


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

                                       11
<PAGE>

<TABLE>
<CAPTION>
                                                                  Operating Segments                         Adjustments
                                         -------------------------------------------------------------------
                                                                                   Octane                      and      Consolidated
                                         Fractionation  Pipelines    Processing  Enhancement      Other   Eliminations     Totals
                                         -------------------------------------------------------------------------------------------

Revenues from
   external customers
<S>                                      <C>          <C>           <C>          <C>           <C>       <C>            <C>
   Three months ended June 30, 2000      $ 103,741    $  18,048     $ 478,244    $  8,307      $    751  $  (5,081)     $ 604,010
   Three months ended June 30, 1999         64,453        4,360       120,638       1,936             -    (13,908)       177,479
   Six months ended June 30, 2000          202,566       27,862     1,125,101      10,812         1,266     (9,873)     1,357,734
   Six months ended June 30, 1999          118,149        8,101       223,511       2,237             -    (25,642)       326,356

Intersegment revenues
   Three months ended June 30, 2000         42,537       14,760       139,655           -            95   (197,047)             -
   Three months ended June 30, 1999         25,137        9,279            16           -           108    (34,540)             -
   Six months ended June 30, 2000           82,728       28,025       281,885           -           189   (392,827)             -
   Six months ended June 30, 1999           37,360       17,310            38           -           204    (54,912)             -

Total revenues
   Three months ended June 30, 2000        146,278       32,808       617,899       8,307           846   (202,128)       604,010
   Three months ended June 30, 1999         89,590       13,639       120,654       1,936           108    (48,448)       177,479
   Six months ended June 30, 2000          285,294       55,887     1,406,986      10,812         1,455   (402,700)     1,357,734
   Six months ended June 30, 1999          155,509       25,411       223,549       2,237           204    (80,554)       326,356

Gross operating margin
   by segment
   Three months ended June 30, 2000         29,591       14,192        18,486       8,307           872          -         71,448
   Three months ended June 30, 1999         26,491        4,350        (1,524)      1,936           277          -         31,530
   Six months ended June 30, 2000           63,922       28,827        58,040      10,812         1,426          -        163,027
   Six months ended June 30, 1999           42,813        8,851          (433)      2,237           481          -         53,949

Segment assets
   At June 30, 2000                        360,410      357,107       125,642           -           111     60,562        903,832
   At December 31, 1999                    362,198      249,453       122,495           -           113     32,810        767,069

Investments in and advances
   to unconsolidated affiliates
   At June 30, 2000                        101,465       85,788        33,000      67,665             -          -        287,918
   At December 31, 1999                     99,110       85,492        33,000      63,004             -          -        280,606
</TABLE>

                                       12
<PAGE>

A reconciliation of segment gross operating margin to consolidated income before
minority interest follows:

<TABLE>
<CAPTION>
                                                           For Three Months Ended           For Six Months Ended
                                                                  June 30,                        June 30,
                                                        -----------------------------   -----------------------------
                                                                2000          1999             2000           1999
                                                        -----------------------------   -----------------------------
<S>                                                           <C>           <C>              <C>            <C>
Total segment gross operating margin                          $ 71,448      $ 31,530         $163,027       $ 53,949
     Depreciation and amortization                              (8,754)       (4,668)         (16,878)        (9,356)
     Retained lease expense, net                                (2,687)       (2,666)          (5,324)        (5,332)
     Gain on sale of assets                                     (2,303)         (127)          (2,303)          (124)
     Selling, general and administrative                        (7,658)       (3,000)         (13,042)        (6,000)
                                                        -----------------------------   -----------------------------
Consolidated operating income                                   50,046        21,069          125,480         33,137
     Interest expense                                           (8,070)       (2,129)         (15,844)        (4,392)
     Interest income from unconsolidated affiliates                 94           292              202            689
     Dividend income from unconsolidated affiliates              2,761             -            3,995              -
     Interest income - other                                     1,358           148            2,973            432
     Other, net                                                    (62)          (30)            (425)            45
                                                        -----------------------------   -----------------------------
Consolidated income before minority interest                  $ 46,127      $ 19,350         $116,381       $ 29,911
                                                        =============================   =============================
</TABLE>

                                       13
<PAGE>
       ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS.

              FOR THE INTERIM PERIODS ENDED JUNE 30, 2000 AND 1999

         The following  discussion  and analysis  should be read in  conjunction
with the  unaudited  consolidated  financial  statements  and notes  thereto  of
Enterprise  Products  Operating L.P.  ("Enterprise"  or the "Company")  included
elsewhere herein.

THE COMPANY

         ENTERPRISE  PRODUCTS  OPERATING  L.P.  (the  "Company")  is  a  leading
integrated North American provider of processing and transportation  services to
domestic  and foreign  producers  of natural  gas liquids  ("NGL" or "NGLs") and
other liquid  hydrocarbons and domestic and foreign consumers of NGLs and liquid
hydrocarbon  products.  The Company  manages a fully  integrated and diversified
portfolio  of  midstream  energy  assets and is engaged  in NGL  processing  and
transportation  through  direct and  indirect  ownership  and  operation  of NGL
fractionators.  It also  operates  and or  manages  NGL  processing  facilities,
storage facilities, pipelines, rail transportation facilities, a methyl tertiary
butyl  ether  ("MTBE")  facility,  a  propylene  production  complex  and  other
transportation  facilities in which it has a direct and indirect ownership. As a
result of acquisitions completed in 1999, the Company is also engaged in natural
gas processing.

         The  Company  was  formed  on  April  9,  1998  as a  Delaware  limited
partnership  to  acquire,  own and  operate  the  natural  gas  liquids  ("NGL")
processing and distribution assets of Enterprise Products Company ("EPCO").  The
Company's  limited  partner,  Enterprise  Products  Partners  L.P. (the "Limited
Partner"),  owns  98.9899%  of the  Company.  Enterprise  Products  GP, LLC (the
"General Partner") is the general partner and owns 1.0101% of the Company.  Both
the Limited Partner and the General Partner are subsidiaries of EPCO.

         The principal  executive office of the Company is located at 2727 North
Loop West, Houston, Texas,  77008-1038,  and the telephone number of that office
is 713-880-6500. References to, or descriptions of, assets and operations of the
Company in this  Quarterly  Report  include  the assets  and  operations  of the
predecessors of the Company.

GENERAL

         The  Company  (i)  processes  natural  gas;  (ii)  fractionates  for  a
processing  fee mixed  NGLs  produced  as  by-products  of oil and  natural  gas
production into their component products:  ethane,  propane,  isobutane,  normal
butane and natural  gasoline;  (iii) converts normal butane to isobutane through
the process of  isomerization;  (iv) produces MTBE from  isobutane and methanol;
and (v)  transports  NGL  products to end users by  pipeline  and  railcar.  The
Company   also   separates   high   purity   propylene   from   refinery-sourced
propane/propylene   mix  and  transports  high  purity   propylene  to  plastics
manufacturers by pipeline.  Products processed by the Company generally are used
as  feedstocks  in  petrochemical  manufacturing,  in the  production  of  motor
gasoline and as fuel for residential and commercial heating.

         The Company's NGL operations are concentrated in the Texas,  Louisiana,
and  Mississippi  Gulf  Coast  area.  A large  portion is  concentrated  in Mont
Belvieu, Texas, which is the hub of the domestic NGL industry and is adjacent to
the largest  concentration of refineries and petrochemical  plants in the United
States. The facilities the Company operates at Mont Belvieu include:  (i) one of
the largest NGL  fractionation  facilities  in the United States with an average
production capacity of 210,000 barrels per day ("BPD");  (ii) the largest butane
isomerization  complex in the United States with an average isobutane production
capacity of 80,000 BPD; (iii) one of the largest MTBE  production  facilities in
the United  States with an average  production  capacity of 14,800 BPD; and (iv)
two propylene  fractionation  units with an average combined production capacity
of 31,000 BPD. The Company  owns all of the assets at its Mont Belvieu  facility
except for the NGL fractionation  facility,  in which it owns an effective 62.5%
economic interest; one of the propylene  fractionation units, in which it owns a
54.6% interest and controls the remaining  interest  through a long-term  lease;
the MTBE production facility, in which it owns a 33.33% interest; and one of its
three isomerization units and one deisobutanizer  which are held under long-term
leases  with  purchase  options.  The  Company's  operations  in  Louisiana  and


                                       14
<PAGE>

Mississippi  include varying  interests in eleven natural gas processing  plants
with a combined  capacity of 11.0  billion  cubic feet per day  ("Bcfd") and net
capacity of 3.1 Bcfd and four NGL fractionation facilities with a combined gross
capacity  of 281,000  BPD and net  capacity of 131,500  BPD.  In  addition,  the
Company owns and  operates a NGL  fractionation  facility in Petal,  Mississippi
with an average production capacity of 7,000 BPD.

         The  Company  owns and  operates  approximately  28 million  barrels of
storage  capacity at Mont Belvieu and 7 million  barrels of storage  capacity in
Petal,  Mississippi that are an integral part of its processing operations.  The
Company  has  interests  in  four  NGL  storage   facilities  in  Louisiana  and
Mississippi  with  approximately  28.8 million barrels of gross capacity and 8.8
million  barrels of net  capacity.  The Company  also leases and operates one of
only two commercial NGL import/export terminals on the Gulf Coast.

         Lastly, the Company has operating and non-operating ownership interests
in over 2,400 miles of NGL  pipelines  along the Gulf Coast  (including an 11.5%
interest in the 1,301 mile Dixie Pipeline).

         Industry Environment

         Because  certain NGL  products  compete  with other  refined  petroleum
products in the fuel and petrochemical feedstock markets, NGL product prices are
set by or in competition with refined petroleum products.  Increased  production
and  importation  of NGLs and NGL products in the United States may decrease NGL
product  prices in  relation  to  refined  petroleum  alternatives  and  thereby
increase  consumption of NGL products as NGL products are  substituted for other
more  expensive  refined  petroleum  products.  Conversely,  a  decrease  in the
production  and  importation of NGLs and NGL products could increase NGL product
prices in  relation to refined  petroleum  product  prices and thereby  decrease
consumption  of NGLs.  However,  because  of the  relationship  of crude oil and
natural gas production to NGL production,  the Company believes any imbalance in
the prices of NGLs and NGL products and alternative products would be temporary.

         Due to higher  crude oil prices in the first six months of 2000  versus
the same period in 1999, the demand for NGLs in petrochemical  manufacturing was
strong. The increased use of NGLs in petrochemical manufacturing resulted in the
increasing of both production and pricing of NGLs. In the NGL industry, revenues
and cost of goods sold can fluctuate  significantly  up or down based on current
NGL prices. However, operating margins will generally remain constant except for
the effect of inventory price adjustments or increased operating expenses.

RESULTS OF OPERATION OF THE COMPANY

         The  Company has five  reportable  operating  segments:  Fractionation,
Pipeline,  Processing,  Octane Enhancement and Other. Fractionation includes NGL
fractionation,  polymer grade propylene  fractionation and butane  isomerization
(converting  normal  butane  into  high  purity  isobutane)  services.  Pipeline
consists of pipeline,  storage and import/export  terminal services.  Processing
includes  the  natural gas  processing  business  and its  related NGL  merchant
activities.   Octane  Enhancement  represents  the  Company's  33.33%  ownership
interest in a facility that produces motor gasoline  additives to enhance octane
(currently  producing MTBE).  The Other operating  segment consists of fee-based
marketing services and other plant support functions.

         The  management of the Company  evaluates  segment  performance  on the
basis of gross  operating  margin.  Gross  operating  margin  reported  for each
segment represents earnings before depreciation and amortization,  lease expense
obligations retained by EPCO, gains and losses on the sale of assets and general
and  administrative  expenses.  In addition,  segment gross operating  margin is
exclusive of interest expense,  interest income (from unconsolidated  affiliates
or others), dividend income from unconsolidated  affiliates,  minority interest,
extraordinary charges and other income and expense  transactions.  The Company's
equity  earnings from  unconsolidated  affiliates  are included in segment gross
operating margin.


                                       15
<PAGE>

         The  Company's  gross  operating  margin by segment  (in  thousands  of
dollars) along with a  reconciliation  to consolidated  operating income for the
three and six months ended June 30, 2000 and 1999 were as follows:

<TABLE>
<CAPTION>
                                                        For Three Months Ended          For Six Months Ended
                                                               June 30,                       June 30,
                                                     -----------------------------  -----------------------------
                                                            2000           1999            2000           1999
                                                     -----------------------------  -----------------------------

Gross Operating Margin by segment:
<S>                                                       <C>            <C>             <C>            <C>
     Fractionation                                        $ 29,591       $ 26,491        $ 63,922       $ 42,813
     Pipeline                                               14,192          4,350          28,827          8,851
     Processing                                             18,486         (1,524)         58,040           (433)
     Octane enhancement                                      8,307          1,936          10,812          2,237
     Other                                                     872            277           1,426            481
                                                     -----------------------------  -----------------------------
Gross Operating margin total                                71,448         31,530         163,027         53,949
     Depreciation and amortization                           8,754          4,668          16,878          9,356
     Retained lease expense, net                             2,687          2,666           5,324          5,332
     Loss (gain) on sale of assets                           2,303            127           2,303            124
     Selling, general and administrative expenses            7,658          3,000          13,042          6,000
                                                     -----------------------------  -----------------------------
Consolidated operating income                             $ 50,046       $ 21,069        $125,480       $ 33,137
                                                     =============================  =============================
</TABLE>

         The Company's  significant  plant  production and other volumetric data
(in  thousands  of  barrels  per day on an equity  basis)  for the three and six
months ended June 30, 2000 and 1999 were as follows:

<TABLE>
<CAPTION>
                                       For Three Months Ended          For Six Months Ended
                                              June 30,                       June 30,
                                    -----------------------------  -----------------------------
                                        2000           1999            2000           1999
                                    -----------------------------  -----------------------------
Plant production data:
<S>                                       <C>          <C>               <C>           <C>
        NGL Production                    71            N/A              71            N/A
        NGL Fractionation                215             61             215             58
        Isomerization                     81             74              74             71
        Propylene Fractionation           30             31              30             27
        MTBE                               5              5               4              4
        Major Pipelines                  331            186             338            173

</TABLE>

         1999 Acquisitions

         The Company  completed two  significant  acquisitions  during the third
quarter of 1999.  Effective  August 1, 1999, the Company  acquired Tejas Natural
Gas Liquids,  LLC ("TNGL")  from Tejas Energy,  LLC, now Coral  Energy,  LLC, an
affiliate of Shell Oil Company ("Shell", including subsidiaries and affiliates),
in exchange  for 14.5  million  non-distribution  bearing,  convertible  special
partnership  Units of the Limited  Partner and $166 million in cash. The Limited
Partner  also  agreed  to issue up to 6.0  million  additional  non-distribution
bearing  special  partnership  Units to Shell in the  future if the  volumes  of
natural gas that the  Company  processes  for Shell reach  agreed upon levels in
2000 and 2001.  The first 3.0 million of these  additional  special  partnership
Units were issued by the Limited Partner on August 1, 2000.

         The businesses  acquired from Shell include  natural gas processing and
NGL  fractionation,  transportation and storage in Louisiana and Mississippi and
its NGL supply  and  merchant  business.  The assets  acquired  include  varying
interests  in eleven  natural  gas  processing  plants,  four NGL  fractionation
facilities,  four NGL storage  facilities,  operator and non-operator  ownership
interests in approximately  1,500 miles of NGL pipelines,  and a 20-year natural
gas processing  agreement with Shell. The Company accounted for this acquisition
using the purchase method.

                                       16
<PAGE>

         Effective  July 1,  1999,  a  subsidiary  of the  Company  acquired  an
additional  25% interest in the Mont  Belvieu NGL  fractionation  facility  from
Kinder  Morgan  Operating  LP "A"  ("Kinder  Morgan")  for a  purchase  price of
approximately $41.2 million in cash and the assumption of $4 million in debt. An
additional 0.5% interest in the same facility was purchased from EPCO for a cash
purchase  price  of $0.9  million.  This  acquisition  (referred  to as the "MBA
acquisition")  increased the Company's  effective  economic interest in the Mont
Belvieu  NGL  fractionation  facility  from 37.0% to 62.5%.  As a result of this
acquisition,  the  results of  operations  after July 1, 1999 were  consolidated
rather than included in equity in earnings of unconsolidated affiliates.

         The results of  operations  for the three and six month  periods  ended
June 30,  1999 do not include  the impact of the assets  acquired  from TNGL and
MBA.  See the section  below  labeled  "Pro Forma  impact of  Acquisitions"  for
selected financial data reflecting these transactions as if they had occurred on
January 1, 1999.

THREE MONTHS ENDED JUNE 30, 2000 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1999

         Revenues,  Costs and  Expenses  and  Operating  Income.  The  Company's
revenues  increased  by 240.3%  to $604.0  million  in 2000  compared  to $177.5
million in 1999. The Company's costs and expenses  increased by 256.1% to $546.3
million in 2000 versus $153.4 million in 1999.  Operating income before selling,
general and administrative  expenses ("SG&A") increased to $57.7 million in 2000
from $24.1  million in 1999.  The  principal  factors  behind the $33.6  million
increase in operating income before SG&A were the additional earnings associated
with the assets acquired in the TNGL acquisition and the overall  improvement in
NGL product prices in 2000 over 1999.

         Fractionation.   The   Company's   gross   operating   margin  for  the
Fractionation  segment  increased to $29.6 million in 2000 from $26.5 million in
1999 due to higher overall  volumes and NGL pricing plus the addition of margins
from the assets acquired from TNGL. NGL  Fractionation  gross  operating  margin
increased  to $12.6  million  in 2000 from $1.2  million in 1999  primarily  the
result of substantially higher volumes.  Net NGL fractionation  volumes were 215
thousand  barrels  per day  ("MBPD") in 2000  compared  to 61 MBPD in 1999.  The
increase is attributable to the four NGL  fractionators  acquired in August 1999
as a  result  of  the  TNGL  acquisition  and  the  completion  of the  BRF  NGL
fractionation  facility  in July  1999.  Of the $11.4  million  increase  in NGL
fractionation gross margin,  $10.8 million is derived from the NGL fractionators
acquired in the TNGL acquisition (including equity earnings of $1.5 million from
Promix) with $0.4 million arising from higher equity earnings from BRF. The Mont
Belvieu NGL fractionation  facility  contributed the remaining $0.2 million rise
in  earnings.  Margins from the Mont Belvieu  facility  increased  due to higher
volumes and the additional  ownership interest acquired in July 1999 as a result
of the MBA acquisition.

         Gross operating  margin from the  isomerization  business  decreased to
$11.4 million in 2000 from $17.2 million in 1999. The decrease in  isomerization
margins is primarily due to expenses  associated  with the restart of one of the
Mont  Belvieu  isomerization  units in May 2000 and  higher  operating  expenses
stemming  from  an  increase  in  fuel  costs.  Isomerization  production  rates
increased  to 81 MBPD in 2000  compared  to 74 MBPD in 1999 as a  result  of the
restart of the  isomerization  unit. The Company's gross operating margin on its
propylene fractionation facilities decreased to $5.4 million in 2000 versus $7.0
million in 1999.  The decrease  stems from the impact of propylene  storage well
charges and higher fuel costs. Propylene production decreased to 30 MBPD in 2000
from 31 MBPD in 1999.

         Pipeline. The Company's gross operating margin for the Pipeline segment
was $14.2 million in the second  quarter of 2000 compared to $4.4 million during
the same period in 1999. The Louisiana Pipeline Distribution System gross margin
for 2000 was $6.7 million  versus $1.4 million in 1999  primarily  due to a 135%
increase in throughput  volumes  stemming from pipeline  assets  acquired in the
TNGL  acquisition.  The gross  operating  margin  of the  Houston  Ship  Channel
Distribution  system increased to $2.9 million in 2000 from $2.1 million in 1999
on the  strength  of  increased  export  volumes at the EPIK  loading  facility.
Earnings from the newly acquired Lou-Tex Propylene Pipeline were $2.3 million.

         Equity earnings from unconsolidated  affiliates in the Pipeline segment
increased  from a loss of $0.2 million in 1999 to a $1.1 million profit in 2000.
A portion of the  improvement in equity  earnings is  attributable to EPIK which
posted an increase of $0.4  million  from a $0.2  million loss in 1999 to a $0.2
million  profit in 2000.  EPIK's  higher  earnings  are  attributable  to a 344%
increase in export volumes due to the new chiller unit that began  operations in


                                       17
<PAGE>

the fourth quarter of 1999.  The remaining $0.9 million  increase stems from the
Wilprise, Tri-States and Belle Rose pipeline systems in which an equity interest
was acquired by the Company as a result of the TNGL acquisition.

         Processing.  The Company's  gross  operating  margin for Processing was
$18.5 million in 2000  compared to a loss of $1.5 million in 1999.  The increase
is  attributable  to  the  gas  processing   operations  acquired  in  the  TNGL
acquisition.  The gas  processing  operations  benefited  from a  favorable  NGL
pricing environment and 71 MBPD of equity NGL production during the quarter.

         Octane  Enhancement.  The Company's gross  operating  margin for Octane
Enhancement  increased to $8.3  million in 2000 from $1.9 million in 1999.  This
segment consists entirely of the Company's equity earnings and 33.33% investment
in BEF, a joint venture  facility that  currently  produces  MTBE.  The earnings
improvement stems from higher MTBE prices and lower debt service costs. BEF made
its final note payment on May 31, 2000 and now owns a debt-free  facility.  MTBE
production,  on an equity  basis,  was steady at 5 MBPD during both the 2000 and
1999 periods.

         Other.  The Company's gross operating  margin for the Other segment was
$0.9 million in 2000  compared to $0.3 million in 1999.  Beginning in the fourth
quarter of 1999, this segment includes fee-based marketing services. The Company
acquired  its  fee-based  marketing  services  business  as  part  of  the  TNGL
acquisition.  For the second quarter of 2000, this business earned $0.7 million.
Apart  from  this  portion  of  the  segment's  operations,   the  gross  margin
contribution  of the other  aspects of this segment were  insignificant  in both
2000 and 1999.

         Selling,  general and administrative  expenses. SG&A expenses increased
to $7.7 million in the second  quarter of 2000 from $3.0 million during the same
period in 1999.  The higher  costs stem from an increase  in the  administrative
services fee charged by EPCO to $1.6 million per month beginning in January 2000
versus the $1.0  million per month  charged in the second  quarter of 1999.  The
remainder  of  the  increase  is   attributable   to   additional   general  and
administrative expenses related to the TNGL acquisition.

         Interest  expense.  The Company's  interest  expense  increased to $8.1
million in the second quarter of 2000 from $2.1 million in the second quarter of
1999. The increase is primarily attributable to a rise in average debt levels to
$404  million  in the  second  quarter  of 2000 from $132  million in the second
quarter  of  1999.  Debt  levels  have  increased  over  the  last  year  due to
acquisitions and capital expenditures.  Specifically,  $215 million was borrowed
to  complete  the TNGL and MBA  acquisitions  in the third  quarter  of 1999 and
approximately  $60 million was borrowed to fund a portion of the purchase of the
Lou-Tex Propylene Pipeline in the first quarter of 2000.

         Dividend   income  from   unconsolidated   affiliates.   The  Company's
investment  in Dixie and VESCO are recorded  using the cost method as prescribed
by  generally  accepted   accounting   principles.   In  accordance  with  these
guidelines,  the Company records as dividend income the cash  distributions from
these  investments as opposed to recording equity  earnings.  Both the Dixie and
VESCO investments were acquired as part of the TNGL acquisition.  For the second
quarter of 2000, the Company recorded dividend income totaling $2.8 from VESCO.

         Loss on sale of assets.  During the second quarter of 2000, the Company
recognized a one-time $2.3 million  non-cash  charge on the sale of its Longview
Terminal  to  Huntsman  Corporation.  The  Longview  Terminal  was  part  of the
Pipelines  segment and was used to unload polymer grade  propylene from NGL tank
trucks.

SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1999

         Revenues,  Costs and  Expenses  and  Operating  Income.  The  Company's
revenues  increased  by 316.0% to  $1,357.7  million in 2000  compared to $326.4
million  in 1999.  The  Company's  costs  and  expenses  increased  by 324.5% to
$1,219.2 million in 2000 versus $287.2 million in 1999.  Operating income before
SG&A  increased  to $138.5  million  in 2000 from  $39.2  million  in 1999.  The
principal  factors behind the $99.4 million  increase in operating income before
SG&A were the additional  earnings  associated  with the assets  acquired in the
TNGL acquisition and the overall  improvement in NGL product prices in 2000 over
1999.

         Fractionation.   The   Company's   gross   operating   margin  for  the
Fractionation  segment  increased to $63.9 million in 2000 from $42.8 million in
1999 due to higher overall  volumes and NGL pricing plus the addition of margins


                                       18
<PAGE>

from the assets acquired from TNGL. NGL  Fractionation  gross  operating  margin
increased  to $29.0  million  in 2000 from $2.9  million in 1999  primarily  the
result of substantially higher volumes.  Net NGL fractionation  volumes were 215
MBPD in 2000 compared to 58 MBPD in 1999.  The increase is  attributable  to the
four  NGL  fractionators  acquired  in  August  1999  as a  result  of the  TNGL
acquisition  and the  completion of the BRF NGL  fractionation  facility in July
1999. Of the $26.1 million  increase in NGL  fractionation  gross margin,  $24.6
million is derived from the NGL  fractionators  acquired in the TNGL acquisition
(including  equity  earnings of $3.2  million  from  Promix)  with $1.0  million
arising from higher equity earnings from BRF. The Mont Belvieu NGL fractionation
facility  contributed the remaining $0.5 million rise in earnings.  Margins from
the Mont Belvieu  facility  increased due to higher  volumes and the  additional
ownership interest acquired in July 1999 as a result of the MBA acquisition.

         Gross operating  margin from the  isomerization  business  decreased to
$21.0 million in 2000 from $24.7 million in 1999. The decrease in  isomerization
margins is primarily due to expenses  associated  with the restart of one of the
Mont  Belvieu  isomerization  units in May 2000 and  higher  operating  expenses
stemming  from  an  increase  in  fuel  costs.  Isomerization  production  rates
increased to 74 MBPD in 2000 compared to 71 MBPD in 1999.  The  Company's  gross
operating  margin on its propylene  production  facilities  was $12.7 million in
2000 and 1999.  The margin for 2000 includes  $0.7 million in propylene  storage
well charges along with $0.6 million in higher fuel expenses associated with the
increased cost of natural gas. Propylene production volumes increased to 30 MBPD
in 2000 versus 27 MBPD in 1999.

         Pipeline. The Company's gross operating margin for the Pipeline segment
was $28.9  million  in 2000  compared  to $8.9  million in 1999.  The  Louisiana
Pipeline Distribution System gross margin for 2000 was $14.5 million versus $3.0
million in 1999 primarily due to a 164% increase in throughput  volumes stemming
from  pipeline  assets  acquired in the TNGL  acquisition.  The gross  operating
margin of the Houston Ship Channel Distribution system increased to $5.9 million
in 2000 from $4.1 million in 1999 on the strength of increased export volumes at
the EPIK loading facility.

         On February 25, 2000,  the purchase of the Lou-Tex  Propylene  Pipeline
and related assets from Concha Chemical Pipeline Company, an affiliate of Shell,
was completed at a cost of approximately $100 million. The effective date of the
transaction was March 1, 2000. The Lou-Tex Propylene Pipeline is a 263-mile, 10"
pipeline that transports  chemical grade  propylene from Sorrento,  Louisiana to
Mont Belvieu, Texas. Also acquired in this transaction was a 27.5-mile 6" ethane
pipeline between Sorrento and Norco,  Louisiana and a 0.5 million barrel storage
cavern at Sorrento,  Louisiana.  For the four months  ended June 30,  2000,  the
Lou-Tex Propylene Pipeline gross operating margin was $3.1 million on volumes of
21 MBPD. Due to customer demand,  a project is currently  underway and should be
completed in the third quarter of 2000 to increase the capacity of this pipeline
to 50,000 BPD .

         Equity earnings from unconsolidated  affiliates in the Pipeline segment
increased  from $0.2  million  in 1999 to $3.8  million  in 2000.  The  greatest
improvement  in  equity  earnings  was from  EPIK  which  posted a $1.8  million
increase  to $2.0  million  in 2000 from $0.2  million  in 1999.  EPIK's  higher
earnings are  attributable  to a 212% increase in export  volumes due to the new
chiller unit that began  operations in the fourth  quarter of 1999.  The Company
recorded a combined $1.8 million in equity income from the Wilprise, Tri-States,
and Belle Rose Systems. Individually, equity earnings from Wilprise, Tri-States,
and Belle Rose were $0.2 million, $1.5 million and $0.1 million, respectively.

         Processing.  The Company's  gross  operating  margin for Processing was
$58.0 million in 2000  compared to a loss of $0.4 million in 1999.  The increase
is  attributable  to  the  gas  processing   operations  acquired  in  the  TNGL
acquisition.  The gas  processing  operations  benefited  from a  favorable  NGL
pricing  environment  and 71 MBPD of equity NGL production  during the first six
months of 2000.

         Octane  Enhancement.  The Company's gross  operating  margin for Octane
Enhancement  increased to $10.8 million in 2000 from $2.2 million in 1999.  This
segment consists entirely of the Company's equity earnings and 33.33% investment
in BEF, a joint venture facility that currently  produces MTBE. The 1999 results
included the impact of a $4.5  million  non-cash  write-off  of the  unamortized
balance of deferred  start-up costs. The Company's share of this non-cash charge
was $1.5 million. The 2000 results reflect the impact of higher than normal MTBE
market prices during the second quarter and lower debt service  costs.  BEF made


                                       19
<PAGE>

its final  note  payment in May 2000 and now owns the MTBE  facility  debt-free.
MTBE production, on an equity basis, was 4 MBPD in 2000 and 1999.

         Other.  The Company's gross operating  margin for the Other segment was
$1.4 million in 2000  compared to $0.5 million in 1999.  Beginning in the fourth
quarter of 1999, this segment includes fee-based marketing services. The Company
acquired  its  fee-based  marketing  services  business  as  part  of  the  TNGL
acquisition.  For the  first six  months  of 2000,  this  business  earned  $1.2
million.  Apart from this portion of the segment's operations,  the gross margin
contribution  of the other  aspects of this segment were  insignificant  in both
2000 and 1999.

         Selling,  general and administrative  expenses. SG&A expenses increased
to $13.0  million in the first six months of 2000 from $6.0  million  during the
same period in 1999.  The primary reason for the higher costs was an increase in
the  administrative  services  fee  charged  by EPCO to $1.6  million  per month
beginning in January 2000 versus the $1.0 million per month charged in the first
quarter of 1999.  The  remainder of the increase is  attributable  to additional
general and administrative costs related to the TNGL acquisition.

         Interest  expense.  The Company's  interest expense  increased to $15.8
million in the first six months of 2000 from $4.4 million during the same period
for 1999.  The  increase is primarily  attributable  to a rise in debt levels to
$374 million in 2000 from $128 million in 1999.  Debt levels have increased over
the last year due to acquisitions and capital expenditures.  Specifically,  $215
million  was  borrowed to complete  the TNGL and MBA  acquisitions  in the third
quarter of 1999 and $60 million was  borrowed to fund a portion of the  purchase
of the Lou-Tex Propylene Pipeline in the first quarter of 2000.

         Dividend   income  from   unconsolidated   affiliates.   The  Company's
investment  in Dixie and VESCO are recorded  using the cost method as prescribed
by  generally  accepted   accounting   principles.   In  accordance  with  these
guidelines,  the Company records as dividend income the cash  distributions from
these  investments as opposed to recording equity  earnings.  Both the Dixie and
VESCO investments were acquired as part of the TNGL  acquisition.  For the first
six months of 2000, the Company  recorded  dividend income totaling $3.4 million
from VESCO and $0.6 million from Dixie.

         Loss on sale of assets.  During the second quarter of 2000, the Company
recognized a one-time $2.3 million  non-cash  charge on the sale of its Longview
Terminal  to  Huntsman  Corporation.  The  Longview  Terminal  was  part  of the
Pipelines  segment and was used to unload polymer grade  propylene from NGL tank
trucks.

PRO FORMA IMPACT OF ACQUISITIONS

         As noted above under 1999  Acquisitions,  the Company acquired TNGL and
MBA in the third quarter of 1999. As a result of these  acquisitions,  revenues,
operating costs and expenses,  interest expense,  and other amounts shown on the
Statements of  Consolidated  Operations  for the three and six months ended June
30, 2000 have increased  significantly  over the amounts shown for the three and
six months ended June 30, 1999. The following table presents  certain  unaudited
pro forma  information  as if the  acquisition  of TNGL from  Shell and the Mont
Belvieu  fractionator  facility  from Kinder Morgan and EPCO had been made as of
January 1, 1999:

                                       20
<PAGE>
                                       Three Months          Six Months
                                          Ended                Ended
                                         June 30,             June 30,
                                           1999                 1999
                                    -------------------  -------------------
Revenues                               $  343,990           $  644,500
                                    ===================  ===================
Net income                             $   27,166           $   40,540
                                    ===================  ===================
Allocation of net income to
      Limited partners                 $   26,892           $   40,131
                                    ===================  ===================
      General Partner                   $     274            $     409
                                    ===================  ===================


LIQUIDITY AND CAPITAL RESOURCES

         General. The Company's primary cash requirements, in addition to normal
operating  expenses,   are  debt  service,   maintenance  capital  expenditures,
expansion capital expenditures, and quarterly distributions to the partners. The
Company  expects to fund  future  cash  distributions  and  maintenance  capital
expenditures with cash flows from operating activities. Capital expenditures for
future  expansion  activities and asset  acquisitions  are expected to be funded
with cash flows from operating  activities  and  borrowings  under the revolving
bank credit facility or issuance of additional Common Units.

         Cash flows from operating  activities  were a $177.0 million inflow for
the  first  six  months  of 2000  compared  to a $14.3  million  inflow  for the
comparable  period of 1999.  Cash  flows  from  operating  activities  primarily
reflect the effects of net income, depreciation and amortization,  extraordinary
items,  equity  income of  unconsolidated  affiliates  and  changes  in  working
capital.  Net income  increased  significantly  as a result of improved  overall
margins and the TNGL  acquisition.  Depreciation  and  amortization  increased a
combined  $8.6  million  in the first six  months of 2000 over  comparable  1999
levels  as a result  of  additional  capital  expenditures  and the TNGL and MBA
acquisitions  in the third quarter of 1999.  Amortization  expense  increased by
$2.8 million due to  amortization  of the intangible  asset  associated with the
Shell Processing  Agreement ($1.5 million),  the write-off of prepaid loan costs
associated  with the payoff of the $200  Million  Bank Credit  Facility in March
2000 ($0.3  million) and the  continued  amortization  of excess costs and other
prepaid loan and bond issue costs ($1.0  million).  The net effect of changes in
operating  accounts  from year to year is generally  the result of timing of NGL
sales and purchases near the end of the period.

         Cash outflows used in investing  activities  were $136.4 million in the
first six months of 2000 and $31.5  million for the  comparable  period of 1999.
Cash outflows included capital  expenditures of $154.2 million for the first six
months  of 2000  versus  $2.5  million  for the same  period  in  1999.  Capital
expenditures  for the first six months of 2000  included  $99.6  million for the
purchase of the Lou-Tex Propylene Pipeline and related assets,  $39.2 million in
construction   costs  for  the  Lou-Tex  NGL  Pipeline,   and  $4.4  million  in
construction costs for the Neptune gas processing facility.  Included in capital
expenditures  for  the  first  six  months  of  2000  are  maintenance   capital
expenditures  of $0.5  million  versus $0.7 million for the same period in 1999.
Investing  cash  outflows  in 2000  include  $3.0  million  in  advances  to and
investments  in  unconsolidated  affiliates  versus $40.4 million for 1999.  The
$37.4 million  decrease stems  primarily from the completion of the BRF facility
and the Tri-States and Wilprise  pipeline  systems in 1999. The first six months
of 1999 included $27.9 million in investments in and advances to these projects.

         On March 8, 2000,  the Company's  offer of February 23, 2000 to buy the
remaining 88.5% ownership interests in Dixie Pipeline Company ("Dixie") from the
other seven owners expired, with no interest being purchased.  In July 2000, the
Company  entered into a letter of intent with a stockholder of Dixie to purchase
all or a portion of that stockholder's interest in Dixie (currently 8.38%) for a
purchase  price of up to  $19.4  million.  The  purchase  of this  stockholder's
interest is subject to a right of first  refusal held by the other  stockholders
of Dixie.



                                       21
<PAGE>

         During the first six months of 2000, the Company  received $6.5 million
in payments from its  participation  in the BEF note that was  purchased  during
1998 with the proceeds from the  Company's  IPO. BEF made its final note payment
in May 2000. With BEF's final payment,  the Company's receivable relating to its
participation in the BEF note was extinguished.

         Cash flows from financing activities were a $40.7 million inflow in the
first six months of 2000  versus a $2.9  million  outflow for the same period in
1999. Cash flows from financing  activities are primarily affected by repayments
of  long-term  debt,   borrowings   under  the  long-term  debt  agreements  and
distributions to the partners. The first six months of 2000 include the proceeds
from $350 Million Senior Notes and the $54 Million MBFC Loan.  Also included are
the March 2000  payments  made to retire the  outstanding  balances  on the $200
Million and $350 Million Bank Credit  Facilities  using the proceeds of the $350
Million Senior Notes and $54 Million MBFC Loan. For a complete discussion of the
$350  Million  Senior Notes and $54 Million  MBFC Loan,  see the sections  below
entitled  "Long-term  Debt" and  "Senior  Notes and MBFC  Loan." Cash flows from
financing  activities  for 1999 reflected the purchase of $4.6 million of Common
Units by a  consolidated  trust.  The  Company  used $36.1  million of the $86.4
million in cash and cash equivalents at June 30, 2000 to fund the quarterly cash
distribution to the Limited Partner and General Partner paid on August 10, 2000.

         Future Capital  Expenditures.  The Company  estimates that its share of
remaining  capital  expenditures for 2000 in the projects of its  unconsolidated
affiliates will be  approximately  $5.0 million  (including $3.2 million for the
BRPC  propylene  fractionator).  In addition,  the Company  forecasts that $95.0
million  will be spent  during the last six  months of 2000 on capital  projects
that will be recorded as property,  plant,  and equipment.  Of this amount,  the
most  significant  projects  and their  remaining  expenditures  for 2000 are as
follows:

     -    $40.5 million for the Lou-Tex NGL Pipeline;
     -    $16.1 million for the Garyville,  Louisiana to Norco, Louisiana butane
          pipelines;
     -    $ 9.9  million  for the Venice,  Louisiana  to Grand  Isle,  Louisiana
          pipeline; and
     -    $ 3.6 million for the Norco fractionator ethane liquefaction facility.

The  Company  expects to fund these  expenditures  with  operating  cash  flows,
borrowings under its bank credit  facility,  and offerings of debt and/or equity
securities.  As of June 30, 2000,  the Company had $15.8 million in  outstanding
purchase commitments  attributable to its capital projects. Of this amount, $7.5
million is related to the  construction  of the  Lou-Tex NGL  Pipeline  and $1.3
million is associated with capital projects which will be recorded as additional
investments in unconsolidated affiliates.

DISTRIBUTIONS AND DIVIDENDS FROM UNCONSOLIDATED AFFILIATES

         Distributions  from  unconsolidated  affiliates.  The Company  received
$14.3 million in distributions  from its equity method  investments in the first
six months of 2000  compared to $4.0 million for the same period in 1999. Of the
$10.3 million  increase in  distributions,  $4.7 million was from EPIK. As noted
before,  EPIK's earnings increased in the first six months of 2000 due to higher
export activity. In addition, the first six months of 2000 included $3.3 million
in cash  receipts  from  Promix  which  was  acquired  as a  result  of the TNGL
acquisition in August 1999.

         Dividends received from unconsolidated affiliates. The Company received
$4.0 million in cash dividend payments from its cost method investments in Dixie
and VESCO. Specifically, dividends paid by Dixie and VESCO were $0.6 million and
$3.4 million,  respectively.  Distributions  received from these investments are
recorded by the Company as "Dividend income from  unconsolidated  affiliates" in
the Statements of Consolidated Operations. Both Dixie and VESCO were acquired in
August 1999 as part of the TNGL acquisition.

         LONG-TERM DEBT

         Long-term debt at June 30, 2000 was comprised of $350 million in 5-year
public Senior Notes (the "$350 Million  Senior Notes") and a 10-year $54 million
loan agreement with the Mississippi Business Finance Corporation ("MBFC" and the
"$54  Million  MBFC  Loan).  The  issuance  of the  $350  Million  Senior  Notes
represented a partial takedown of the $800 million universal shelf  registration
(the  "Registration  Statement") that was filed with the Securities and Exchange
Commission in December 1999. The proceeds from the $350 Million Senior Notes and


                                       22
<PAGE>

the $54 Million MBFC Loan were used to extinguish all outstanding  balances owed
under the $200  Million  Bank Credit  Facility  and the $350 Million Bank Credit
Facility.

         The following table summarizes long-term debt at:

                                                      JUNE 30,      DECEMBER 31,
                                                       2000            1999
                                               --------------------------------
Borrowings under:
     $200 Million Bank Credit Facility                             $   129,000
     $350 Million Bank Credit Facility                                 166,000
     $350 Million Senior Notes                     $   350,000
     $54  Million MBFC Loan                             54,000
                                               --------------------------------
              Total                                    404,000         295,000
Less current maturities of long-term debt
                                                             -         129,000
                                               ---------------------------------
              Long-term debt                       $   404,000     $   166,000
                                               ================================

         At June 30,  2000,  the  Company  had a total of $40 million of standby
letters  of  credit  available  of  which   approximately   $13.3  million  were
outstanding under letter of credit agreements with the banks.

         Bank Credit Facilities

         $200 Million Bank Credit  Facility.  In July 1998, the Company  entered
into a $200 Million Bank Credit  Facility  that  included a $50 million  working
capital facility and a $150 million  revolving term loan facility.  On March 15,
2000,  the Company used $169  million of the  proceeds  from the issuance of the
$350 Million Senior Notes to retire this credit  facility in accordance with its
agreement with the banks.

         $350 Million Bank Credit  Facility.  In July 1999, the Company  entered
into a $350 Million Bank Credit  Facility  that  includes a $50 million  working
capital  facility  and a $300 million  revolving  term loan  facility.  The $300
million  revolving  term loan  facility  includes a sublimit  of $40 million for
letters of credit.  Borrowings  under the $350 Million Bank Credit Facility will
bear  interest at either the bank's prime rate or the  Eurodollar  rate plus the
applicable  margin as defined in the facility.  The Company elects the basis for
the interest rate at the time of each borrowing.

         This  facility  is  scheduled  to expire  in July 2001 and all  amounts
borrowed  thereunder  shall be due and  payable at that  time.  There must be no
amount   outstanding  under  the  working  capital  facility  for  at  least  15
consecutive  days during each fiscal year. In March 2000,  the Company used $179
million of the proceeds  from the issuance of the $350 Million  Senior Notes and
$47 million from the $54 Million MBFC Loan to payoff the outstanding  balance on
this credit facility.  No amount was outstanding on this credit facility at June
30, 2000.

         As amended on July 28,  1999,  the credit  agreement  relating  to this
facility contains a prohibition on distributions on, or purchases or redemptions
of,  Units of the  Limited  Partner if any event of default  is  continuing.  In
addition,  this bank credit facility  contains various  affirmative and negative
covenants  applicable to the ability of the Company to, among other things,  (i)
incur certain  additional  indebtedness,  (ii) grant certain  liens,  (iii) sell
assets in excess of certain  limitations,  (iv) make investments,  (v) engage in
transactions with affiliates and (vi) enter into a merger, consolidation or sale
of assets.  The bank  credit  facility  requires  that the  Company  satisfy the
following  financial  covenants at the end of each fiscal quarter:  (i) maintain
Consolidated  Tangible Net Worth (as defined in the bank credit  facility) of at
least $250  million,  (ii)  maintain  a ratio of EBITDA (as  defined in the bank
credit facility) to Consolidated Interest Expense (as defined in the bank credit
facility)  for the  previous  12-month  period  of at least 3.5 to 1.0 and (iii)
maintain a ratio of Total  Indebtedness (as defined in the bank credit facility)
to EBITDA of no more than 3.0 to 1.0. The Company was in  compliance  with these
restrictive covenants at June 30, 2000.

                                       23
<PAGE>

         Senior Notes and MBFC Loan

         $350 Million Senior Notes.  On March 13, 2000, the Company  completed a
public offering of $350 million in principal amount of 8.25%  fixed-rate  Senior
Notes due March 15, 2005 at a price to the public of 99.948% per Senior Note. In
the offering,  the Company received proceeds,  net of underwriting discounts and
commissions,  of approximately $347.7 million. The proceeds were used to pay the
entire $169  million  outstanding  principal  balance on the $200  Million  Bank
Credit  Facility  and $179  million of the $226  million  outstanding  principal
balance on the $350 Million Bank Credit Facility.

         The notes are subject to a make-whole  redemption right by the Company.
They are an  unsecured  obligation  of the  Company  and rank  equally  with its
existing and future unsecured and unsubordinated  indebtedness and senior to any
future  subordinated  indebtedness.  The notes  are  guaranteed  by the  Limited
Partner through an unsecured and unsubordinated  guarantee and were issued under
an indenture containing certain restrictive covenants.  These covenants restrict
the ability of the Company and the Limited Partner, with certain exceptions,  to
incur debt secured by liens and engage in sale and leaseback  transactions.  The
Company  and the  Limited  Partner  were in  compliance  with these  restrictive
covenants at June 30, 2000.

         Settlement  was  completed on March 15, 2000.  The offering of the $350
Million  Senior Notes was a takedown  under the Company's and Limited  Partner's
$800  million  Registration  Statement;  therefore,  the  amount  of  securities
available under the Registration Statement is reduced to $450 million.

         $54 Million MBFC Loan.  On March 27, 2000,  the Company  executed a $54
million loan  agreement  with the MBFC which was funded by the proceeds from the
sale of Revenue  Bonds by the MBFC.  The  Revenue  Bonds  issued by the MBFC are
10-year  bonds  with a  maturity  date of  March 1,  2010 and bear a fixed  rate
interest coupon of 8.70 percent.  The Company received proceeds from the sale of
the  Revenue  Bonds,  net  of  underwriting   discounts  and   commissions,   of
approximately  $53.6  million.  The proceeds  were used to pay the remaining $47
million  outstanding  principal balance on the $350 Million Bank Credit Facility
and for working capital and other general partnership  purposes. In general, the
proceeds of the Revenue  Bonds were used to  reimburse  the Company for costs it
incurred in acquiring and constructing the Pascagoula,  Mississippi  natural gas
processing plant.

         The Revenue  Bonds were  issued at par and are subject to a  make-whole
redemption right by the Company. The Revenue Bonds are guaranteed by the Limited
Partner through an unsecured and  unsubordinated  guarantee.  The loan agreement
contains certain covenants including maintaining appropriate levels of insurance
on the Pascagoula  natural gas processing  facility and  restrictions  regarding
mergers. The Company was in compliance with these restrictive  covenants at June
30, 2000.

         Interest Rate Swaps. The Company's  interest rate exposure results from
variable  rate  borrowings  from  commercial  banks  and fixed  rate  borrowings
pursuant to the $350 Million  Senior  Notes and the $54 Million  MBFC Loan.  The
company  manages its exposure to changes in interest  rates in its  consolidated
debt  portfolio by utilizing  interest  rate swaps.  An interest  rate swap,  in
general, requires one party to pay a fixed rate on the notional amount while the
other party pays a floating rate based on the notional amount.

         In March 2000,  after the issuance of the $350 Million Senior Notes and
the execution of the $54 Million MBFC Loan,  100% of the Company's  consolidated
debt were fixed rate  obligations.  To maintain a balance between  variable rate
and fixed rate exposure,  the Company entered into interest rate swap agreements
with a notional  amount of $154 million by which the Company  receives  payments
based on a fixed rate and pays an amount based on a floating rate. The Company's
consolidated  debt portfolio  interest rate exposure was 62 percent fixed and 38
percent  floating,  after  considering  the  effect  of the  interest  rate swap
agreements.  The notional amount does not represent exposure to credit loss. The
Company  monitors its  positions and the credit  ratings of its  counterparties.
Management  believes the risk of incurring a credit related loss is remote,  and
that if incurred, such losses would be immaterial.

         The effect of these swaps (none of which are leveraged) was to decrease
the Company's  interest  expense by $3.2 million for the three months ended June
30, 2000 and $3.5 million for the six months  ended June 30,  2000.  For further
information regarding the interest rate swaps, see Note 8 of the unaudited Notes
to the Consolidated Financial Statements.

                                       24
<PAGE>

MTBE FACILITY

         The Company owns a 33.33% economic interest in the BEF partnership that
owns the MTBE  production  facility  located  within the Company's  Mont Belvieu
complex.  The production of MTBE is driven by oxygenated  fuels programs enacted
under the federal Clean Air Act  Amendments of 1990 and other  legislation.  Any
changes to these programs that enable  localities to opt out of these  programs,
lessen the requirements  for oxygenates or favor the use of non-isobutane  based
oxygenated  fuels reduce the demand for MTBE and could have an adverse effect on
the Company's results of operations.

         In recent years,  MTBE has been detected in water  supplies.  The major
source of the ground water  contamination  appears to be leaks from  underground
storage  tanks.  Although  these  detections  have  been  limited  and the great
majority  of these  detections  have been  well  below  levels of public  health
concern,  there have been  actions  calling for the  phase-out  of MTBE in motor
gasoline in various federal and state governmental agencies.

         In  light  of  these   developments,   the  Company  is  formulating  a
contingency   plan  for  use  of  the  BEF  facility  if  MTBE  were  banned  or
significantly  curtailed.  Management is exploring a possible  conversion of the
BEF  facility  from MTBE  production  to  alkylate  production.  At present  the
forecast  cost of this  conversion  would be in the $20  million to $25  million
range,  with the Company's share being $6.7 million to $8.3 million.  Management
anticipates that if MTBE is banned alkylate demand will rise as producers use it
to replace MTBE as an octane enhancer.  Alkylate production would be expected to
generate  spot market  margins  comparable  to those of MTBE.  Greater  alkylate
production would be expected to increase  isobutane  consumption  nationwide and
result in improved isomerization margins for the Company.

         Sun, the MTBE facility's major customer and one of the partners of BEF,
has entered into a contract with BEF to take all of the MTBE production  through
September 2004.

YEAR 2000 READINESS DISCLOSURE

         The Company's  efforts at preparing  its computer  systems for the Year
2000 were successful and no significant problems were encountered. The Year 2000
Readiness team reported that all systems functioned properly as the date changed
from  December 31, 1999 to January 1, 2000.  The Company is also pleased to note
that no problems  were reported to it by its customers or vendors as a result of
the Year 2000 issue.  The Company  continues  to be vigilant in  monitoring  its
systems for any potential  Year 2000 problems that may arise in the  short-term.
There is no  assurance  that  residual  Year 2000  issues  will not arise in the
future  which  could have a material  adverse  effect on the  operations  of the
Company.

ACCOUNTING STANDARDS

         In June 1999, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standard  ("SFAS") No. 137,  "Accounting for
Derivative Instruments and Hedging  Activities-Deferral of the Effective Date of
FASB Statement No. 133-an amendment of FASB Statement No. 133" which effectively
delays the application of SFAS No. 133  "Accounting  for Derivative  Instruments
and Hedging  Activities"  for one year, to fiscal years beginning after June 15,
2000.  In June 2000,  the FASB  issued  SFAS No.  138,  "Accounting  for Certain
Derivative  Instruments  and Certain  Hedging  Activities - an amendment of FASB
Statement No. 133" which amends and supercedes various sections of SFAS No. 133.
Management  is  currently  studying  SFAS No. 133 and its  amendments  for their
possible impact on the consolidated  financial  statements when they are adopted
in January 2001.

UNCERTAINTY OF FORWARD-LOOKING STATEMENTS AND INFORMATION

         This quarterly report contains various  forward-looking  statements and
information that are based on the belief of the Company and the General Partner,
as well  as  assumptions  made by and  information  currently  available  to the
Company  and the  General  Partner.  When used in this  document,  words such as
"anticipate,"  "estimate,"  "project,"  "expect," "plan," "forecast,"  "intend,"
"could," and "may," and similar  expressions and statements  regarding the plans
and  objectives of the Company for future  operations,  are intended to identify
forward-looking statements. Although the Company and the General Partner believe
that  the  expectations   reflected  in  such  forward-looking   statements  are


                                       25
<PAGE>

reasonable,  they can give no assurance that such  expectations will prove to be
correct.  Such  statements  are  subject to certain  risks,  uncertainties,  and
assumptions.  If one or more of these risks or uncertainties materialize,  or if
underlying assumptions prove incorrect,  actual results may vary materially from
those anticipated, estimated, projected, or expected. Among the key risk factors
that may have a direct  bearing  on the  Company's  results  of  operations  and
financial  condition are: (a)  competitive  practices in the industries in which
the Company  competes,  (b)  fluctuations  in oil,  natural gas, and NGL product
prices and  production,  (c) operational  and systems risks,  (d)  environmental
liabilities  that are not covered by indemnity or  insurance,  (e) the impact of
current and future laws and governmental  regulations  (including  environmental
regulations) affecting the NGL industry in general, and the Company's operations
in particular,  (f) loss of a significant customer,  and (g) failure to complete
one or more new projects on time or within budget.


ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         The Company is exposed to financial market risks,  including changes in
interest rates with respect to a portion of its debt  obligations and changes in
commodity prices.  The Company may use derivative  financial  instruments (i.e.,
futures,  forwards, swaps, options, and other financial instruments with similar
characteristics)  to mitigate  these risks.  The Company does not use derivative
financial instruments for speculative (or trading) purposes.

         Beginning  with the  fourth  quarter  of 1999,  the  Company  adopted a
commercial  policy  to  manage  exposures  to the  risks  generated  by the  NGL
businesses  acquired in the TNGL acquisition.  The objective of the policy is to
assist the Company in achieving  its  profitability  goals while  maintaining  a
portfolio of  conservative  risk,  defined as remaining with the position limits
established by the Board of Directors of the General  Partner.  The Company will
enter into risk  management  transactions  to manage  price  risk,  basis  risk,
physical risk or other risks related to energy  commodities on both a short-term
(less than 30 days) and long-term  basis,  not to exceed 18 months.  The General
Partner has  established a Risk  Committee (the  "Committee")  that will oversee
overall  strategies  associated with physical and financial risks. The Committee
will approve specific commercial policies of the Company subject to this policy,
including  authorized  products,  instruments and markets. The Committee is also
charged with  establishing  specific  guidelines and procedures for implementing
the policy and ensuring compliance with the policy.

INTEREST RATE RISK

         Variable rate Debt. At June 30, 2000 and December 31, 1999, the Company
had no derivative instruments in place to cover any potential interest rate risk
on its variable-rate  debt obligations.  Variable interest rate debt obligations
do expose the Company to possible increases in interest expense and decreases in
earnings if interest rates were to rise. The Company's long-term debt associated
with the $350 Million Bank Credit  Facility is at variable  interest  rates.  No
amount was outstanding under this facility during the second quarter of 2000.

         If  the  weighted   average  base  interest   rates   selected  on  the
variable-rate  long-term  debt at December 31, 1999 were to have been 10% higher
than the weighted  average of the actual base interest rates selected,  assuming
no changes in weighted average variable debt levels, interest expense would have
increased  by  approximately  $1.4  million  with a  corresponding  decrease  in
earnings  before  minority  interest.  No  calculation  has  been  made  on  the
variable-rate  debt for June 30, 2000 since no amount was outstanding  under the
$350 Million Bank Credit Facility.

         Fixed rate Debt. In March 2000, the Company  entered into interest rate
swaps whereby the fixed rate of interest on a portion of the $350 Million Senior
Notes and the $54 Million MBFC Loan was  effectively  swapped for floating rates
tied to the six month London  Interbank  Offering Rate ("LIBOR").  Interest rate
swaps are used to manage the Company's exposure to changes in interest rates and
to lower overall costs of financing. An interest rate swap, in general, requires
one party to pay a fixed rate on the notional  amount while the other party pays
a floating rate based on the notional amount.

         After the issuance of the $350 Million  Senior Notes and the  execution
of the $54 Million MBFC Loan, 100% of the Company's consolidated debt were fixed
rate  obligations.  To maintain a balance  between  variable rate and fixed rate
exposure, the Company entered into interest rate swap agreements with a notional
amount of $154 million by which the Company  receives  payments based on a fixed


                                       26
<PAGE>

rate and pays an amount based on a floating  rate.  The  Company's  consolidated
debt  portfolio  interest  rate  exposure  was 62  percent  fixed and 38 percent
floating, after considering the effect of the interest rate swap agreements. The
notional amount does not represent exposure to credit loss. The Company monitors
its positions and the credit ratings of its counterparties.  Management believes
the risk of  incurring a credit  related  loss is remote,  and that if incurred,
such losses would be immaterial.

         The effect of these swaps (none of which are leveraged) was to decrease
the Company's  interest  expense by $3.2 million for the three months ended June
30, 2000 and $3.5 million for the six months  ended June 30, 2000.  Following is
selected  information on the Company's  portfolio of interest rate swaps at June
30, 2000:


INTEREST RATE SWAP PORTFOLIO AT JUNE 30, 2000 (1) :
(Dollars in millions)
                                                 Early             Fixed /
  Notional                                    Termination         Floating
   Amount            Period Covered             Date (2)          Rate (3)
--------------------------------------------------------------------------------

      $ 50.0 March 2000 - March 2005        March 2001         8.25% / 6.9500%
      $ 50.0 March 2000 - March 2005        March 2001         8.25% / 6.9550%
      $ 54.0 March 2000 - March 2010        March 2003         8.70% / 7.2575%

Notes:
(1)  All swaps outstanding at June 30, 2000 were entered into for the purpose of
     managing the Company's exposure to fluctuations in market interest rates.
(2)  In each case,  the  counterparty  has the option to terminate  the interest
     rate swap on the Early Termination Date
(3)  In each case, the Company is the  floating-price  payor.  The floating rate
     was the rate in effect as of June 30, 2000.

         If the six month  LIBOR  rates on the  notional  amounts of  fixed-rate
long-term  debt at June 30, 2000 were to have been 10% higher than the six month
LIBOR  rates  actually  used in the swap  agreements,  assuming  no  changes  in
weighted average fixed-rate debt levels,  interest expense for the three and six
months ended June 30, 2000 would have  increased by  approximately  $0.3 million
with a corresponding decrease in earnings before minority interest.

         Other.  At June 30, 2000 and December  31, 1999,  the Company had $86.3
million and $5.2 million  invested in cash and cash  equivalents,  respectively.
All cash equivalent investments other than cash are highly liquid, have original
maturities of less than three months,  and are considered to have  insignificant
interest rate risk.

COMMODITY PRICE RISK

         The  Company  is  exposed  to  commodity  price  risk  through  its NGL
businesses acquired in the TNGL acquisition. In order to effectively manage this
risk, the Company may enter into swaps, forwards, commodity futures, options and
other derivative  commodity  instruments with similar  characteristics  that are
permitted  by contract or business  custom to be settled in cash or with another
financial  instrument.  The purpose of these risk  management  activities  is to
hedge  exposure to price risks  associated  with natural  gas, NGL  inventories,
commitments and certain anticipated  transactions.  The table below presents the
hypothetical  changes in fair values arising from immediate  selected  potential
changes  in  the  quoted  market  prices  of  derivative  commodity  instruments
outstanding  at  December  31,  1999 and June  30,  2000.  Gain or loss on these
derivative commodity instruments would be offset by a corresponding gain or loss
on the hedged commodity positions, which are not included in the table. The fair
value of the  commodity  futures  at  December  31,  1999 and June 30,  2000 was
estimated at $0.5 million  payable and $7.7  million  receivable,  respectively,
based on quoted market prices of comparable  contracts and  approximate the gain
or loss that would have been  realized if the  contracts had been settled at the
balance  sheet date.  The change in fair value of the  commodity  futures  since
December 31, 1999 is primarily due to an increase in volumes  hedged,  change in
composition of commodities  hedged and higher natural gas prices.  The change in
fair value between June 30, 2000 and August 1, 2000 is due to the  settlement of
the July 2000 contract volumes and changes in the natural gas prices.

                                       27
<PAGE>
<TABLE>
<CAPTION>

(MILLIONS OF DOLLARS)                 NO CHANGE             10% INCREASE                   10% DECREASE
                                      ---------             ------------                   ------------

   IMPACT OF CHANGES IN QUOTED          FAIR            FAIR         INCREASE          FAIR          INCREASE
        MARKET PRICES ON:               VALUE          VALUE        (DECREASE)         VALUE        (DECREASE)
------------------------------------------------------------------------------------------------------------------

Commodity futures
<S>                                     <C>             <C>             <C>            <C>             <C>
       At December 31, 1999             $    (0.5)      $     1.2       $     1.7      $    (2.2)      $    (1.7)
       At June 30, 2000                 $     7.7       $    12.1       $     4.4      $     3.2      $     (4.5)
       At August 1, 2000                $     0.7       $     5.6       $     4.9      $    (4.2)      $    (4.9)
</TABLE>



PART II.    OTHER INFORMATION

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS.

         The  following  table shows the Use of Proceeds  from the $350  Million
Senior Notes offering completed on March 15, 2000. The $350 Million Senior Notes
represented a partial  takedown of the Company's and the Limited  Partner's $800
million Registration Statement filed with the Securities and Exchange Commission
in December 1999 (File Nos.  333-93239 and  333-93239-01,  effective January 14,
2000);  therefore,  the amount of securities  available  under the  Registration
Statement was reduced to $450 million.

         The title of the registered debt securities was "8.25% Senior Notes Due
2005." The  underwriters  of the offering were Chase  Securities,  Inc.,  Lehman
Brothers Inc., Banc One Capital Markets,  Inc.,  FleetBoston  Robertson Stephens
Inc.,  First Union  Securities,  Inc.,  Scotia  Capital  (USA) Inc. and SG Cowen
Securities Corp.. The 5-year Senior Notes have a maturity date of March 15, 2005
and bear a fixed-rate interest coupon of 8.25%.


<TABLE>
<CAPTION>
                                                                            Amounts
                                                                         (in millions)
                                                                         --------------
Proceeds:
<S>                                                                           <C>
       Sale of $350 Million Senior Notes to public at 99.948% per Note        $    350
       Less underwriting discount of 0.600% per Note                                (2)
                                                                         --------------
           Total Proceeds to Company and Operating Partnership                $    348
                                                                         ==============

Use of Proceeds:
       Retire balance on $200 Million Bank Credit Facility                    $   (169)
       Partial retirement of balance on $350 Million Bank Credit Facility         (179)
                                                                         --------------
           Total uses of funds                                                $   (348)
                                                                         ==============
</TABLE>


         See Note 4 of the  Notes to  Consolidated  Financial  Statements  for a
description of the $350 Million Senior Notes.


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(A)      EXHIBITS

*1.1     Underwriting  Agreement dated March 10, 2000, among Enterprise Products
         Partners L.P.,  Enterprise  Products  Operating L.P.,  Chase Securities
         Inc., Lehman Brothers Inc., Banc One Capital Markets, Inc., FleetBoston
         Robertson  Stephens Inc., First Union Securities,  Inc., Scotia Capital
         (USA) Inc. and SG Cowen Securities Corp. (Exhibit 1.1 on Form 8-K filed
         March 10, 2000; File No. 1-14323).

                                       28
<PAGE>

*3.1     Form of  Amended  and  Restated  Agreement  of Limited  Partnership  of
         Enterprise   Products   Partners  L.P.  (Exhibit  3.1  to  Registration
         Statement on Form S-1, File No. 333-52537, filed on May 13, 1998).

*3.2     Form of  Amended  and  Restated  Agreement  of Limited  Partnership  of
         Enterprise   Products  Operating  L.P.  (Exhibit  3.2  to  Registration
         Statement on Form S-1/A, File No. 333-52537, filed on July 21, 1998).

*3.3     LLC  Agreement of Enterprise  Products GP (Exhibit 3.3 to  Registration
         Statement on Form S-1/A, File No. 333-52537, filed on July 21, 1998).

*3.4     Second  Amended  and  Restated  Agreement  of  Limited  Partnership  of
         Enterprise  Products  Partners  L.P.  dated  September  17, 1999.  (The
         Company  incorporates  by reference the above document  included in the
         Schedule  13D filed  September  27, 1999 by Tejas Energy LLC ; filed as
         Exhibit 99.7 on Form 8-K dated October 4, 1999).

*3.5     First  Amended and  Restated  Limited  Liability  Company  Agreement of
         Enterprise  Products GP, LLC dated September 17, 1999. (Exhibit 99.8 on
         Form 8-K/A-1 filed October 27, 1999; File No. 1-14323).

*3.6     Amendment  No. 1 to Second  Amended and  Restated  Agreement of Limited
         Partnership  of Enterprise  Products  Partners L.P. dated June 9, 2000.
         (File No. 1-14323).

*4.1     Form of Common Unit certificate (Exhibit 4.1 to Registration  Statement
         on Form S-1/A, File No. 333-52537, filed on July 21, 1998).

*4.2     $200 million Credit Agreement among Enterprise Products Operating L.P.,
         the Several  Banks from Time to Time  Parties  Hereto,  Den Norske Bank
         ASA,   and  Bank  of   Tokyo-Mitsubishi,   Ltd.,   Houston   Agency  as
         Co-Arrangers,   The  Bank  of  Nova  Scotia,   as  Co-Arranger  and  as
         Documentation  Agent and The Chase Manhattan Bank as Co-Arranger and as
         Agent dated as of July 27, 1998 as Amended and Restated as of September
         30, 1998.  (Exhibit 4.2 on Form 10-K for year ended  December 31, 1998,
         filed March 17, 1999; File No. 1-14323).

*4.3     First  Amendment to $200 million Credit  Agreement  dated July 28, 1999
         among Enterprise Products Operating L.P. and the several banks thereto.
         (Exhibit  99.9 on  Form  8-K/A-1  filed  October  27,  1999;  File  No.
         1-14323).

*4.4     $350 million Credit Agreement among Enterprise Products Operating L.P.,
         BankBoston,  N.A.,  Societe Generale,  Southwest Agency and First Union
         National  Bank,  as   Co-Arrangers,   The  Chase   Manhattan  Bank,  as
         Co-Arranger  and as  Administrative  Agent,  The First National Bank of
         Chicago,  as Co-Arranger and as  Documentation  Agent, The Bank of Nova
         Scotia,  as Co-Arranger  and Syndication  Agent,  and the Several Banks
         from Time to Time  parties  hereto  with First  Union  Capital  Markets
         acting  as  Managing  Agent and Chase  Securities  Inc.  acting as Lead
         Arranger and Book Manager  dated July 28, 1999  (Exhibit  99.10 on Form
         8-K/A-1 filed October 27, 1999; File No. 1-14323).

*4.5     Unitholder  Rights  Agreement  among Tejas Energy LLC, Tejas  Midstream
         Enterprises,   LLC,  Enterprise  Products  Partners  L.P.,   Enterprise
         Products  Operating  L.P.,  Enterprise  Products  Company,   Enterprise
         Products GP, LLC and EPC Partners II, Inc.  dated  September  17, 1999.
         (The Company  incorporates by reference the above document  included in
         the Schedule 13D filed September 27, 1999 by Tejas Energy LLC; filed as
         Exhibit 99.5 on Form 8-K dated October 4, 1999).

*4.6     Form of 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.  (Exhibit 4.1 on
         Form 8-K filed March 10, 2000; File No. 1-14323).

*4.7     Form of  Global  Note  representing  all 8.25%  Senior  Notes Due 2005.
         (Exhibit 4.2 on Form 8-K filed March 10, 2000; File No. 1-14323).

*4.8     Second Amendment,  dated as of January 24, 2000, to $200 Million Credit
         Agreement  dated as of July 27,  1998,  as Amended  and  Restated as of
         September 30, 1998,  among Enterprise  Products  Operating L.P. and the
         several banks  thereto.  (Exhibit 4.3 on Form 8-K filed March 10, 2000;
         File No. 1-14323).

                                       29
<PAGE>

*4.9     First  Amendment,  dated as of January 24, 2000, to $350 Million Credit
         Agreement among Enterprise Products Operating L.P.,  BankBoston,  N.A.,
         Societe  Generale,  Southwest  Agency and First Union National Bank, as
         Co-Arrangers,   The  Chase   Manhattan  Bank,  as  Co-Arranger  and  as
         Administrative   Agent,   BankOne   N.A.,   as  Co-   Arranger  and  as
         Documentation  Agent,  The Bank of Nova Scotia,  as Co-Arranger  and as
         Syndication  Agent,  and the  several  Banks from time to time  parties
         thereto,  with First Union Capital Markets acting as Managing Agent and
         Chase  Securities  Inc. acting as Lead Arranger and Manager dated as of
         July 28, 1999.  (Exhibit 4.4 on Form 8-K filed March 10, 2000; File No.
         1-14323).

*4.10    Second  Amendment,  dated as of March 7, 2000,  to $350 Million  Credit
         Agreement among Enterprise Products Operating L.P.,  BankBoston,  N.A.,
         Societe  Generale,  Southwest  Agency and First Union National Bank, as
         Co-Arrangers,   The  Chase   Manhattan  Bank,  as  Co-Arranger  and  as
         Administrative   Agent,   BankOne   N.A.,   as  Co-   Arranger  and  as
         Documentation  Agent,  The Bank of Nova Scotia,  as Co-Arranger  and as
         Syndication  Agent,  and the  several  Banks from time to time  parties
         thereto,  with First Union Capital Markets acting as Managing Agent and
         Chase  Securities  Inc. acting as Lead Arranger and Manager dated as of
         July 28, 1999.  (Exhibit 4.5 on Form 8-K filed March 10, 2000; File No.
         1-14323).

*4.11    Guaranty  Agreement,  dated as of March 7, 2000, by Enterprise Products
         Partners L.P. in favor of The Chase Manhattan  Bank, as  Administrative
         Agent, with respect to the $350 Million Credit Agreement referred to in
         Exhibits  4.4 and 4.5.  (Exhibit  4.6 on Form 8-K filed March 10, 2000;
         File No. 1-14323).

*10.1    Articles  of  Merger  of  Enterprise  Products  Company,  HSC  Pipeline
         Partnership,  L.P., Chunchula Pipeline Company, LLC, Propylene Pipeline
         Partnership,  L.P., Cajun Pipeline Company, LLC and Enterprise Products
         Texas  Operating L.P. dated June 1, 1998 (Exhibit 10.1 to  Registration
         Statement on Form S-1/A, File No: 333-52537, filed on July 8, 1998).

*10.2    Form of EPCO  Agreement  between  Enterprise  Products  Partners  L.P.,
         Enterprise  Products  Operating L.P.,  Enterprise  Products GP, LLC and
         Enterprise Products Company (Exhibit 10.2 to Registration  Statement on
         Form S-1/A, File No. 333-52537, filed on July 21, 1998).

*10.3    Transportation  Contract between Enterprise Products Operating L.P. and
         Enterprise  Transportation  Company dated June 1, 1998 (Exhibit 10.3 to
         Registration Statement on Form S-1/A, File No. 333-52537, filed on July
         8, 1998).

*10.4    Venture Participation Agreement between Sun Company, Inc. (R&M), Liquid
         Energy  Corporation and Enterprise  Products  Company dated May 1, 1992
         (Exhibit  10.4  to  Registration   Statement  on  Form  S-1,  File  No.
         333-52537, filed on May 13, 1998).

*10.5    Partnership  Agreement  between  Sun BEF,  Inc.,  Liquid  Energy  Fuels
         Corporation and Enterprise  Products Company dated May 1, 1992 (Exhibit
         10.5 to Registration  Statement on Form S-1, File No. 333-52537,  filed
         on May 13, 1998).

*10.6    Amended  and  Restated  MTBE   Off-Take   Agreement   between   Belvieu
         Environmental  Fuels and Sun Company,  Inc. (R&M) dated August 16, 1995
         (Exhibit  10.6  to  Registration   Statement  on  Form  S-1,  File  No.
         333-52537, filed on May 13, 1998).

*10.7    Articles of Partnership of Mont Belvieu  Associates dated July 17, 1985
         (Exhibit  10.7  to  Registration   Statement  on  Form  S-1,  File  No.
         333-52537, filed on May 13, 1998).

*10.8    First  Amendment to Articles of Partnership of Mont Belvieu  Associates
         dated July 15, 1996  (Exhibit  10.8 to  Registration  Statement on Form
         S-1, File No. 333-52537, filed on May 13, 1998).

*10.9    Propylene   Facility  and   Pipeline   Agreement   between   Enterprise
         Petrochemical Company and Hercules Incorporated dated December 13, 1978
         (Exhibit  10.9  to  Registration   Statement  on  Form  S-1,  File  No.
         333-52537, dated May 13, 1998).

                                       30
<PAGE>

*10.10   Restated  Operating  Agreement  for  the  Mont  Belvieu   Fractionation
         Facilities Chambers County,  Texas between Enterprise Products Company,
         Texaco  Producing  Inc.,  El Paso  Hydrocarbons  Company  and  Champlin
         Petroleum  Company dated July 17, 1985 (Exhibit  10.10 to  Registration
         Statement on Form S-1/A, File No. 333-52537, filed on July 8, 1998).

*10.11   Ratification and Joinder Agreement  relating to Mont Belvieu Associates
         Facilities between Enterprise Products Company,  Texaco Producing Inc.,
         El Paso  Hydrocarbons  Company,  Champlin  Petroleum  Company  and Mont
         Belvieu  Associates  dated July 17, 1985 (Exhibit 10.11 to Registration
         Statement on Form S-1/A, File No. 333-52537, filed on July 8, 1998).

*10.12   Amendment to Propylene  Facility and Pipeline Sales  Agreement  between
         HIMONT U.S.A.,  Inc. and Enterprise  Products  Company dated January 1,
         1993 (Exhibit 10.12 to Registration  Statement on Form S-1/A,  File No.
         333-52537, filed on July 8, 1998).

*10.13   Amendment to Propylene  Facility and Pipeline  Agreement between HIMONT
         U.S.A.,  Inc. and  Enterprise  Products  Company  dated January 1, 1995
         (Exhibit  10.13  to  Registration  Statement  on Form  S-1/A,  File No.
         333-52537, filed on July 8, 1998).

*10.14   Fourth  Amendment to Conveyance of Gas Processing  Rights between Tejas
         Natural Gas Liquids,  LLC and Shell Oil Company,  Shell  Exploration  &
         Production  Company,  Shell Offshore Inc., Shell Deepwater  Development
         Inc.,  Shell Land & Energy  Company and Shell  Frontier  Oil & Gas Inc.
         dated August 1, 1999. (Exhibit 10.14 to Form 10-Q filed on November 15,
         1999; File No. 1-14323).

*12.1    Computation  of ratio of earnings  to fixed  charges for the year ended
         December 31, 1999. (Exhibit 12.1 on Form 8-K filed March 10, 2000; File
         No. 1-14323).

*25.1    Statement of Eligibility  and  Qualification  under the Trust Indenture
         Act of 1939 on Form T-1 of First Union National Bank.  (Exhibit 25.1 on
         Form 8-K filed March 10, 2000; File No. 1-14323).

*99.1    Contribution  Agreement  between  Tejas  Energy  LLC,  Tejas  Midstream
         Enterprises,   LLC,  Enterprise  Products  Partners  L.P.,   Enterprise
         Products  Operating  L.P.,  Enterprise  Products  Company,   Enterprise
         Products GP, LLC and EPC Partners II, Inc.  dated  September  17, 1999.
         (The Company  incorporates by reference the above document  included in
         the Schedule 13D filed September 27, 1999 by Tejas Energy LLC; filed as
         Exhibit 99.4 on Form 8-K dated October 4, 1999).

*99.2    Registration  Rights Agreement  between Tejas Energy LLC and Enterprise
         Products   Partners  L.P.  dated   September  17,  1999.  (The  Company
         incorporates  by reference the above document  included in the Schedule
         13D filed  September  27,  1999 by Tejas  Energy LLC ; filed as Exhibit
         99.6 on Form 8-K dated October 4, 1999).

27.1     Financial Data Schedule

---------------------

* Asterisk indicates exhibits incorporated by reference as indicated;  all other
exhibits are filed herewith


         (B) REPORTS ON FORM 8-K
         There were no reports on Form 8-K filed during the quarter.


                                       31
<PAGE>

                                   SIGNATURES


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                            ENTERPRISE PRODUCTS OPERATING L.P.
                                            (A Delaware Limited Partnership)

                                            By: Enterprise Products GP, LLC
                                                as General Partner


Date:   August 11, 2000                         /s/  Michael J. Knesek
                                                --------------------------------
                                                Vice President, Controller and
                                                Principal Accounting Officer