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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

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

For the Quarter Ended September 30, 2002

Commission File No. 1-10403

TEPPCO Partners, L.P.

(Exact name of Registrant as specified in its charter)


|                                                  |  |                                                   
|------------------------------------------------- |  | --------------------------------------------------
|Delaware
(State of Incorporation
or Organization) |  | 76-0291058
(I.R.S. Employer
Identification Number)

2929 Allen Parkway
P.O. Box 2521
Houston, Texas 77252-2521
(Address of principal executive offices, including zip code)

(713) 759-3636
(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

Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date.

Limited Partner Units outstanding as of October 31, 2002: 50,014,597



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TABLE OF CONTENTS



|                                                  |                                                                                               |                                            |  |  |  |  |  | 
|------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                    
|                                                  | Item 1. Financial Statements                                                                 
|                                                  |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                                                  |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME         
|                                                  |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                                  |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                                  | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                  |                                                                                               | Forward-Looking Statements                
|                                                  | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|                                                  | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION                       
|                                                  | Item 6. Exhibits and Reports on Form 8-K.                                                    
|SIGNATURES                                       
|EXHIBIT INDEX                                    
|Computation of Ratio of Earnings to Fixed Charges



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##### Table of Contents



TEPPCO PARTNERS, L.P.

TABLE OF CONTENTS

|                                                                                              |                                                                                                                      |      |    |    | 
|--------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | ---- | -- | -- | 
|PART I. FINANCIAL INFORMATION                                                                 |                                                                                                                      | Page
|                                                                                              |                                                                                                                      |     
|Item 1. Financial Statements                                                                  |                                                                                                                      |      |    |   
|                                                                                              | Consolidated Balance Sheets as of September 30, 2002 (unaudited) and December 31, 2001                               |      |    | 1  | 
|                                                                                              | Consolidated Statements of Income for the three months and nine months ended September 30,
2002 and 2001 (unaudited) |      |    | 2  | 
|                                                                                              | Consolidated Statements of Cash Flows for the nine months ended September 30, 2002
and 2001 (unaudited)              |      |    | 3  | 
|                                                                                              | Notes to the Consolidated Financial Statements (unaudited)                                                           |      |    | 4  | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                                      |      | 28 |   
|                                                                                              | Forward-Looking Statements                                                                                           |      |    | 44 | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                                      |      | 44 |   
|Item 4. Controls and Procedures                                                               |                                                                                                                      |      | 46 |   
|PART II. OTHER INFORMATION                                                                    |                                                                                                                      |      |    |   
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                      |      | 46 |   

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PART I. FINANCIAL INFORMATION




Item 1. Financial Statements




TEPPCO PARTNERS, L.P.

CONSOLIDATED BALANCE SHEETS
(in thousands)

|                                                                                                                   |                                          |                                         |                         |                                   |           |               |           |              |           |         |  | 
|------------------------------------------------------------------------------------------------------------------ | ---------------------------------------- | --------------------------------------- | ----------------------- | --------------------------------- | --------- | ------------- | --------- | ------------ | --------- | ------- |  | 
|                                                                                                                   |                                          |                                         |                         |                                   |           | September 30, |           | December 31,
|                                                                                                                   |                                          |                                         |                         |                                   |           | 2002          |           | 2001        
|                                                                                                                   |                                          |                                         |                         |                                   |           |               |           |             
|                                                                                                                   |                                          |                                         |                         |                                   |           | (Unaudited)   |           |              |           |        
|                                                                                                                   |                                          |                                         |                         | ASSETS                            |           |               |           |              |           |         |  | 
|Current assets:                                                                                                    |                                          |                                         |                         |                                   |           |               |           |             
|                                                                                                                   | Cash and cash equivalents                |                                         | $                       | 32,137                            |           |               | $         | 25,479       |          
|                                                                                                                   | Accounts receivable, trade               |                                         |                         | 293,044                           |           |               |           | 221,541      |          
|                                                                                                                   | Accounts receivable, related party       |                                         |                         | 6,023                             |           |               |           | 4,310        |          
|                                                                                                                   | Inventories                              |                                         |                         | 21,693                            |           |               |           | 17,243       |          
|                                                                                                                   | Other                                    |                                         |                         | 25,245                            |           |               |           | 14,907       |          
|                                                                                                                   |                                          |                                         |                         |                                   |           |               |           |              |          
|                                                                                                                   |                                          | Total current assets                    |                         |                                   | 378,142   |               |           |              | 283,480   |        
|                                                                                                                   |                                          |                                         |                         |                                   |           |               |           |              |          
|Property, plant and equipment, at cost (Net of accumulated
depreciation and amortization of $324,627 and $290,248) |                                          |                                         | 1,593,435               |                                   |           |               | 1,180,461 |             
|Equity investments                                                                                                 |                                          |                                         | 285,623                 |                                   |           |               | 292,224   |             
|Intangible assets                                                                                                  |                                          |                                         | 450,448                 |                                   |           |               | 251,487   |             
|Goodwill                                                                                                           |                                          |                                         | 16,944                  |                                   |           |               | 16,669    |             
|Other assets                                                                                                       |                                          |                                         | 88,751                  |                                   |           |               | 41,027    |             
|                                                                                                                   |                                          |                                         |                         |                                   |           |               |           |              |          
|                                                                                                                   |                                          | Total assets                            |                         | $                                 | 2,813,343 |               |           | $            | 2,065,348 |        
|                                                                                                                   |                                          |                                         |                         |                                   |           |               |           |              |          
|                                                                                                                   |                                          |                                         |                         | LIABILITIES AND PARTNERS CAPITAL |           |               |           |              |           |         |  | 
|Current liabilities:                                                                                               |                                          |                                         |                         |                                   |           |               |           |             
|                                                                                                                   | Notes payable                            |                                         | $                       | 72,000                            |           |               | $         | 360,000      |          
|                                                                                                                   | Accounts payable and accrued liabilities |                                         |                         | 276,742                           |           |               |           | 228,075      |          
|                                                                                                                   | Accounts payable, related parties        |                                         |                         | 5,511                             |           |               |           | 22,680       |          
|                                                                                                                   | Accrued interest                         |                                         |                         | 13,387                            |           |               |           | 15,649       |          
|                                                                                                                   | Other accrued taxes                      |                                         |                         | 11,871                            |           |               |           | 8,888        |          
|                                                                                                                   | Other                                    |                                         |                         | 50,016                            |           |               |           | 33,550       |          
|                                                                                                                   |                                          |                                         |                         |                                   |           |               |           |              |          
|                                                                                                                   |                                          | Total current liabilities               |                         |                                   | 429,527   |               |           |              | 668,842   |        
|                                                                                                                   |                                          |                                         |                         |                                   |           |               |           |              |          
|Senior Notes                                                                                                       |                                          |                                         | 949,456                 |                                   |           |               | 375,184   |             
|Other long-term debt                                                                                               |                                          |                                         | 500,000                 |                                   |           |               | 340,658   |             
|Other liabilities and deferred credits                                                                             |                                          |                                         | 31,634                  |                                   |           |               | 31,853    |             
|Redeemable Class B Units held by related party                                                                     |                                          |                                         | 103,883                 |                                   |           |               | 105,630   |             
|Commitments and contingencies                                                                                      |                                          |                                         |                         |                                   |           |               |           |             
|Partners capital:                                                                                                 |                                          |                                         |                         |                                   |           |               |           |             
|                                                                                                                   | Accumulated other comprehensive loss     |                                         |                         | (22,192                           | )         |               |           | (20,324      | )        
|                                                                                                                   | General partners interest               |                                         |                         | 13,187                            |           |               |           | 13,190       |          
|                                                                                                                   | Limited partners interests              |                                         |                         | 807,848                           |           |               |           | 550,315      |          
|                                                                                                                   |                                          |                                         |                         |                                   |           |               |           |              |          
|                                                                                                                   |                                          |                                         | Total partners capital |                                   |           | 798,843       |           |              |           | 543,181 | 
|                                                                                                                   |                                          |                                         |                         |                                   |           |               |           |              |          
|                                                                                                                   |                                          | Total liabilities and partners capital |                         | $                                 | 2,813,343 |               |           | $            | 2,065,348 |        
|                                                                                                                   |                                          |                                         |                         |                                   |           |               |           |              |          

See accompanying Notes to Consolidated Financial Statements.

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TEPPCO PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per Unit amounts)

|                                                               |                                               |                                 |         |                    |         |                   |         |         |         |      |         |           |           |   |         |           |           | 
|-------------------------------------------------------------- | --------------------------------------------- | ------------------------------- | ------- | ------------------ | ------- | ----------------- | ------- | ------- | ------- | ---- | ------- | --------- | --------- | - | ------- | --------- | --------- | 
|                                                               |                                               |                                 |         | Three Months Ended |         | Nine Months Ended
|                                                               |                                               |                                 |         | September 30,      |         | September 30,    
|                                                               |                                               |                                 |         |                    |         |                  
|                                                               |                                               |                                 |         | 2002               |         | 2001              |         | 2002    |         | 2001
|                                                               |                                               |                                 |         |                    |         |                   |         |         |         |     
|Operating revenues:                                            |                                               |                                 |         |                    |         |                   |         |         |         |      |         |           |           |   |         |          
|                                                               | Sales of crude oil and petroleum products     |                                 | $       | 766,502            |         |                   | $       | 915,296 |         |      | $       | 2,111,817 |           |   | $       | 2,601,580 |          
|                                                               | Transportation  Refined products             |                                 |         | 35,271             |         |                   |         | 32,161  |         |      |         | 92,218    |           |   |         | 109,748   |          
|                                                               | Transportation  LPGs                         |                                 |         | 12,515             |         |                   |         | 15,669  |         |      |         | 46,688    |           |   |         | 54,174    |          
|                                                               | Transportation  Crude oil                    |                                 |         | 6,809              |         |                   |         | 6,862   |         |      |         | 20,032    |           |   |         | 18,929    |          
|                                                               | Transportation   NGLs                        |                                 |         | 11,157             |         |                   |         | 5,305   |         |      |         | 28,007    |           |   |         | 15,555    |          
|                                                               | Gathering  Natural gas                       |                                 |         | 33,031             |         |                   |         |        |         |      |         | 54,005    |           |   |         |          |          
|                                                               | Mont Belvieu operations                       |                                 |         | 3,726              |         |                   |         | 3,977   |         |      |         | 11,121    |           |   |         | 9,871     |          
|                                                               | Other                                         |                                 |         | 11,793             |         |                   |         | 11,546  |         |      |         | 36,382    |           |   |         | 39,876    |          
|                                                               |                                               |                                 |         |                    |         |                   |         |         |         |      |         |           |           |   |         |           |          
|                                                               |                                               | Total operating revenues        |         |                    | 880,804 |                   |         |         | 990,816 |      |         |           | 2,400,270 |   |         |           | 2,849,733 | 
|                                                               |                                               |                                 |         |                    |         |                   |         |         |         |      |         |           |           |   |         |           |          
|Costs and expenses:                                            |                                               |                                 |         |                    |         |                   |         |         |         |      |         |           |           |   |         |          
|                                                               | Purchases of crude oil and petroleum
products |                                 |         | 753,577            |         |                   |         | 902,126 |         |      |         | 2,074,719 |           |   |         | 2,566,621 |          
|                                                               | Operating, general and administrative         |                                 |         | 41,567             |         |                   |         | 38,181  |         |      |         | 108,095   |           |   |         | 96,086    |          
|                                                               | Operating fuel and power                      |                                 |         | 9,599              |         |                   |         | 9,125   |         |      |         | 25,431    |           |   |         | 27,946    |          
|                                                               | Depreciation and amortization                 |                                 |         | 24,551             |         |                   |         | 10,411  |         |      |         | 58,191    |           |   |         | 31,175    |          
|                                                               | Taxes  other than income taxes               |                                 |         | 4,875              |         |                   |         | 3,852   |         |      |         | 12,854    |           |   |         | 11,409    |          
|                                                               |                                               |                                 |         |                    |         |                   |         |         |         |      |         |           |           |   |         |           |          
|                                                               |                                               | Total costs and expenses        |         |                    | 834,169 |                   |         |         | 963,695 |      |         |           | 2,279,290 |   |         |           | 2,733,237 | 
|                                                               |                                               |                                 |         |                    |         |                   |         |         |         |      |         |           |           |   |         |           |          
|                                                               |                                               | Operating income                |         |                    | 46,635  |                   |         |         | 27,121  |      |         |           | 120,980   |   |         |           | 116,496   | 
|Interest expense                                               |                                               |                                 | (19,763 | )                  |         |                   | (15,679 | )       |         |      | (53,379 | )         |           |   | (47,365 | )        
|Interest capitalized                                           |                                               |                                 | 1,338   |                    |         |                   | 1,105   |         |         |      | 4,476   |           |           |   | 2,040   |          
|Equity earnings                                                |                                               |                                 | 3,147   |                    |         |                   | 5,645   |         |         |      | 9,133   |           |           |   | 15,270  |          
|Other income  net                                             |                                               |                                 | 736     |                    |         |                   | 997     |         |         |      | 2,068   |           |           |   | 2,224   |          
|                                                               |                                               |                                 |         |                    |         |                   |         |         |         |      |         |           |           |   |         |           |          
|                                                               |                                               | Income before minority interest |         |                    | 32,093  |                   |         |         | 19,189  |      |         |           | 83,278    |   |         |           | 88,665    | 
|Minority interest                                              |                                               |                                 |        |                    |         |                   | (97     | )       |         |      |        |           |           |   | (800    | )        
|                                                               |                                               |                                 |         |                    |         |                   |         |         |         |      |         |           |           |   |         |           |          
|                                                               |                                               | Net income                      |         | $                  | 32,093  |                   |         | $       | 19,092  |      |         | $         | 83,278    |   |         | $         | 87,865    | 
|                                                               |                                               |                                 |         |                    |         |                   |         |         |         |      |         |           |           |   |         |           |          
|Net Income Allocation:                                         |                                               |                                 |         |                    |         |                   |         |         |         |      |         |           |           |   |         |          
|Limited Partner Unitholders                                    |                                               | $                               | 22,139  |                    |         | $                 | 12,113  |         |         | $    | 57,200  |           |           | $ | 62,035  |          
|Class B Unitholder                                             |                                               |                                 | 1,873   |                    |         |                   | 1,357   |         |         |      | 5,107   |           |           |   | 7,027   |          
|General Partner                                                |                                               |                                 | 8,081   |                    |         |                   | 5,622   |         |         |      | 20,971  |           |           |   | 18,803  |          
|                                                               |                                               |                                 |         |                    |         |                   |         |         |         |      |         |           |           |   |         |           |          
|                                                               |                                               | Total net income allocated      |         | $                  | 32,093  |                   |         | $       | 19,092  |      |         | $         | 83,278    |   |         | $         | 87,865    | 
|                                                               |                                               |                                 |         |                    |         |                   |         |         |         |      |         |           |           |   |         |           |          
|Basic net income per Limited
Partner and Class B Unit          |                                               | $                               | 0.48    |                    |         | $                 | 0.35    |         |         | $    | 1.33    |           |           | $ | 1.79    |          
|                                                               |                                               |                                 |         |                    |         |                   |         |         |         |      |         |           |           |   |         |           |          
|Diluted net income per Limited
Partner and Class B Unit        |                                               | $                               | 0.48    |                    |         | $                 | 0.35    |         |         | $    | 1.32    |           |           | $ | 1.79    |          
|                                                               |                                               |                                 |         |                    |         |                   |         |         |         |      |         |           |           |   |         |           |          
|Weighted average Limited Partner and Class B
Units outstanding |                                               |                                 | 50,007  |                    |         |                   | 38,867  |         |         |      | 46,991  |           |           |   | 38,544  |          

See accompanying Notes to Consolidated Financial Statements.

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TEPPCO PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)

|                                                 |                                                                               |                                                               |                                                              |                                           |          |                   |          |        |          |         |          |  
|------------------------------------------------ | ----------------------------------------------------------------------------- | ------------------------------------------------------------- | ------------------------------------------------------------ | ----------------------------------------- | -------- | ----------------- | -------- | ------ | -------- | ------- | -------- | -
|                                                 |                                                                               |                                                               |                                                              |                                           |          | Nine Months Ended
|                                                 |                                                                               |                                                               |                                                              |                                           |          | September 30,    
|                                                 |                                                                               |                                                               |                                                              |                                           |          |                  
|                                                 |                                                                               |                                                               |                                                              |                                           |          | 2002              |          | 2001  
|                                                 |                                                                               |                                                               |                                                              |                                           |          |                   |          |       
|Cash flows from operating activities:            |                                                                               |                                                               |                                                              |                                           |          |                   |          |       
|                                                 | Net income                                                                    |                                                               | $                                                            | 83,278                                    |          |                   | $        | 87,865 |         
|                                                 | Adjustments to reconcile net income to cash provided by
operating activities: |                                                               |                                                              |                                           |          |                   |          |        |         
|                                                 |                                                                               |                                                               | Depreciation and amortization                                |                                           |          | 58,191            |          |        |          | 31,175  |         
|                                                 |                                                                               |                                                               | Earnings in equity investments, net of distributions         |                                           |          | 14,322            |          |        |          | 6,090   |         
|                                                 |                                                                               |                                                               | Non-cash portion of interest expense                         |                                           |          | 4,018             |          |        |          | 2,175   |         
|                                                 |                                                                               |                                                               | (Increase) decrease in accounts receivable                   |                                           |          | (71,503           | )        |        |          | 9,292   |         
|                                                 |                                                                               |                                                               | Increase in inventories                                      |                                           |          | (4,450            | )        |        |          | (1,972  | )       
|                                                 |                                                                               |                                                               | Increase in other current assets                             |                                           |          | (10,337           | )        |        |          | (3,524  | )       
|                                                 |                                                                               |                                                               | Increase (decrease) in accounts payable and accrued expenses |                                           |          | 45,046            |          |        |          | (16,231 | )       
|                                                 |                                                                               |                                                               | Other                                                        |                                           |          | 22,021            |          |        |          | (1,412  | )       
|                                                 |                                                                               |                                                               |                                                              |                                           |          |                   |          |        |         
|                                                 |                                                                               |                                                               |                                                              | Net cash provided by operating activities |          |                   | 140,586  |        |          |         | 113,458  |  
|                                                 |                                                                               |                                                               |                                                              |                                           |          |                   |          |        |         
|Cash flows from investing activities:            |                                                                               |                                                               |                                                              |                                           |          |                   |          |       
|                                                 |                                                                               | Proceeds from cash investments                                |                                                              |                                           |         |                   |          |        | 3,236    |        
|                                                 |                                                                               | Purchase of crude oil assets                                  |                                                              |                                           |         |                   |          |        | (20,000  | )      
|                                                 |                                                                               | Proceeds from the sale of assets                              |                                                              |                                           | 3,380    |                   |          |        | 1,300    |        
|                                                 |                                                                               | Purchase of Val Verde Gathering System                        |                                                              |                                           | (444,150 | )                 |          |        |         |        
|                                                 |                                                                               | Purchase of Chaparral NGL system                              |                                                              |                                           | (132,372 | )                 |          |        |         |        
|                                                 |                                                                               | Purchase of Jonah Gas Gathering Company                       |                                                              |                                           | (7,319   | )                 |          |        | (359,834 | )      
|                                                 |                                                                               | Investments in Centennial Pipeline LLC                        |                                                              |                                           | (7,721   | )                 |          |        | (34,335  | )      
|                                                 |                                                                               | Capital expenditures                                          |                                                              |                                           | (98,363  | )                 |          |        | (61,966  | )      
|                                                 |                                                                               |                                                               |                                                              |                                           |          |                   |          |        |         
|                                                 |                                                                               |                                                               |                                                              | Net cash used in investing activities     |          |                   | (686,545 | )      |          |         | (471,599 | )
|                                                 |                                                                               |                                                               |                                                              |                                           |          |                   |          |        |         
|Cash flows from financing activities:            |                                                                               |                                                               |                                                              |                                           |          |                   |          |       
|                                                 |                                                                               | Proceeds from term and revolving credit facilities            |                                                              |                                           | 662,000  |                   |          |        | 427,000  |        
|                                                 |                                                                               | Repayments on term and revolving credit facilities            |                                                              |                                           | (790,659 | )                 |          |        | (41,000  | )      
|                                                 |                                                                               | Issuance of Senior Notes                                      |                                                              |                                           | 497,805  |                   |          |        |         |        
|                                                 |                                                                               | Debt issuance costs                                           |                                                              |                                           | (7,025   | )                 |          |        | (2,601   | )      
|                                                 |                                                                               | Proceeds from termination of interest rate swaps              |                                                              |                                           | 17,984   |                   |          |        |         |        
|                                                 |                                                                               | Issuance of Limited Partner Units, net                        |                                                              |                                           | 275,264  |                   |          |        | 54,588   |        
|                                                 |                                                                               | General Partners contributions                               |                                                              |                                           | 5,627    |                   |          |        | 1,114    |        
|                                                 |                                                                               | Distributions                                                 |                                                              |                                           | (108,379 | )                 |          |        | (75,025  | )      
|                                                 |                                                                               |                                                               |                                                              |                                           |          |                   |          |        |         
|                                                 |                                                                               |                                                               |                                                              | Net cash provided by financing activities |          |                   | 552,617  |        |          |         | 364,076  |  
|                                                 |                                                                               |                                                               |                                                              |                                           |          |                   |          |        |         
|Net increase in cash and cash equivalents        |                                                                               |                                                               | 6,658                                                        |                                           |          |                   | 5,935    |       
|Cash and cash equivalents at beginning of period |                                                                               |                                                               | 25,479                                                       |                                           |          |                   | 27,096   |       
|                                                 |                                                                               |                                                               |                                                              |                                           |          |                   |          |        |         
|Cash and cash equivalents at end of period       |                                                                               | $                                                             | 32,137                                                       |                                           |          | $                 | 33,031   |       
|                                                 |                                                                               |                                                               |                                                              |                                           |          |                   |          |        |         
|Supplemental disclosure of cash flows:           |                                                                               |                                                               |                                                              |                                           |          |                   |          |       
|                                                 |                                                                               | Interest paid during the period (net of capitalized interest) |                                                              | $                                         | 30,475   |                   |          | $      | 52,022   |        
|                                                 |                                                                               |                                                               |                                                              |                                           |          |                   |          |        |         

See accompanying Notes to Consolidated Financial Statements.

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TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

TEPPCO Partners, L.P. (the Partnership), a Delaware limited partnership,
is a master limited partnership formed in March 1990. We operate through TE
Products Pipeline Company, Limited Partnership (TE Products), TCTM, L.P.
(TCTM) and TEPPCO Midstream Companies, L.P. (TEPPCO Midstream).
Collectively, TE Products, TCTM and TEPPCO Midstream are referred to as the
Operating Partnerships. Texas Eastern Products Pipeline Company, LLC (the
Company or General Partner), a Delaware limited liability company, serves
as our general partner. The General Partner is a wholly-owned subsidiary of
Duke Energy Field Services (DEFS), a joint venture between Duke Energy
Corporation (Duke Energy) and ConocoPhillips. Duke Energy holds an
approximate 70% interest in DEFS, and ConocoPhillips holds the remaining 30%.
The Company, as general partner, performs all management and operating
functions required for us, except for the management and operations of certain
of the TEPPCO Midstream assets. We have entered into agreements with DEFS in
which DEFS manages certain of the TEPPCO Midstream assets on our behalf. We
reimburse the General Partner for all reasonable direct and indirect expenses
incurred in managing us.

On July 26, 2001, the Company restructured its general partner ownership
of the Operating Partnerships to cause them to be indirectly wholly-owned by
us. TEPPCO GP, Inc. (TEPPCO GP), our subsidiary, succeeded the Company as
general partner of the Operating Partnerships. All remaining partner interests
in the Operating Partnerships not already owned by us were transferred to us.
In exchange for this contribution, the Companys interest as our general
partner was increased to 2%. The increased percentage is the economic
equivalent of the aggregate interest that the Company had prior to the
restructuring through its combined interests in us and the Operating
Partnerships. As a result, we hold a 99.999% limited partner interest in the
Operating Partnerships and TEPPCO GP holds a 0.001% general partner interest.
This reorganization was undertaken to simplify required financial reporting by
the Operating Partnerships when the Operating Partnerships issue guarantees of
our debt.

As used in this Report, we, us, our, and the Partnership means
TEPPCO Partners, L.P. and, where the context requires, includes our subsidiary
operating partnerships.

The accompanying unaudited consolidated financial statements reflect all
adjustments that are, in the opinion of the management of the Company, of a
normal and recurring nature and necessary for a fair statement of our financial
position as of September 30, 2002, and the results of our operations and cash
flows for the periods presented. The results of operations for the three
months and nine months ended September 30, 2002, are not necessarily indicative
of results of our operations for the full year 2002. You should read the
interim financial statements in conjunction with our consolidated financial
statements and notes thereto presented in the TEPPCO Partners, L.P. Annual
Report on Form 10-K, as amended, for the year ended December 31, 2001. We have
reclassified certain amounts from prior periods to conform with the current
presentation.

We operate and report in three business segments: transportation and
storage of refined products, liquefied petroleum gases (LPGs) and
petrochemicals (Downstream Segment); gathering, transportation, marketing and
storage of crude oil; and distribution of lubrication oils and specialty
chemicals (Upstream Segment); and gathering of natural gas, fractionation of
natural gas liquids (NGLs) and transportation of NGLs (Midstream Segment).
Our reportable segments offer different products and services and are managed
separately because each requires different business strategies.

Our interstate transportation operations, including rates charged to
customers, are subject to regulations prescribed by the Federal Energy
Regulatory Commission (FERC). We refer to refined products, LPGs,
petrochemicals, crude oil, NGLs and natural gas in this Report, collectively,
as petroleum products or products.

4



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TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

Basic net income per Unit is computed by dividing net income, after
deduction of the general partners interest, by the weighted average number of
Limited Partner and Class B Units outstanding (a total of 50.0 million and 38.9
million Units for the three months ended September 30, 2002, and 2001,
respectively, and 47.0 million and 38.5 million Units for the nine months ended
September 30, 2002, and 2001, respectively). The general partners percentage
interest in net income is based on its percentage of cash distributions from
Available Cash for each period (see Note 10. Quarterly Distributions of
Available Cash). The general partner was allocated $8.1 million (representing
25.18%) and $5.6 million (representing 29.45%) of net income for the three
months ended September 30, 2002, and 2001, respectively, and $21.0 million
(representing 25.18%) and $18.8 million (representing 21.40%) of net income for
the nine months ended September 30, 2002, and 2001, respectively. The General
Partners percentage interest in our net income increased for the nine months
ended September 30, 2002, compared to the corresponding period in 2001, as a
result of higher annualized distributions paid per Unit during 2002.

Diluted net income per Unit is similar to the computation of basic net
income per Unit above, except that the denominator was increased to include the
dilutive effect of outstanding Unit options by application of the treasury
stock method. For the three months ended September 30, 2002, and 2001, the
denominator was increased by 20,645 Units and 45,110 Units, respectively. For
the nine months ended September 30, 2002, and 2001, the denominator was
increased by 34,931 Units and 33,277 Units, respectively.

NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for
Asset Retirement Obligations. SFAS 143 requires us to record the fair value of
an asset retirement obligation as a liability in the period in which we incur a
legal obligation for the retirement of tangible long-lived assets. A
corresponding asset is also recorded and depreciated over the life of the
asset. After the initial measurement of the asset retirement obligation, the
obligation will be adjusted at the end of each period to reflect the passage of
time and changes in the estimated future cash flows underlying the obligation.
We are required to adopt SFAS 143 effective January 1, 2003. We are currently
evaluating the impact of adopting SFAS 143.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS 144 supercedes SFAS No. 121,
Accounting for Long-Lived Assets and For Long-Lived Assets to be Disposed Of,
but retains its fundamental provisions for reorganizing and measuring
impairment losses on long-lived assets held for use and long-lived assets to be
disposed of by sale. We adopted SFAS 144 effective January 1, 2002. The
adoption of SFAS 144 did not have a material effect on our financial position,
results of operations or cash flows.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS 145 eliminates the requirement to classify gains and losses
from the extinguishment of indebtedness as extraordinary, requires certain
lease modifications to be treated the same as a sale-leaseback transaction, and
makes other non-substantive technical corrections to existing pronouncements.
SFAS 145 is effective for fiscal years beginning after May 15, 2002, with
earlier adoption encouraged. We are required to adopt SFAS 145 effective
January 1, 2003. We do not believe that the adoption of SFAS 145 will have a
material effect on our financial position, results of operations or cash flows.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring). SFAS 146
requires recognition of a liability for a cost associated with an exit or
disposal activity

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TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

when the liability is incurred, as opposed to when the entity commits to an
exit plan under EITF No. 94-3. SFAS 146 is to be applied prospectively to exit
or disposal activities initiated after December 31, 2002. We do not believe
that the adoption of SFAS 146 will have a material effect on our financial
position, results of operations or cash flows.

In June 2002, the EITF reached a consensus on certain issues contained in
Topic 02-03, Recognition and Reporting of Gains and Losses on Energy Trading
Contracts under EITF Issue No. 98-10, Accounting for Contracts Involved in
Energy Trading and Risk Management Activities. We do not believe that this
consensus, as currently interpreted by the EITF, applies to us, as we engage in
the marketing of crude oil owned by us and third parties, rather than energy
trading as contemplated by EITF No. 98-10. We do not engage in material energy
trading activities. While certain accounting bodies have requested
clarification from the EITF, the EITF has not expanded its definition of energy
trading activities to include the marketing activities in which we engage.
However, if the EITF does expand its definition of energy trading activities to
include our marketing activities, we may be required to present sales of crude
oil and petroleum products in the statement of income on a net margin basis.
Any such change would significantly decrease our reported sales and purchases
of crude oil and petroleum products, but would have no effect on our operating
income or cash flow.

NOTE 3. GOODWILL AND OTHER INTANGIBLE ASSETS

In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS 142 requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead tested for impairment at least
annually. SFAS 142 requires that intangible assets with definite useful lives
be amortized over their respective estimated useful lives.

Beginning January 1, 2002, effective with the adoption of SFAS 142, we no
longer record amortization expense related to goodwill or amortization expense
related to the excess investment on our equity investment in Seaway Crude
Pipeline Company (see Note 7. Equity Investments). Upon adoption of SFAS 142
effective January 1, 2002, we had not yet begun to amortize our excess
investment in Centennial Pipeline LLC; therefore, no amortization expense has
been recorded in any of the periods presented below related to this excess
investment. The following table presents our results on a comparable basis, as
if we had not recorded amortization expense of goodwill or amortization expense
of our excess investment in Seaway Crude Pipeline Company for the three months
and nine months ended September 30, 2001 (in thousands, except per Unit
amounts):

|                       |                                                |                            |   |                    |        |                   |   |        |        |      |   |        |        |  |   |        |        | 
|---------------------- | ---------------------------------------------- | -------------------------- | - | ------------------ | ------ | ----------------- | - | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                       |                                                |                            |   | Three Months Ended |        | Nine Months Ended
|                       |                                                |                            |   | September 30,      |        | September 30,    
|                       |                                                |                            |   |                    |        |                  
|                       |                                                |                            |   | 2002               |        | 2001              |   | 2002   |        | 2001
|                       |                                                |                            |   |                    |        |                   |   |        |        |     
|Net income:            |                                                |                            |   |                    |        |                   |   |        |        |      |   |        |        |  |   |       
|                       | Reported net income                            |                            | $ | 32,093             |        |                   | $ | 19,092 |        |      | $ | 83,278 |        |  | $ | 87,865 |       
|                       | Amortization of goodwill and
excess investment |                            |   |                   |        |                   |   | 566    |        |      |   |       |        |  |   | 1,829  |       
|                       |                                                |                            |   |                    |        |                   |   |        |        |      |   |        |        |  |   |        |       
|                       |                                                | Adjusted net income        |   | $                  | 32,093 |                   |   | $      | 19,658 |      |   | $      | 83,278 |  |   | $      | 89,694 | 
|                       |                                                |                            |   |                    |        |                   |   |        |        |      |   |        |        |  |   |        |       
|Net Income Allocation: |                                                |                            |   |                    |        |                   |   |        |        |      |   |        |        |  |   |       
|                       | Limited Partner Unitholders                    |                            | $ | 22,139             |        |                   | $ | 12,472 |        |      | $ | 57,200 |        |  | $ | 63,327 |       
|                       | Class B Unitholder                             |                            |   | 1,873              |        |                   |   | 1,397  |        |      |   | 5,107  |        |  |   | 7,173  |       
|                       | General Partner                                |                            |   | 8,081              |        |                   |   | 5,789  |        |      |   | 20,971 |        |  |   | 19,194 |       
|                       |                                                |                            |   |                    |        |                   |   |        |        |      |   |        |        |  |   |        |       
|                       |                                                | Total net income allocated |   | $                  | 32,093 |                   |   | $      | 19,658 |      |   | $      | 83,278 |  |   | $      | 89,694 | 
|                       |                                                |                            |   |                    |        |                   |   |        |        |      |   |        |        |  |   |        |       

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TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

|                               |                           |                                                |                              |   |                    |      |                   |   |      |      |      |   |      |      |  |   |      |      | 
|------------------------------ | ------------------------- | ---------------------------------------------- | ---------------------------- | - | ------------------ | ---- | ----------------- | - | ---- | ---- | ---- | - | ---- | ---- |  | - | ---- | ---- | 
|                               |                           |                                                |                              |   | Three Months Ended |      | Nine Months Ended
|                               |                           |                                                |                              |   | September 30,      |      | September 30,    
|                               |                           |                                                |                              |   |                    |      |                  
|                               |                           |                                                |                              |   | 2002               |      | 2001              |   | 2002 |      | 2001
|                               |                           |                                                |                              |   |                    |      |                   |   |      |      |     
|Basic net income per Limited   |                           |                                                |                              |   |                    |      |                   |   |      |      |      |   |      |      |  |  
|                               | Partner and Class B Unit: |                                                |                              |   |                    |      |                   |   |      |      |      |   |      |      |  |   |     
|                               |                           | As reported                                    |                              | $ | 0.48               |      |                   | $ | 0.35 |      |      | $ | 1.33 |      |  | $ | 1.79 |     
|                               |                           | Amortization of goodwill and
excess investment |                              |   |                   |      |                   |   | 0.01 |      |      |   |     |      |  |   | 0.04 |     
|                               |                           |                                                |                              |   |                    |      |                   |   |      |      |      |   |      |      |  |   |      |     
|                               |                           |                                                | Adjusted net income per Unit |   | $                  | 0.48 |                   |   | $    | 0.36 |      |   | $    | 1.33 |  |   | $    | 1.83 | 
|                               |                           |                                                |                              |   |                    |      |                   |   |      |      |      |   |      |      |  |   |      |     
|Diluted net income per Limited |                           |                                                |                              |   |                    |      |                   |   |      |      |      |   |      |      |  |  
|                               | Partner and Class B Unit: |                                                |                              |   |                    |      |                   |   |      |      |      |   |      |      |  |   |     
|                               |                           | As reported                                    |                              | $ | 0.48               |      |                   | $ | 0.35 |      |      | $ | 1.32 |      |  | $ | 1.79 |     
|                               |                           | Amortization of goodwill and
excess investment |                              |   |                   |      |                   |   | 0.01 |      |      |   |     |      |  |   | 0.04 |     
|                               |                           |                                                |                              |   |                    |      |                   |   |      |      |      |   |      |      |  |   |      |     
|                               |                           |                                                | Adjusted net income per Unit |   | $                  | 0.48 |                   |   | $    | 0.36 |      |   | $    | 1.32 |  |   | $    | 1.83 | 
|                               |                           |                                                |                              |   |                    |      |                   |   |      |      |      |   |      |      |  |   |      |     

Upon the adoption of SFAS 142, we were required to reassess the useful
lives and residual values of all intangible assets acquired, and make necessary
amortization period adjustments by the end of the first interim period after
adoption. We completed this analysis during the first quarter of 2002,
resulting in no change to the amortization period for our intangible assets.
We will continue to reassess the useful lives and residual values of all
intangible assets on an annual basis.

In connection with the transitional goodwill impairment evaluation
required by SFAS 142, we were required to perform an assessment of whether
there was an indication that goodwill was impaired as of the date of adoption.
We accomplished this by identifying our reporting units and determining the
carrying value of each reporting unit by assigning the assets and liabilities,
including the existing goodwill and intangible assets, to those reporting units
as of the date of adoption. We then determined the fair value of each
reporting unit and compared it to the carrying value of the reporting unit. We
completed this analysis during the second quarter of 2002, resulting in no
transitional impairment loss. We will continue to compare the fair value of
each reporting unit to the carrying value on an annual basis to determine if an
impairment loss has occurred.

At September 30, 2002, we had $16.9 million of unamortized goodwill and
$58.4 million of excess investment in our equity investments (equity method
goodwill). We completed an impairment analysis of the excess investment in our
equity investments during the nine months ended September 30, 2002, and we
noted no indication of impairment. The excess investment is included in our
equity investments account at September 30, 2002. The following table presents
the carrying amount of goodwill and excess investments at September 30, 2002,
by business segment (in thousands):

|                       |  |            |        |           |  |          |       |          |  |   |        |  |  |   |        | 
|---------------------- |  | ---------- | ------ | --------- |  | -------- | ----- | -------- |  | - | ------ |  |  | - | ------ | 
|                       |  | Downstream |        | Midstream |  | Upstream |       | Segments
|                       |  | Segment    |        | Segment   |  | Segment  |       | Total   
|                       |  |            |        |           |  |          |       |         
|Goodwill               |  | $          |       |           |  | $        | 2,777 |          |  | $ | 14,167 |  |  | $ | 16,944 | 
|Equity method goodwill |  | $          | 32,935 |           |  | $        |      |          |  | $ | 25,502 |  |  | $ | 58,437 | 

7



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##### Table of Contents



TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

The following table reflects the components of amortized intangible
assets, excluding goodwill (in thousands):

|                             |                                      |       |   |                    |         |                   |   |                |         |              |   |         |         |  |   |        |         |  
|---------------------------- | ------------------------------------ | ----- | - | ------------------ | ------- | ----------------- | - | -------------- | ------- | ------------ | - | ------- | ------- |  | - | ------ | ------- | -
|                             |                                      |       |   | September 30, 2002 |         | December 31, 2001
|                             |                                      |       |   |                    |         |                  
|                             |                                      |       |   | Gross Carrying     |         | Accumulated       |   | Gross Carrying |         | Accumulated 
|                             |                                      |       |   | Amount             |         | Amortization      |   | Amount         |         | Amortization
|                             |                                      |       |   |                    |         |                   |   |                |         |             
|Amortized intangible assets: |                                      |       |   |                    |         |                   |   |                |         |              |   |         |         |  |   |       
|                             | Fractionation agreement              |       | $ | 38,000             |         |                   | $ | (8,550         | )       |              | $ | 38,000  |         |  | $ | (7,125 | )      
|                             | Natural gas transportation contracts |       |   | 441,126            |         |                   |   | (21,019        | )       |              |   | 222,800 |         |  |   | (3,275 | )      
|                             | Other                                |       |   | 1,451              |         |                   |   | (560           | )       |              |   | 1,458   |         |  |   | (371   | )      
|                             |                                      |       |   |                    |         |                   |   |                |         |              |   |         |         |  |   |        |        
|                             |                                      | Total |   | $                  | 480,577 |                   |   | $              | (30,129 | )            |   | $       | 262,258 |  |   | $      | (10,771 | )
|                             |                                      |       |   |                    |         |                   |   |                |         |              |   |         |         |  |   |        |        

Excluding goodwill, amortization expense on intangible assets was $10.1
million and $0.5 million for the three months ended September 30, 2002 and
2001, respectively, and $19.4 million and $1.6 million for the nine months
ended September 30, 2002 and 2001, respectively.

The following table sets forth the estimated amortization expense on
intangible assets for the years ending December 31 (in thousands):

|     |  |   |        | 
|---- |  | - | ------ | 
|2002 |  | $ | 29,463 | 
|2003 |  |   | 47,969 | 
|2004 |  |   | 49,525 | 
|2005 |  |   | 50,109 | 
|2006 |  |   | 44,894 | 

NOTE 4. DERIVATIVE FINANCIAL INSTRUMENTS

We account for derivative financial instruments in accordance with SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities,and SFAS
No. 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities, an amendment of FASB Statement No. 133.These statements establish
accounting and reporting standards requiring that derivative instruments
(including certain derivative instruments embedded in other contracts) be
recorded on the balance sheet at fair value as either assets or liabilities.
The accounting for changes in the fair value of a derivative instrument depends
on the intended use of the derivative and the resulting designation, which is
established at the inception of a derivative. Special accounting for
derivatives qualifying as fair value hedges allows a derivatives gains and
losses to offset related results on the hedged item in the statement of income.
For derivative instruments designated as cash flow hedges, changes in fair
value, to the extent the hedge is effective, are recognized in other
comprehensive income until the hedged item is recognized in earnings. Hedge
effectiveness is measured at least quarterly based on the relative cumulative
changes in fair value between the derivative contract and the hedged item over
time. Any change in fair value resulting from ineffectiveness, as defined by
SFAS 133, is recognized immediately in earnings.

We have utilized and expect to continue to utilize interest rate swap
agreements to hedge a portion of our cash flow and fair value risks. Interest
rate swap agreements are used to manage the fixed and floating interest rate
mix of our total debt portfolio and overall cost of borrowing. The interest
rate swap related to our cash flow risk is intended to reduce our exposure to
increases in the benchmark interest rates underlying our variable rate
revolving credit facility. The interest rate swaps related to our fair value
risks are intended to reduce our exposure to changes in the fair value of our
fixed rate Senior Notes. The interest rate swap agreements involve the
periodic exchange of

8Table of Contents

TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

payments without the exchange of the notional amount upon which the
payments are based. The related amount payable to or receivable from
counterparties is included as an adjustment to accrued interest.

By using interest rate swap agreements to hedge exposures to changes in
interest rates and the fair value of fixed rate Senior Notes, we are exposed to
credit risk and market risk. Credit risk is the failure of the counterparty to
perform under the terms of the derivative contract. When the fair value of a
derivative contract is positive, the counterparty owes us, which creates credit
risk for us. When the fair value of a derivative contract is negative, we owe
the counterparty and, therefore, we do not possess credit risk. We minimize
the credit risk in derivative instruments by entering into transactions with
major financial institutions. Market risk is the adverse effect on the value
of a financial instrument that results from a change in interest rates. We
manage market risk associated with interest rate contracts by establishing and
monitoring parameters that limit the type and degree of market risk that may be
undertaken.

We have entered into an interest rate swap agreement to hedge our exposure
to increases in the benchmark interest rate underlying our variable rate
revolving credit facility. The term of the interest rate swap matches the
maturity of the credit facility. We designated this swap agreement, which
hedges exposure to variability in expected future cash flows attributed to
changes in interest rates, as a cash flow hedge. The swap agreement is based on
a notional amount of $250.0 million. Under the swap agreement, we pay a fixed
rate of interest of 6.955% and receive a floating rate based on a three month
U.S. Dollar LIBOR rate. Since this swap is designated as a cash flow hedge,
the changes in fair value, to the extent the swap is effective, are recognized
in other comprehensive income until the hedged interest costs are recognized in
earnings. During the nine months ended September 30, 2002, and 2001, we
recognized $9.6 million and $4.0 million, respectively, in losses, included in
interest expense, on the interest rate swap. During the quarter ended
September 30, 2002, we measured the hedge effectiveness of this interest rate
swap and noted that no gain or loss from ineffectiveness was required to be
recognized. The fair value of the interest rate swap agreement was a loss of
approximately $22.2 million and $20.3 million at September 30, 2002, and
December 31, 2001, respectively. We anticipate that approximately $13.1 million
of the fair value will be transferred into earnings over the next twelve
months.

On October 4, 2001, our TE Products subsidiary entered into an interest
rate swap agreement to hedge its exposure to changes in the fair value of its
fixed rate 7.51% Senior Notes due 2028. We designated this swap agreement as a
fair value hedge. The swap agreement has a notional amount of $210.0 million
and matures in January 2028 to match the principal and maturity of the TE
Products Senior Notes. Under the swap agreement, TE Products pays a floating
rate based on a three month U.S. Dollar LIBOR rate, plus a spread, and receives
a fixed rate of interest of 7.51%. During the nine months ended September 30,
2002, we recognized a gain of $5.4 million, recorded as a reduction of interest
expense, on the interest rate swap. During the quarter ended September 30,
2002, we measured the hedge effectiveness of this interest rate swap and noted
that no gain or loss from ineffectiveness was required to be recognized. The
fair value of this interest rate swap agreement was a gain of approximately
$5.2 million at September 30, 2002, and a loss of approximately $14.6 million
at December 31, 2001.

On February 20, 2002, we entered into interest rate swap agreements to
hedge our exposure to changes in the fair value of our fixed rate 7.625% Senior
Notes due 2012. We designated these swap agreements as fair value hedges. The
swap agreements had a combined notional amount of $500.0 million and matured in
2012 to match the principal and maturity of the Senior Notes. Under the swap
agreements, we paid a floating rate based on a six month U.S. Dollar LIBOR
rate, plus a spread, and received a fixed rate of interest of 7.625%. On July
16, 2002, we terminated these interest rate swap agreements. Upon termination,
the fair value of the interest rate swap agreements was $25.8 million. From
inception of the swap agreements on February 20, 2002, through the termination
on July 16, 2002, $7.8 million had been recognized as a reduction to interest
expense. The remaining gain of approximately $18.0 million has been deferred
as an adjustment to the carrying value of the Senior Notes and is being
amortized as a reduction to future interest expense over the remaining term of
the original contract life of the terminated swap

9Table of Contents

TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

agreements. In the event of early extinguishment of the Senior Notes, any
remaining unamortized gain would be recognized in the consolidated statement of
income at the time of extinguishment.

Additionally, on July 16, 2002, we entered into new interest rate swap
agreements to hedge our exposure to changes in the fair value of our $500.0
million principal amount of 7.625% fixed rate Senior Notes due 2012. We
designated these swap agreements as fair value hedges. The swap agreements have
a combined notional amount of $500.0 million and mature in 2012 to match the
principal and maturity of the Senior Notes. Under these swap agreements, we pay
a floating rate based on a six month U.S. Dollar LIBOR rate, plus a spread,
which increased by approximately 50 basis points from the previous swap
agreements, and receive a fixed rate of interest of 7.625%. During the quarter
ended September 30, 2002, we recognized a gain of $4.0 million, recorded as a
reduction of interest expense, on these interest rate swaps. During the
quarter ended September 30, 2002, we measured the hedge effectiveness of these
interest rate swaps and noted that no gain or loss from ineffectiveness was
required to be recognized. The fair value of these interest rate swap
agreements was a gain of approximately $39.0 million at September 30, 2002.

NOTE 5. ACQUISITIONS

On September 30, 2001, our subsidiaries completed the purchase of Jonah
Gas Gathering Company (Jonah) from Alberta Energy Company for $359.8 million.
The acquisition served as our entry into the natural gas gathering industry. We
recognized goodwill on the purchase of approximately $2.8 million. We
accounted for the acquisition under the purchase method of accounting.
Accordingly, the results of the acquisition are included in the consolidated
financial statements from September 30, 2001. We paid an additional $7.3
million on February 4, 2002, for final purchase adjustments related primarily
to construction projects in progress at the time of closing. Under a
contractual arrangement, DEFS operates and manages Jonah on our behalf.

The following table allocates the estimated fair value of the Jonah assets
acquired on September 30, 2001, and includes the additional purchase adjustment
paid in February 2002 (in thousands):

|                                                           |                     |   |         |         | 
|---------------------------------------------------------- | ------------------- | - | ------- | ------- | 
|Property, plant and equipment                              |                     | $ | 141,835 |        
|Intangible assets (primarily gas transportation contracts) |                     |   | 222,800 |        
|Goodwill                                                   |                     |   | 2,777   |        
|                                                           |                     |   |         |        
|                                                           | Total assets        |   |         | 367,412 | 
|                                                           |                     |   |         |        
|Total liabilities assumed                                  |                     |   | (489    | )      
|                                                           |                     |   |         |        
|                                                           | Net assets acquired |   | $       | 366,923 | 
|                                                           |                     |   |         |        

The value assigned to intangible assets relates to contracts with
customers that are either for a fixed term or which dedicate total future lease
production. We are amortizing the value assigned to intangible assets over the
expected lives of the contracts (approximately 16 years) in proportion to the
timing of expected contractual volumes.

On March 1, 2002, we completed the purchase of the Chaparral NGL system
(Chaparral) for $132.4 million from Diamond-Koch II, L.P. and Diamond-Koch
III, L.P., including acquisition costs of approximately $0.4 million. We
funded the purchase by a drawdown of our $500.0 million revolving credit
facility (see Note 8. Debt). Chaparral is an NGL pipeline system that extends
from West Texas and New Mexico to Mont Belvieu, Texas. The pipeline delivers
NGLs to fractionators and to our existing storage in Mont Belvieu. Under a
contractual arrangement, DEFS operates and manages these assets on our behalf.
We accounted for the acquisition of the assets under the purchase method of
accounting. We allocated the purchase price to property, plant and equipment.

10



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##### Table of Contents



TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

On June 30, 2002, we completed the purchase of the Val Verde Gathering
System (Val Verde) for $444.2 million from Burlington Resources Gathering
Inc., a subsidiary of Burlington Resources Inc., including acquisition costs of
approximately $1.2 million. We funded the purchase by drawing down $168.0
million under our $500.0 million revolving credit facility, $72.0 million under
our 364-day revolving credit facility, and $200.0 million under a six-month
term loan with SunTrust Bank (see Note 8. Debt). The remaining purchase price
was funded through working capital sources of cash. The Val Verde system
gathers coal seam gas from the Fruitland Coal Formation of the San Juan Basin
in New Mexico. The system is one of the largest coal seam gas gathering and
treating facilities in the United States. Under a contractual arrangement,
DEFS operates and manages Val Verde on our behalf. We accounted for the
acquisition of the assets under the purchase method of accounting.
Accordingly, the results of the acquisition are included in the consolidated
financial statements from June 30, 2002.

The following table allocates the estimated fair value of the Val Verde
assets acquired on June 30, 2002 (in thousands):

|                                                           |                     |   |         |         | 
|---------------------------------------------------------- | ------------------- | - | ------- | ------- | 
|Property, plant and equipment                              |                     | $ | 226,469 |        
|Intangible assets (primarily gas transportation contracts) |                     |   | 218,326 |        
|                                                           |                     |   |         |        
|                                                           | Total assets        |   |         | 444,795 | 
|                                                           |                     |   |         |        
|Total liabilities assumed                                  |                     |   | (645    | )      
|                                                           |                     |   |         |        
|                                                           | Net assets acquired |   | $       | 444,150 | 
|                                                           |                     |   |         |        

The purchase price allocation for the Val Verde acquisition is based on
our best estimate using information currently available. We are in the process
of completing the final purchase price allocation for the Val Verde
acquisition. Consequently, the final purchase price allocation may be
different from the purchase price allocation shown above. However, we do not
currently anticipate that the difference will be material to our financial
position, results of operations or cash flows.

The value assigned to intangible assets relates to fixed-term contracts
with customers. We are amortizing the value assigned to intangible assets over
the lives of the contracts (averaging approximately 20 years) in proportion to
the expected contractual volumes.

The following table presents our unaudited pro forma results as though the
acquisitions of Jonah and Val Verde occurred at the beginning of 2001
or 2002 (in
thousands, except per Unit amounts). The unaudited pro forma results give
effect to certain pro forma adjustments including depreciation and amortization
expense adjustments of property, plant and equipment and intangible assets
based upon the purchase price allocations, interest expense related to
financing the acquisitions, amortization of debt issue costs and the removal of
income tax effects in historical results of operations. The pro forma results
do not include operating efficiencies or revenue growth from historical
results.

11



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TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

|                                                                  |  |                    |         |                   |  |      |           |      |  |   |           |  |  |   |           | 
|----------------------------------------------------------------- |  | ------------------ | ------- | ----------------- |  | ---- | --------- | ---- |  | - | --------- |  |  | - | --------- | 
|                                                                  |  | Three Months Ended |         | Nine Months Ended
|                                                                  |  | September 30,      |         | September 30,    
|                                                                  |  |                    |         |                  
|                                                                  |  | 2002               |         | 2001              |  | 2002 |           | 2001
|                                                                  |  |                    |         |                   |  |      |           |     
|Revenues                                                          |  | $                  | 880,804 |                   |  | $    | 1,017,914 |      |  | $ | 2,438,055 |  |  | $ | 2,934,586 | 
|Operating income                                                  |  |                    | 46,635  |                   |  |      | 34,257    |      |  |   | 132,397   |  |  |   | 140,964   | 
|Net income                                                        |  |                    | 36,043  |                   |  |      | 20,898    |      |  |   | 93,295    |  |  |   | 96,319    | 
|Basic and diluted net income per
Limited Partner and Class B Unit |  | $                  | 0.50    |                   |  | $    | 0.32      |      |  | $ | 1.31      |  |  | $ | 1.64      | 

The summarized pro forma information has been prepared for comparative
purposes only. It is not intended to be indicative of the actual operating
results that would have occurred had the acquisitions been consummated at the
beginning of 2001 or 2002, or the results which may be attained in the future.

NOTE 6. INVENTORIES

Inventories are carried at the lower of cost (based on weighted average
cost method) or market. The major components of inventories were as follows
(in thousands):

|                       |       |   |               |        |              |   |       |        | 
|---------------------- | ----- | - | ------------- | ------ | ------------ | - | ----- | ------ | 
|                       |       |   | September 30, |        | December 31,
|                       |       |   | 2002          |        | 2001        
|                       |       |   |               |        |             
|Crude oil              |       | $ | 6,897         |        |              | $ | 3,783 |       
|Gasolines              |       |   | 855           |        |              |   | 3,670 |       
|Propane                |       |   |              |        |              |   | 1,096 |       
|Butanes                |       |   | 4,253         |        |              |   | 1,431 |       
|Other products         |       |   | 5,137         |        |              |   | 3,744 |       
|Materials and supplies |       |   | 4,551         |        |              |   | 3,519 |       
|                       |       |   |               |        |              |   |       |       
|                       | Total |   | $             | 21,693 |              |   | $     | 17,243 | 
|                       |       |   |               |        |              |   |       |       

The costs of inventories did not exceed market values at September 30,
2002, and December 31, 2001.

NOTE 7. EQUITY INVESTMENTS

The acquisition of the ARCO Pipe Line Company (ARCO) assets in July 2000
included ARCOs 50-percent ownership interest in Seaway Crude Pipeline Company
(Seaway), which owns a pipeline that carries mostly imported crude oil from a
marine terminal at Freeport, Texas, to Cushing, Oklahoma, and from a marine
terminal at Texas City, Texas, to refineries in the Texas City and Houston
areas. Seaway is a partnership between TEPPCO Seaway, L.P. (TEPPCO Seaway),
a subsidiary of TCTM, and ConocoPhillips. TCTM purchased the 50-percent
ownership interest in Seaway on July 20, 2000, and transferred the investment
to TEPPCO Seaway. The Seaway Crude Pipeline Company Partnership Agreement
provides for varying participation ratios throughout the life of the Seaway
partnership. From July 20, 2000, through May 2002, TEPPCO Seaway received 80%
of revenue and expense of Seaway. From June 2002 through May 2006, TEPPCO
Seaway receives 60% of revenue and expense of Seaway. Thereafter, the sharing
ratio becomes 40% of revenue and expense to TEPPCO Seaway. For the year ended
December 31, 2002, our portion of equity earnings on a pro-rated basis will
average approximately 67%.

In August 2000, TE Products entered into agreements with Panhandle Eastern
Pipeline Company (PEPL), a subsidiary of CMS Energy Corporation, and Marathon
Ashland Petroleum LLC (Marathon) to form Centennial Pipeline LLC
(Centennial). Centennial owns and operates an interstate refined petroleum
products pipeline extending from the upper Texas Gulf Coast to Illinois. Each
participant owns a one-third interest in Centennial. CMS Energy Corporation
has announced that it is exploring the sale of certain of its assets, including
its investment

12Table of Contents

TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

in Centennial. Through December 31, 2001, we contributed approximately
$70.0 million for our investment in Centennial. During the nine months ended
September 30, 2002, we contributed approximately $7.7 million for our
investment in Centennial. These amounts are included in the equity investment
balance at September 30, 2002.

We use the equity method of accounting to report our investments in Seaway
and Centennial. Summarized combined income statement data for Seaway and
Centennial for the nine months ended September 30, 2002, and 2001, is presented
below (in thousands):

|           |  |                   |        |      |  |   |        | 
|---------- |  | ----------------- | ------ | ---- |  | - | ------ | 
|           |  | Nine Months Ended
|           |  | September 30,    
|           |  |                  
|           |  | 2002              |        | 2001
|           |  |                   |        |     
|Revenues   |  | $                 | 60,960 |      |  | $ | 55,719 | 
|Net income |  |                   | 6,848  |      |  |   | 26,218 | 

Summarized combined balance sheet data for Seaway and Centennial as of
September 30, 2002, and December 31, 2001, is presented below (in thousands):

|                       |  |               |         |              |  |   |         | 
|---------------------- |  | ------------- | ------- | ------------ |  | - | ------- | 
|                       |  | September 30, |         | December 31,
|                       |  | 2002          |         | 2001        
|                       |  |               |         |             
|Current assets         |  | $             | 35,016  |              |  | $ | 57,368  | 
|Noncurrent assets      |  |               | 546,163 |              |  |   | 528,835 | 
|Current liabilities    |  |               | 22,194  |              |  |   | 31,308  | 
|Long-term debt         |  |               | 140,000 |              |  |   | 128,000 | 
|Noncurrent liabilities |  |               | 14,730  |              |  |   |        | 
|Partners capital      |  |               | 404,255 |              |  |   | 426,895 | 

Our investment in Seaway at September 30, 2002, and December 31, 2001,
includes an excess net investment amount of $25.5 million. At September 30,
2002, our investment in Centennial includes an excess net investment amount of
$32.9 million. Excess investment is the amount by which our investment balance
exceeds our proportionate share of the net assets of the investment. Prior to
January 1, 2002, and the adoption of SFAS 142, we were amortizing the excess
investment in Seaway using the straight-line method over 20 years.

NOTE 8. DEBT

Senior Notes

On January 27, 1998, TE Products completed the issuance of $180.0 million
principal amount of 6.45% Senior Notes due 2008, and $210.0 million principal
amount of 7.51% Senior Notes due 2028 (collectively the TE Products Senior
Notes). The 6.45% TE Products Senior Notes were issued at a discount and are
being accreted to their face value over the term of the notes. The 6.45% TE
Products Senior Notes due 2008 are not subject to redemption prior to January
15, 2008. The 7.51% TE Products Senior Notes due 2028, issued at par, may be
redeemed at any time after January 15, 2008, at the option of TE Products, in
whole or in part, at a premium.

The TE Products Senior Notes do not have sinking fund requirements.
Interest on the TE Products Senior Notes is payable semiannually in arrears on
January 15 and July 15 of each year. The TE Products Senior Notes are
unsecured obligations of TE Products and rank on a parity with all other
unsecured and unsubordinated indebtedness of TE Products. The indenture
governing the TE Products Senior Notes contains covenants, including, but not

13Table of ContentsTEPPCO PARTNERS, L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)limited to, covenants limiting the creation of liens securing indebtedness
and sale and leaseback transactions. However, the indenture does not limit our
ability to incur additional indebtedness. As of September 30, 2002, TE
Products was in compliance with the covenants of the TE Products Senior Notes.On February 20, 2002, we received $494.6 million in net proceeds from the
issuance of $500.0 million principal amount of 7.625% Senior Notes due 2012.
The 7.625% Senior Notes were issued at a discount and are being accreted to
their face value over the term of the notes. We used the proceeds from the
offering to reduce a portion of the outstanding balances of our credit
facilities, including those issued in connection with the acquisition of Jonah.
The Senior Notes may be redeemed at any time at our option with the payment of
accrued interest and a make-whole premium determined by discounting remaining
interest and principal payments using a discount rate equal to the rate of the
United States Treasury securities of comparable remaining maturity plus 35
basis points. The indenture governing our 7.625% Senior Notes contains
covenants, including, but not limited to, covenants limiting the creation of
liens securing indebtedness and sale and leaseback transactions. However, the
indenture does not limit our ability to incur additional indebtedness. As of
September 30, 2002, we were in compliance with the covenants of these Senior
Notes.We have entered into interest rate swap agreements to hedge our exposure
to changes in the fair value on a portion of the Senior Notes discussed above.
See Note 4. Derivative Financial Instruments.Other Long Term Debt and Credit FacilitiesOn April 6, 2001, we entered into an Amended and Restated Credit Agreement
(Three Year Facility) which provides for revolving borrowings of up to $500.0
million for a period of three years including the issuance of letters of credit
of up to $20.0 million. The interest rate is based, at our option, on either
the lenders base rate plus a spread, or LIBOR plus a spread in effect at the
time of the borrowings. The credit agreement for the Three Year Facility
contains restrictive financial covenants that require us to maintain a minimum
level of partners capital as well as maximum debt-to-EBITDA (earnings before
interest expense, income tax expense and depreciation and amortization expense)
and minimum fixed charge coverage ratios. On February 20, 2002, we repaid
$115.7 million of the then outstanding balance of the Three Year Facility with
proceeds from the issuance of our 7.625% Senior Notes. On March 1, 2002, we
borrowed $132.0 million under the Three Year Facility to finance the
acquisition of Chaparral. On March 22, 2002, we repaid a portion of the Three
Year Facility with proceeds we received from the issuance of additional Limited
Partner Units (see Note 9. Partners Capital). To facilitate our financing of
a portion of the purchase price of the Val Verde assets, on June 27, 2002, the
Three Year Facility was amended to increase the maximum debt-to-EBITDA ratio
covenant to allow us to incur additional indebtedness. We then drew down the
existing capacity of the Three Year Facility. At September 30, 2002, $500.0
million was outstanding under the Three Year Facility at a weighted average
interest rate of 2.9%. As of September 30, 2002, we were in compliance with
the covenants contained in this credit agreement.We have entered into an interest rate swap agreement to hedge our exposure
to increases in interest rates on the Three Year Facility discussed above. See
Note 4. Derivative Financial Instruments.Short Term Credit FacilitiesOn April 6, 2001, we entered into a 364-day, $200.0 million revolving
credit agreement (Short-term Revolver). The interest rate is based, at our
option, on either the lenders base rate plus a spread, or LIBOR plus a spread
in effect at the time of the borrowings. The credit agreement contains
restrictive financial covenants that require us to maintain a minimum level of
partners capital as well as maximum debt-to-EBITDA and minimum fixed charge
coverage ratios. On March 28, 2002, the Short-term Revolver was extended for an
additional period of 364 days, ending in March 2003. To facilitate our
financing of a portion of the purchase price of the Val Verde

14Table of ContentsTEPPCO PARTNERS, L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)assets, on June 27, 2002, the Short-term Revolver was amended to increase
the maximum debt-to-EBITDA ratio covenant to allow us to incur additional
indebtedness. We then drew down $72.0 million under the Short-term Revolver.
At September 30, 2002, $72.0 million was outstanding under the Short-term
Revolver at an interest rate of 2.9%. As of September 30, 2002, we were in
compliance with the covenants contained in this credit agreement.On September 28, 2001, we entered into a $400.0 million credit facility
with SunTrust Bank (Bridge Facility) payable in June 2002. We borrowed
$360.0 million under the Bridge Facility to acquire the Jonah assets (see Note
5. Acquisitions). During the fourth quarter of 2001, we repaid $160.0 million
of the outstanding principal from proceeds received from the issuance of
Limited Partner Units in November 2001. On February 5, 2002, we drew down an
additional $15.0 million under the Bridge Facility. On February 20, 2002, we
repaid the outstanding balance of the Bridge Facility of $215.0 million, with
proceeds from the issuance of the 7.625% Senior Notes and canceled the
facility.On June 27, 2002, we entered into a $200.0 million six-month term loan
with SunTrust Bank (Six-Month Term Loan) payable in December 2002. We
borrowed $200.0 million under the Six-Month Term Loan to acquire the Val Verde
assets (see Note 5. Acquisitions). The interest rate was based, at our
option, on either the lenders base rate plus a spread, or LIBOR plus a spread
in effect at the time of the borrowings. The credit agreement contained
restrictive financial covenants that required us to maintain a minimum level of
partners capital as well as maximum debt-to-EBITDA and minimum fixed charge
coverage ratios. On July 11, 2002, we repaid $90.0 million of the outstanding
principal primarily from proceeds received from the issuance of Limited Partner
Units in July 2002. On September 10, 2002, we repaid the remaining outstanding
balance of $110.0 million with proceeds received from the issuance of Limited
Partner Units in September 2002 (see Note 9. Partners Capital), and canceled
the facility.The following table summarizes the principal amounts outstanding under our
credit facilities as of September 30, 2002, and December 31, 2001 (in
thousands):

|                              |                                                                         |                                                  |                                    |        |               |           |              |         |         |         | 
|----------------------------- | ----------------------------------------------------------------------- | ------------------------------------------------ | ---------------------------------- | ------ | ------------- | --------- | ------------ | ------- | ------- | ------- | 
|                              |                                                                         |                                                  |                                    |        | September 30, |           | December 31,
|                              |                                                                         |                                                  |                                    |        | 2002          |           | 2001        
|                              |                                                                         |                                                  |                                    |        |               |           |             
|Short Term Credit Facilities: |                                                                         |                                                  |                                    |        |               |           |              |        
|                              |                                                                         | Short-term
Revolver, due March 2003              |                                    | $      | 72,000        |           |              | $       | 160,000 |        
|                              |                                                                         | Bridge Facility, due June 2002                   |                                    |        |              |           |              |         | 200,000 |        
|                              |                                                                         |                                                  |                                    |        |               |           |              |         |         |        
|                              |                                                                         |                                                  | Total Short Term Credit Facilities |        | $             | 72,000    |              |         | $       | 360,000 | 
|                              |                                                                         |                                                  |                                    |        |               |           |              |         |         |        
|Long Term Credit Facilities:  |                                                                         |                                                  |                                    |        |               |           |              |        
|                              |                                                                         | Three Year Facility, due April 2004              |                                    | $      | 500,000       |           |              | $       | 340,658 |        
|                              |                                                                         | 6.45% TE Products Senior Notes, due January 2008 |                                    |        | 179,837       |           |              |         | 179,814 |        
|                              |                                                                         | 7.51% TE Products Senior Notes, due January 2028 |                                    |        | 210,000       |           |              |         | 210,000 |        
|                              |                                                                         | 7.625% Senior Notes, due February 2012           |                                    |        | 497,940       |           |              |         |        |        
|                              |                                                                         |                                                  |                                    |        |               |           |              |         |         |        
|                              |                                                                         |                                                  | Total borrowings                   |        |               | 1,387,777 |              |         |         | 730,472 | 
|                              | Adjustment to carrying value associated with
hedges of fair value swaps |                                                  |                                    | 61,679 |               |           |              | (14,630 | )      
|                              |                                                                         |                                                  |                                    |        |               |           |              |         |         |        
|                              |                                                                         |                                                  | Total Long Term Credit Facilities  |        | $             | 1,449,456 |              |         | $       | 715,842 | 
|                              |                                                                         |                                                  |                                    |        |               |           |              |         |         |        

15



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##### Table of Contents



TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

NOTE 9. PARTNERS CAPITAL

On March 22, 2002, we sold in an underwritten public offering 1.92 million
Limited Partner Units at $31.18 per Unit. The proceeds from the offering, net
of underwriting discount, totaled approximately $57.3 million and were used to
repay $50.0 million of the outstanding balance on the Three Year Facility, with
the remaining amount being used for general purposes.

On July 11, 2002, we sold in an underwritten public offering 3.0 million
Limited Partner Units at $30.15 per Unit. The proceeds from the offering, net
of underwriting discount, totaled approximately $86.6 million and were used to
reduce borrowings under our Six-Month Term Loan. On August 14, 2002, 175,000
Units were sold upon exercise of the underwriters over-allotment option
granted in connection with the offering on July 11, 2002. Proceeds from that
sale totaled $5.1 million and were used for general purposes.

On September 6, 2002, we sold in an underwritten public offering 3.8
million Limited Partner Units at $29.72 per Unit. The proceeds from the
offering, net of underwriting discount, totaled approximately $108.1 million
and were used to reduce borrowings under our Six-Month Term Loan. On September
19, 2002, 570,000 Units were sold upon exercise of the underwriters
over-allotment option granted in connection with the offering on September 6,
2002. Proceeds from that sale totaled $16.2 million and were used to repay a
portion of the Short-term Revolver.

NOTE 10. QUARTERLY DISTRIBUTONS OF AVAILABLE CASH

We make quarterly cash distributions of all of our Available Cash,
generally defined as consolidated cash receipts less consolidated cash
disbursements and cash reserves established by the General Partner in its sole
discretion. According to the Partnership Agreement, the Company receives
incremental incentive cash distributions when cash distributions exceed certain
target thresholds as follows:

|                                      |                                                                     |  |             |    |         |  |         |    |  
|------------------------------------- | ------------------------------------------------------------------- |  | ----------- | -- | ------- |  | ------- | -- | -
|                                      |                                                                     |  |             |    |         |  | General
|                                      |                                                                     |  | Unitholders |    | Partner
|                                      |                                                                     |  |             |    |        
|Quarterly Cash Distribution per Unit: |                                                                     |  |             |    |         |  |         |   
|                                      | Up to Minimum Quarterly Distribution ($0.275 per Unit)              |  |             | 98 | %       |  |         | 2  | %
|                                      | First Target  $0.276 per Unit up to $0.325 per Unit                |  |             | 85 | %       |  |         | 15 | %
|                                      | Second Target  $0.326 per Unit up to $0.45 per Unit                |  |             | 75 | %       |  |         | 25 | %
|                                      | Over Second Target  Cash distributions greater than $0.45 per Unit |  |             | 50 | %       |  |         | 50 | %

16



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TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

The following table reflects the allocation of total distributions paid
during the nine months ended September 30, 2002, and 2001 (in thousands, except
per Unit amounts).

|                                       |                                            |   |                   |         |      |   |        |        | 
|-------------------------------------- | ------------------------------------------ | - | ----------------- | ------- | ---- | - | ------ | ------ | 
|                                       |                                            |   | Nine Months Ended
|                                       |                                            |   | September 30,    
|                                       |                                            |   |                  
|                                       |                                            |   | 2002              |         | 2001
|                                       |                                            |   |                   |         |     
|Limited Partner Units                  |                                            | $ | 74,924            |         |      | $ | 53,865 |       
|General Partner Ownership Interest     |                                            |   | 1,669             |         |      |   | 817    |       
|General Partner Incentive              |                                            |   | 24,933            |         |      |   | 13,674 |       
|                                       |                                            |   |                   |         |      |   |        |       
|                                       | Total Partners Capital Cash Distributions |   |                   | 101,526 |      |   |        | 68,356 | 
|Class B Units                          |                                            |   | 6,854             |         |      |   | 6,169  |       
|Minority Interest                      |                                            |   |                  |         |      |   | 500    |       
|                                       |                                            |   |                   |         |      |   |        |       
|                                       | Total Cash Distributions Paid              |   | $                 | 108,380 |      |   | $      | 75,025 | 
|                                       |                                            |   |                   |         |      |   |        |       
|Total Cash Distributions Paid Per Unit |                                            | $ | 1.750             |         |      | $ | 1.575  |       
|                                       |                                            |   |                   |         |      |   |        |       

On November 8, 2002, we will pay a cash distribution of $0.60 per Limited
Partner Unit and Class B Unit for the quarter ended September 30, 2002. The
third quarter 2002 cash distribution will total approximately $43.5 million.

NOTE 11. SEGMENT DATA

We have three reporting segments: transportation and storage of refined
products, LPGs and petrochemicals, which operates as the Downstream Segment;
gathering, transportation, marketing and storage of crude oil, and distribution
of lubrication oils and specialty chemicals, which operates as the Upstream
Segment; and gathering of natural gas, fractionation of NGLs and transportation
of NGLs, which operates as the Midstream Segment. The amounts indicated below
as Partnership and Other relate primarily to intercompany eliminations and
assets that we hold that have not been allocated to any of our reporting
segments.

Effective January 1, 2002, we realigned our three business segments to
reflect our entry into the natural gas gathering business and the expanded
scope of NGLs operations. We transferred the fractionation of NGLs, which were
previously reflected as part of the Downstream Segment, to the Midstream
Segment. The operation of NGL pipelines, which was previously reflected as
part of the Upstream Segment, was also transferred to the Midstream Segment.
We have adjusted our period-to-period comparisons to conform with the current
presentation.

Our Downstream Segment includes the interstate transportation, storage and
terminaling of petroleum products and LPGs and intrastate transportation of
petrochemicals. Revenues are derived from transportation and storage of
refined products and LPGs, storage and short-haul shuttle transportation of
LPGs at the Mont Belvieu complex, intrastate transportation of petrochemicals,
sale of product inventory and other ancillary services. Our Downstream
Segments pipeline system extends from southeast Texas through the central and
midwestern United States to the northeastern United States, and is one of the
largest pipeline common carriers of refined petroleum products and LPGs in the
United States. Our Downstream Segment also includes our equity investment in
Centennial.

Our Upstream Segment includes the gathering, transportation, marketing and
storage of crude oil and distribution of lubrication oils and specialty
chemicals, principally in Oklahoma, Texas and the Rocky Mountain region. Our
Upstream Segment also includes the equity earnings from our investment in
Seaway. Seaway is a large diameter pipeline that transports crude oil from the
U.S. Gulf Coast to Cushing, Oklahoma, a central crude oil distribution point
for the Central United States.

17



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TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

Our Midstream Segment includes the fractionation of NGLs in Colorado; the
ownership and operation of two trunkline NGL pipelines in South Texas and two
NGL pipelines in East Texas; and the gathering of natural gas in the Green
River Basin in southwestern Wyoming, through Jonah, which was acquired by our
subsidiaries on September 30, 2001. This segment also includes Chaparral,
which we acquired on March 1, 2002. Chaparral is an NGL pipeline system that
extends from West Texas and New Mexico to Mont Belvieu. The pipeline delivers
NGLs to fractionators and to our existing storage in Mont Belvieu. On June 30,
2002, we acquired the Val Verde system, which gathers coal seam gas from the
Fruitland Coal Formation of the San Juan Basin in New Mexico and is one of the
largest coal seam gas gathering and treating facilities in the United States.
The results of operations of the Jonah, Chaparral, and Val Verde acquisitions
are included in periods subsequent to September 30, 2001, March 1, 2002, and
June 30, 2002, respectively (See Note 5. Acquisitions).

The tables below include financial information by reporting segment for
the three months and nine months ended September 30, 2002, and 2001 (in
thousands):

|                                      |                          |   |                                       |        |           |   |          |        |          |   |             |        |              |   |         |        |  |   |      |      |   |   |         |        | 
|------------------------------------- | ------------------------ | - | ------------------------------------- | ------ | --------- | - | -------- | ------ | -------- | - | ----------- | ------ | ------------ | - | ------- | ------ |  | - | ---- | ---- | - | - | ------- | ------ | 
|                                      |                          |   | Three Months Ended September 30, 2002
|                                      |                          |   |                                      
|                                      |                          |   | Downstream                            |        | Midstream |   | Upstream |        | Segments |   | Partnership |        |              |   |        
|                                      |                          |   | Segment                               |        | Segment   |   | Segment  |        | Total    |   | and Other   |        | Consolidated
|                                      |                          |   |                                       |        |           |   |          |        |          |   |             |        |             
|Revenues                              |                          | $ | 58,754                                |        |           | $ | 46,210   |        |          | $ | 776,036     |        |              | $ | 881,000 |        |  | $ | (196 | )    |   | $ | 880,804 |       
|Operating expenses, including
power   |                          |   | 31,530                                |        |           |   | 12,273   |        |          |   | 766,011     |        |              |   | 809,814 |        |  |   | (196 | )    |   |   | 809,618 |       
|Depreciation and amortization
expense |                          |   | 7,496                                 |        |           |   | 14,938   |        |          |   | 2,117       |        |              |   | 24,551  |        |  |   |     |      |   |   | 24,551  |       
|                                      |                          |   |                                       |        |           |   |          |        |          |   |             |        |              |   |         |        |  |   |      |      |   |   |         |       
|                                      | Operating income         |   |                                       | 19,728 |           |   |          | 18,999 |          |   |             | 7,908  |              |   |         | 46,635 |  |   |      |     |   |   |         | 46,635 | 
|Equity earnings (losses)              |                          |   | (2,019                                | )      |           |   |         |        |          |   | 5,166       |        |              |   | 3,147   |        |  |   |     |      |   |   | 3,147   |       
|Other income, net                     |                          |   | 77                                    |        |           |   | 40       |        |          |   | 985         |        |              |   | 1,102   |        |  |   | (366 | )    |   |   | 736     |       
|                                      |                          |   |                                       |        |           |   |          |        |          |   |             |        |              |   |         |        |  |   |      |      |   |   |         |       
|                                      | Earnings before interest |   | $                                     | 17,786 |           |   | $        | 19,039 |          |   | $           | 14,059 |              |   | $       | 50,884 |  |   | $    | (366 | ) |   | $       | 50,518 | 
|                                      |                          |   |                                       |        |           |   |          |        |          |   |             |        |              |   |         |        |  |   |      |      |   |   |         |       

|                                      |                          |   |                                       |        |           |   |          |       |          |   |             |       |              |   |         |        |  |   |   |   |  |   |         |        | 
|------------------------------------- | ------------------------ | - | ------------------------------------- | ------ | --------- | - | -------- | ----- | -------- | - | ----------- | ----- | ------------ | - | ------- | ------ |  | - | - | - |  | - | ------- | ------ | 
|                                      |                          |   | Three Months Ended September 30, 2001
|                                      |                          |   |                                      
|                                      |                          |   | Downstream                            |        | Midstream |   | Upstream |       | Segments |   | Partnership |       |              |   |        
|                                      |                          |   | Segment                               |        | Segment   |   | Segment  |       | Total    |   | and Other   |       | Consolidated
|                                      |                          |   |                                       |        |           |   |          |       |          |   |             |       |             
|Revenues                              |                          | $ | 58,527                                |        |           | $ | 7,033    |       |          | $ | 925,256     |       |              | $ | 990,816 |        |  | $ |  |   |  | $ | 990,816 |       
|Operating expenses, including
power   |                          |   | 29,784                                |        |           |   | 2,034    |       |          |   | 921,466     |       |              |   | 953,284 |        |  |   |  |   |  |   | 953,284 |       
|Depreciation and amortization
expense |                          |   | 6,675                                 |        |           |   | 1,401    |       |          |   | 2,335       |       |              |   | 10,411  |        |  |   |  |   |  |   | 10,411  |       
|                                      |                          |   |                                       |        |           |   |          |       |          |   |             |       |              |   |         |        |  |   |   |   |  |   |         |       
|                                      | Operating income         |   |                                       | 22,068 |           |   |          | 3,598 |          |   |             | 1,455 |              |   |         | 27,121 |  |   |   |  |  |   |         | 27,121 | 
|Equity earnings (losses)              |                          |   | (297                                  | )      |           |   |         |       |          |   | 5,942       |       |              |   | 5,645   |        |  |   |  |   |  |   | 5,645   |       
|Other income, net                     |                          |   | 434                                   |        |           |   | 15       |       |          |   | 548         |       |              |   | 997     |        |  |   |  |   |  |   | 997     |       
|                                      |                          |   |                                       |        |           |   |          |       |          |   |             |       |              |   |         |        |  |   |   |   |  |   |         |       
|                                      | Earnings before interest |   | $                                     | 22,205 |           |   | $        | 3,613 |          |   | $           | 7,945 |              |   | $       | 33,763 |  |   | $ |  |  |   | $       | 33,763 | 
|                                      |                          |   |                                       |        |           |   |          |       |          |   |             |       |              |   |         |        |  |   |   |   |  |   |         |       

18



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##### Table of Contents



TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

|                                      |                          |   |                                      |        |           |   |          |        |          |   |             |        |              |   |           |         |  |   |        |      |   |   |           |         | 
|------------------------------------- | ------------------------ | - | ------------------------------------ | ------ | --------- | - | -------- | ------ | -------- | - | ----------- | ------ | ------------ | - | --------- | ------- |  | - | ------ | ---- | - | - | --------- | ------- | 
|                                      |                          |   | Nine Months Ended September 30, 2002
|                                      |                          |   |                                     
|                                      |                          |   | Downstream                           |        | Midstream |   | Upstream |        | Segments |   | Partnership |        |              |   |          
|                                      |                          |   | Segment                              |        | Segment   |   | Segment  |        | Total    |   | and Other   |        | Consolidated
|                                      |                          |   |                                      |        |           |   |          |        |          |   |             |        |             
|Revenues                              |                          | $ | 172,996                              |        |           | $ | 88,946   |        |          | $ | 2,139,703   |        |              | $ | 2,401,645 |         |  | $ | (1,375 | )    |   | $ | 2,400,270 |        
|Operating expenses, including
power   |                          |   | 89,352                               |        |           |   | 20,269   |        |          |   | 2,112,853   |        |              |   | 2,222,474 |         |  |   | (1,375 | )    |   |   | 2,221,099 |        
|Depreciation and amortization
expense |                          |   | 21,692                               |        |           |   | 30,229   |        |          |   | 6,270       |        |              |   | 58,191    |         |  |   |       |      |   |   | 58,191    |        
|                                      |                          |   |                                      |        |           |   |          |        |          |   |             |        |              |   |           |         |  |   |        |      |   |   |           |        
|                                      | Operating income         |   |                                      | 61,952 |           |   |          | 38,448 |          |   |             | 20,580 |              |   |           | 120,980 |  |   |        |     |   |   |           | 120,980 | 
|Equity earnings (losses)              |                          |   | (5,005                               | )      |           |   |         |        |          |   | 14,138      |        |              |   | 9,133     |         |  |   |       |      |   |   | 9,133     |        
|Other income, net                     |                          |   | 271                                  |        |           |   | 221      |        |          |   | 1,942       |        |              |   | 2,434     |         |  |   | (366   | )    |   |   | 2,068     |        
|                                      |                          |   |                                      |        |           |   |          |        |          |   |             |        |              |   |           |         |  |   |        |      |   |   |           |        
|                                      | Earnings before interest |   | $                                    | 57,218 |           |   | $        | 38,669 |          |   | $           | 36,660 |              |   | $         | 132,547 |  |   | $      | (366 | ) |   | $         | 132,181 | 
|                                      |                          |   |                                      |        |           |   |          |        |          |   |             |        |              |   |           |         |  |   |        |      |   |   |           |        

|                                      |                          |   |                                      |        |           |   |          |        |          |   |                 |        |              |   |           |         |  |   |   |   |  |   |           |         | 
|------------------------------------- | ------------------------ | - | ------------------------------------ | ------ | --------- | - | -------- | ------ | -------- | - | --------------- | ------ | ------------ | - | --------- | ------- |  | - | - | - |  | - | --------- | ------- | 
|                                      |                          |   | Nine Months Ended September 30, 2001
|                                      |                          |   |                                     
|                                      |                          |   | Downstream                           |        | Midstream |   | Upstream |        | Segments |   | Partnership and |        |              |   |          
|                                      |                          |   | Segment                              |        | Segment   |   | Segment  |        | Total    |   | Other           |        | Consolidated
|                                      |                          |   |                                      |        |           |   |          |        |          |   |                 |        |             
|Revenues                              |                          | $ | 199,374                              |        |           | $ | 20,999   |        |          | $ | 2,629,360       |        |              | $ | 2,849,733 |         |  | $ |  |   |  | $ | 2,849,733 |        
|Operating expenses, including
power   |                          |   | 87,661                               |        |           |   | 4,445    |        |          |   | 2,609,956       |        |              |   | 2,702,062 |         |  |   |  |   |  |   | 2,702,062 |        
|Depreciation and amortization
expense |                          |   | 20,051                               |        |           |   | 4,203    |        |          |   | 6,921           |        |              |   | 31,175    |         |  |   |  |   |  |   | 31,175    |        
|                                      |                          |   |                                      |        |           |   |          |        |          |   |                 |        |              |   |           |         |  |   |   |   |  |   |           |        
|                                      | Operating income         |   |                                      | 91,662 |           |   |          | 12,351 |          |   |                 | 12,483 |              |   |           | 116,496 |  |   |   |  |  |   |           | 116,496 | 
|Equity earnings (losses)              |                          |   | (636                                 | )      |           |   |         |        |          |   | 15,906          |        |              |   | 15,270    |         |  |   |  |   |  |   | 15,270    |        
|Other income, net                     |                          |   | 1,115                                |        |           |   | 6        |        |          |   | 1,103           |        |              |   | 2,224     |         |  |   |  |   |  |   | 2,224     |        
|                                      |                          |   |                                      |        |           |   |          |        |          |   |                 |        |              |   |           |         |  |   |   |   |  |   |           |        
|                                      | Earnings before interest |   | $                                    | 92,141 |           |   | $        | 12,357 |          |   | $               | 29,492 |              |   | $         | 133,990 |  |   | $ |  |  |   | $         | 133,990 | 
|                                      |                          |   |                                      |        |           |   |          |        |          |   |                 |        |              |   |           |         |  |   |   |   |  |   |           |        

The following table provides the total assets for each segment as of
September 30, 2002, and December 31, 2001 (in thousands):

|     |  |            |         |           |  |          |           |          |  |                 |         |              |  |   |           |  |  |   |         |   |  |   |           | 
|---- |  | ---------- | ------- | --------- |  | -------- | --------- | -------- |  | --------------- | ------- | ------------ |  | - | --------- |  |  | - | ------- | - |  | - | --------- | 
|     |  | Downstream |         | Midstream |  | Upstream |           | Segments |  | Partnership and |         |              |  |  
|     |  | Segment    |         | Segment   |  | Segment  |           | Total    |  | Other           |         | Consolidated
|     |  |            |         |           |  |          |           |          |  |                 |         |             
|2002 |  | $          | 874,574 |           |  | $        | 1,159,630 |          |  | $               | 866,007 |              |  | $ | 2,900,211 |  |  | $ | (86,868 | ) |  | $ | 2,813,343 | 
|2001 |  | $          | 844,036 |           |  | $        | 541,195   |          |  | $               | 694,934 |              |  | $ | 2,080,165 |  |  | $ | (14,817 | ) |  | $ | 2,065,348 | 

The following table reconciles the segments total earnings before interest
to consolidated net income (in thousands):

|                         |            |   |                    |        |                   |   |         |        |      |   |         |        |  |   |         |        | 
|------------------------ | ---------- | - | ------------------ | ------ | ----------------- | - | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ | 
|                         |            |   | Three Months Ended |        | Nine Months Ended
|                         |            |   | September 30,      |        | September 30,    
|                         |            |   |                    |        |                  
|                         |            |   | 2002               |        | 2001              |   | 2002    |        | 2001
|                         |            |   |                    |        |                   |   |         |        |     
|Earnings before interest |            | $ | 50,518             |        |                   | $ | 33,763  |        |      | $ | 132,181 |        |  | $ | 133,990 |       
|Interest expense         |            |   | (19,763            | )      |                   |   | (15,679 | )      |      |   | (53,379 | )      |  |   | (47,365 | )     
|Interest capitalized     |            |   | 1,338              |        |                   |   | 1,105   |        |      |   | 4,476   |        |  |   | 2,040   |       
|Minority interest        |            |   |                   |        |                   |   | (97     | )      |      |   |        |        |  |   | (800    | )     
|                         |            |   |                    |        |                   |   |         |        |      |   |         |        |  |   |         |       
|                         | Net income |   | $                  | 32,093 |                   |   | $       | 19,092 |      |   | $       | 83,278 |  |   | $       | 87,865 | 
|                         |            |   |                    |        |                   |   |         |        |      |   |         |        |  |   |         |       

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TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

NOTE 12. COMMITMENTS AND CONTINGENCIES

In the fall of 1999 and on December 1, 2000, the Company and the
Partnership were named as defendants in two separate lawsuits in Jackson County
Circuit Court, Jackson County, Indiana, in Ryan E. McCleery and Marcia S.
McCleery, et. al. v. Texas Eastern Corporation, et. al. (including the Company
and Partnership)and Gilbert Richards and Jean Richards v. Texas Eastern
Corporation, et. al. (including the Company and Partnership).In both cases,
the plaintiffs contend, among other things, that the Company and other
defendants stored and disposed of toxic and hazardous substances and hazardous
wastes in a manner that caused the materials to be released into the air, soil
and water. They further contend that the release caused damages to the
plaintiffs. In their complaints, the plaintiffs allege strict liability for
both personal injury and property damage together with gross negligence,
continuing nuisance, trespass, criminal mischief and loss of consortium. The
plaintiffs are seeking compensatory, punitive and treble damages. The Company
has filed an answer to both complaints, denying the allegations, as well as
various other motions. These cases are not covered by insurance. Discovery is
ongoing, and the Company is defending itself vigorously against the lawsuits.
The plaintiffs have not stipulated the amount of damages that they are seeking
in the suit. We cannot estimate the loss, if any, associated with these
pending lawsuits.

On December 21, 2001, TE Products was named as a defendant in a lawsuit in
the 10th Judicial District, Natchitoches Parish, Louisiana, in Rebecca L.
Grisham et. al. v. TE Products Pipeline Company, Limited Partnership. In this
case, the plaintiffs contend that our pipeline, which crosses the plaintiffs
property, leaked toxic products onto the plaintiffs property. The plaintiffs
further contend that this leak caused damages to the plaintiffs. We have filed
an answer to the plaintiffs petition denying the allegations. The plaintiffs
have not stipulated the amount of damages they are seeking in the suit. We are
defending ourself vigorously against the lawsuit. We cannot estimate the
damages, if any, associated with this pending lawsuit, however; this case is
covered by insurance.

On April 19, 2002, we, through our subsidiary, TEPPCO Crude Oil, L.P.,
filed a declaratory judgment action in the U.S. District Court for the Western
District of Oklahoma against D.R.D. Environmental Services, Inc. (D.R.D.),
seeking resolution of billing and other contractual disputes regarding
potential overcharges for environmental remediation services provided by D.R.D.
On May 28, 2002, D.R.D. filed a counterclaim for alleged breach of contract in
the amount of $2,243,525, and for unspecified damages for alleged tortious
interference with D.R.D.s contractual relations with DEFS. We have denied the
counterclaims. Discovery is ongoing, and trial has been initially scheduled
for May 2003. If D.R.D. should be successful, a substantial portion of the
$2,243,525 breach of contract claim will be covered under an indemnity from
DEFS. We cannot predict the outcome of the litigation against us, however, we
are defending ourselves vigorously against the counterclaim. We do not believe
that the outcome of this lawsuit will have a material adverse effect on our
financial position, results of operations or cash flows.

In addition to the litigation discussed above, we have been, in the
ordinary course of business, a defendant in various lawsuits and a party to
various other legal proceedings, some of which are covered in whole or in part
by insurance. We believe that the outcome of these lawsuits and other
proceedings will not individually or in the aggregate have a material adverse
effect on our consolidated financial position, results of operations or cash
flows.

In February 2002, a producer on the Jonah system notified Alberta Energy
Company that it may have a right to acquire all or a portion of the assets
comprising the Jonah system. The producers inquiry is based upon an alleged
right of first refusal contained in a gas gathering agreement between the
producer and Jonah. Subsidiaries of Alberta Energy Company have agreed to
indemnify us against losses resulting from the breach of representations
concerning the absence of third party rights in connection with the acquisition
of the entity that owns the Jonah system. We believe that we have adequate
legal defenses if the producer should assert a claim and we also believe that
no right of first refusal on any of the underlying Jonah system assets has been
triggered.

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TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

Our operations are subject to federal, state and local laws and
regulations governing the discharge of materials into the environment. Failure
to comply with these laws and regulations may result in the assessment of
administrative, civil, and criminal penalties, imposition of injunctions
delaying or prohibiting certain activities, and the need to perform
investigatory and remedial activities. Although we believe our operations are
in material compliance with applicable environmental laws and regulations,
risks of significant costs and liabilities are inherent in pipeline operations,
and we cannot assure you that significant costs and liabilities will not be
incurred. Moreover, it is possible that other developments, such as
increasingly strict environmental laws and regulations and enforcement policies
thereunder, and claims for damages to property or persons resulting from our
operations, could result in substantial costs and liabilities to us. We
believe that changes in environmental laws and regulations will not have a
material adverse effect on our financial position, results of operations or
cash flows in the near term.

In 1994, we entered into an Agreed Order with the Indiana Department of
Environmental Management (IDEM) that resulted in the implementation of a
remediation program for groundwater contamination attributable to our
operations at the Seymour, Indiana, terminal. In 1999, the IDEM approved a
Feasibility Study, which includes our proposed remediation program. We expect
the IDEM to issue a Record of Decision formally approving the remediation
program. After the Record of Decision is issued, we will enter into a
subsequent Agreed Order for the continued operation and maintenance of the
remediation program. We have an accrued liability of $0.2 million at September
30, 2002, for future remediation costs at the Seymour terminal. We do not
expect that the completion of the remediation program will have a future
material adverse effect on our financial position, results of operations or
cash flows.

In 1994, the Louisiana Department of Environmental Quality (LDEQ) issued
a compliance order for environmental contamination at our Arcadia, Louisiana,
facility. This contamination may be attributable to our operations, as well as
adjacent petroleum terminals operated by other companies. In 1999, our Arcadia
facility and adjacent terminals were directed by the Remediation Services
Division of the LDEQ to pursue remediation of this containment phase. At
September 30, 2002, we have an accrued liability of $0.2 million for
remediation costs at our Arcadia facility. We do not expect that the
completion of the remediation program that we have proposed will have a future
material adverse effect on our financial position, results of operations or
cash flows.

At September 30,
2002, we have an accrued liability of $5.6 million and a receivable
of $4.2 million related to various TCTM sites requiring
environmental remediation activities (included in our Upstream
Segment). The receivable is
based on a contractual indemnity obligation for specified environmental
liabilities that DEFS owes to us in connection with our acquisition of the
Upstream Segment from DEFS in November 1998. Under this indemnity obligation,
we are responsible for the first $3.0 million in specified environmental
liabilities, and DEFS is responsible for those environmental liabilities in
excess of $3.0 million, up to a maximum amount of $25.0 million. The majority
of the indemnified costs relate to remediation activities at the Velma crude
oil site in Stephens County, Oklahoma, attributable to operations prior to our
acquisition of the Upstream Segment. We
do not expect that the completion of remediation programs associated
with TCTM activities will have a future
material adverse effect on our financial position, results of operations or
cash flows.

Centennial entered into credit facilities totaling $150.0 million, and as
of September 30, 2002, $150.0 million was outstanding under those credit
facilities. The proceeds were used to fund construction and conversion costs
of its pipeline system. Each of the participants in Centennial originally
guaranteed one-third of Centennials debt, which included TE Products, who had
guaranteed one-third of the debt up to a maximum amount of $50.0 million.
During the third quarter of 2002, PEPL, one of the participants in Centennial,
was downgraded by Moodys and Standard & Poors to below investment grade, which
resulted in PEPL being in default under its portion of the

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TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

Centennial guaranty. Effective September 27, 2002, the two remaining
participants, TE Products and Marathon, increased their guaranteed amounts to
one-half of the debt of Centennial, up to a maximum amount of $75.0 million
each, to avoid a default on the Centennial debt. As compensation to TE
Products and Marathon for providing their additional guarantees, PEPL is
required to pay interest at a rate of 4% per annum to each of TE Products and
Marathon on the portion of the additional guaranty that each has provided for
PEPL.

In February 2000, we entered into a joint marketing and development
alliance with Louis Dreyfus Plastics Corporation, now known as Louis Dreyfus
Energy Services, L.P. (Louis Dreyfus), in which our Mont Belvieu LPGs storage
and transportation shuttle system services are jointly marketed by Louis
Dreyfus and us. The purpose of the alliance is to expand services to the upper
Texas Gulf Coast energy marketplace by increasing pipeline throughput and the
mix of products handled through the existing system and establishing new
receipt and delivery connections. TE Products operates the facilities for the
alliance. Under the alliance, Louis Dreyfus has invested $6.1 million for
expansion projects at Mont Belvieu. The alliance is a service-oriented,
fee-based venture with no commodity trading activity. The alliance is
scheduled to terminate on December 31, 2002, at which time a partnership may be
established between TE Products and Louis Dreyfus, if the terms of the joint
development agreement are met. We anticipate that the terms in the joint
development agreement will be met during the fourth quarter of 2002, and the
partnership will be created effective January 1, 2003. Under the terms of the
joint development agreement, we would contribute our Mont Belvieu assets to a
newly formed partnership. The economic terms of the partnership will be the
same as those under the joint development and marketing alliance.

NOTE 13. COMPREHENSIVE INCOME

SFAS No. 130, Reporting Comprehensive Incomerequires certain items such
as foreign currency translation adjustments, minimum pension liability
adjustments, and unrealized gains and losses on certain investments to be
reported in a financial statement. As of and for the nine months ended
September 30, 2002, and 2001, the components of comprehensive income were due
to the interest rate swap related to our variable rate revolving credit
facility, which is designated as a cash flow hedge. Changes in the fair value
of the cash flow hedge, to the extent the hedge is effective, are recognized in
other comprehensive income until the hedge interest costs are recognized in
earnings. The table below reconciles reported net income to total
comprehensive income (loss) for the three months and nine months ended
September 30, 2002, and 2001 (in thousands).

|                                                       |                                   |   |                    |        |                   |   |         |        |      |   |        |        |  |   |         |        | 
|------------------------------------------------------ | --------------------------------- | - | ------------------ | ------ | ----------------- | - | ------- | ------ | ---- | - | ------ | ------ |  | - | ------- | ------ | 
|                                                       |                                   |   | Three Months Ended |        | Nine Months Ended
|                                                       |                                   |   | September 30,      |        | September 30,    
|                                                       |                                   |   |                    |        |                  
|                                                       |                                   |   | 2002               |        | 2001              |   | 2002    |        | 2001
|                                                       |                                   |   |                    |        |                   |   |         |        |     
|Net income                                             |                                   | $ | 32,093             |        |                   | $ | 19,092  |        |      | $ | 83,278 |        |  | $ | 87,865  |       
|Cumulative effect attributable to
adoption of SFAS 133 |                                   |   |                   |        |                   |   |        |        |      |   |       |        |  |   | (10,103 | )     
|Net loss on cash flow hedge                            |                                   |   | (2,216             | )      |                   |   | (22,274 | )      |      |   | (1,868 | )      |  |   | (16,889 | )     
|                                                       |                                   |   |                    |        |                   |   |         |        |      |   |        |        |  |   |         |       
|                                                       | Total comprehensive income (loss) |   | $                  | 29,877 |                   |   | $       | (3,182 | )    |   | $      | 81,410 |  |   | $       | 60,873 | 
|                                                       |                                   |   |                    |        |                   |   |         |        |      |   |        |        |  |   |         |       

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TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

The accumulated balance of other comprehensive loss related to cash flow
hedges is as follows (in thousands):

|                              |                                        |   |         |         |  
|----------------------------- | -------------------------------------- | - | ------- | ------- | -
|Balance at December 31, 2000  |                                        | $ |        |        
|                              | Cumulative effect of accounting change |   |         | (10,103 | )
|                              | Net loss on cash flow hedge            |   |         | (10,221 | )
|                              |                                        |   |         |        
|Balance at December 31, 2001  |                                        | $ | (20,324 | )      
|                              | Net loss on cash flow hedge            |   |         | (1,868  | )
|                              |                                        |   |         |        
|Balance at September 30, 2002 |                                        | $ | (22,192 | )      
|                              |                                        |   |         |        

NOTE 14. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

In connection with our issuance of Senior Notes on February 20, 2002, TE
Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream
Companies, L.P. and Jonah Gas Gathering Company, our significant operating
subsidiaries, issued unconditional guarantees of our debt securities.
Effective with the acquisition of the Val Verde assets on June 30, 2002, our
subsidiary, Val Verde Gas Gathering Company, L.P. also became a significant
operating subsidiary and issued unconditional guarantees of our debt
securities. The guarantees are full, unconditional, and joint and several. TE
Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream
Companies, L.P., Jonah Gas Gathering Company and Val Verde Gas Gathering
Company, L.P. are collectively referred to as the Guarantor Subsidiaries.

The following supplemental condensed consolidating financial information
reflects our separate accounts, the combined accounts of the Guarantor
Subsidiaries, the combined accounts of our other non-guarantor subsidiaries,
the combined consolidating adjustments and eliminations and our consolidated
accounts for the dates and periods indicated. For purposes of the following
consolidating information, our investments in our subsidiaries and the
Guarantor Subsidiaries investments in their subsidiaries are accounted for
under the equity method of accounting.

23



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TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

|       |                                   |                                                   |                                         |   |                    |           |              |   |               |           |               |   |                |           |  |   |            |            |   |   |           |           | 
|------ | --------------------------------- | ------------------------------------------------- | --------------------------------------- | - | ------------------ | --------- | ------------ | - | ------------- | --------- | ------------- | - | -------------- | --------- |  | - | ---------- | ---------- | - | - | --------- | --------- | 
|       |                                   |                                                   |                                         |   | September 30, 2002
|       |                                   |                                                   |                                         |   |                   
|       |                                   |                                                   |                                         |   |                    |           |              |   |               |           |               |   |                |           |  |   |            |            |   |   | TEPPCO   
|       |                                   |                                                   |                                         |   | TEPPCO             |           | Guarantor    |   | Non-Guarantor |           | Consolidating |   | Partners, L.P.
|       |                                   |                                                   |                                         |   | Partners, L.P.     |           | Subsidiaries |   | Subsidiaries  |           | Adjustments   |   | Consolidated  
|       |                                   |                                                   |                                         |   |                    |           |              |   |               |           |               |   |               
|       |                                   |                                                   |                                         |   |                    |           |              |   |               |           |               |   | (in thousands) |           |  |   |            |            |   |   |          
|Assets |                                   |                                                   |                                         |   |                    |           |              |   |               |           |               |   |                |           |  |   |            |            |   |  
|       |                                   | Current assets                                    |                                         | $ | (1,168             | )         |              | $ | 199,589       |           |               | $ | 309,776        |           |  | $ | (130,055   | )          |   | $ | 378,142   |          
|       |                                   | Property, plant and equipment  net               |                                         |   |                   |           |              |   | 1,130,815     |           |               |   | 462,620        |           |  |   |           |            |   |   | 1,593,435 |          
|       |                                   | Equity investments                                |                                         |   | 923,067            |           |              |   | 754,107       |           |               |   | 213,498        |           |  |   | (1,605,049 | )          |   |   | 285,623   |          
|       |                                   | Intercompany notes receivable                     |                                         |   | 1,091,042          |           |              |   |              |           |               |   |               |           |  |   | (1,091,042 | )          |   |   |          |          
|       |                                   | Intangible assets                                 |                                         |   |                   |           |              |   | 420,107       |           |               |   | 30,341         |           |  |   |           |            |   |   | 450,448   |          
|       |                                   | Other assets                                      |                                         |   | 46,031             |           |              |   | 25,266        |           |               |   | 34,398         |           |  |   |           |            |   |   | 105,695   |          
|       |                                   |                                                   |                                         |   |                    |           |              |   |               |           |               |   |                |           |  |   |            |            |   |   |           |          
|       |                                   |                                                   | Total assets                            |   | $                  | 2,058,972 |              |   | $             | 2,529,884 |               |   | $              | 1,050,633 |  |   | $          | (2,826,146 | ) |   | $         | 2,813,343 | 
|       |                                   |                                                   |                                         |   |                    |           |              |   |               |           |               |   |                |           |  |   |            |            |   |   |           |          
|       | Liabilities and partners capital |                                                   |                                         |   |                    |           |              |   |               |           |               |   |                |           |  |   |            |            |   |   |          
|       |                                   | Current liabilities                               |                                         | $ | 92,826             |           |              | $ | 283,879       |           |               | $ | 276,506        |           |  | $ | (223,684   | )          |   | $ | 429,527   |          
|       |                                   | Long-term debt                                    |                                         |   | 1,054,374          |           |              |   | 395,082       |           |               |   |               |           |  |   |           |            |   |   | 1,449,456 |          
|       |                                   | Intercompany notes payable                        |                                         |   |                   |           |              |   | 529,538       |           |               |   | 467,872        |           |  |   | (997,410   | )          |   |   |          |          
|       |                                   | Other long term liabilities and
minority interest |                                         |   | 9,048              |           |              |   | 22,355        |           |               |   | 231            |           |  |   |           |            |   |   | 31,634    |          
|       |                                   | Redeemable Class B Units held by
related party    |                                         |   | 103,883            |           |              |   |              |           |               |   |               |           |  |   |           |            |   |   | 103,883   |          
|       |                                   | Total partners capital                           |                                         |   | 798,841            |           |              |   | 1,299,030     |           |               |   | 306,024        |           |  |   | (1,605,052 | )          |   |   | 798,843   |          
|       |                                   |                                                   |                                         |   |                    |           |              |   |               |           |               |   |                |           |  |   |            |            |   |   |           |          
|       |                                   |                                                   | Total liabilities and partners capital |   | $                  | 2,058,972 |              |   | $             | 2,529,884 |               |   | $              | 1,050,633 |  |   | $          | (2,826,146 | ) |   | $         | 2,813,343 | 
|       |                                   |                                                   |                                         |   |                    |           |              |   |               |           |               |   |                |           |  |   |            |            |   |   |           |          

|                                  |                                                   |                                         |   |                   |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |           |           | 
|--------------------------------- | ------------------------------------------------- | --------------------------------------- | - | ----------------- | --------- | ------------ | - | ------------- | --------- | ------------- | - | -------------- | ------- |  | - | -------- | ---------- | - | - | --------- | --------- | 
|                                  |                                                   |                                         |   | December 31, 2001
|                                  |                                                   |                                         |   |                  
|                                  |                                                   |                                         |   |                   |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   | TEPPCO   
|                                  |                                                   |                                         |   | TEPPCO            |           | Guarantor    |   | Non-Guarantor |           | Consolidating |   | Partners, L.P.
|                                  |                                                   |                                         |   | Partners, L.P.    |           | Subsidiaries |   | Subsidiaries  |           | Adjustments   |   | Consolidated  
|                                  |                                                   |                                         |   |                   |           |              |   |               |           |               |   |               
|                                  |                                                   |                                         |   |                   |           |              |   |               |           |               |   | (in thousands) |         |  |   |          |            |   |   |          
|Assets                            |                                                   |                                         |   |                   |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |          
|                                  | Current assets                                    |                                         | $ | 3,100             |           |              | $ | 59,730        |           |               | $ | 223,345        |         |  | $ | (2,695   | )          |   | $ | 283,480   |          
|                                  | Property, plant and equipment  net               |                                         |   |                  |           |              |   | 849,978       |           |               |   | 330,483        |         |  |   |         |            |   |   | 1,180,461 |          
|                                  | Equity investments                                |                                         |   | 669,370           |           |              |   | 309,080       |           |               |   | 222,815        |         |  |   | (909,041 | )          |   |   | 292,224   |          
|                                  | Intercompany notes receivable                     |                                         |   | 700,564           |           |              |   | 11,269        |           |               |   | 7,404          |         |  |   | (719,237 | )          |   |   |          |          
|                                  | Intangible assets                                 |                                         |   |                  |           |              |   | 219,525       |           |               |   | 31,962         |         |  |   |         |            |   |   | 251,487   |          
|                                  | Other assets                                      |                                         |   | 3,853             |           |              |   | 24,923        |           |               |   | 33,424         |         |  |   | (4,504   | )          |   |   | 57,696    |          
|                                  |                                                   |                                         |   |                   |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |           |          
|                                  |                                                   | Total assets                            |   | $                 | 1,376,887 |              |   | $             | 1,474,505 |               |   | $              | 849,433 |  |   | $        | (1,635,477 | ) |   | $         | 2,065,348 | 
|                                  |                                                   |                                         |   |                   |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |           |          
|Liabilities and partners capital |                                                   |                                         |   |                   |           |              |   |               |           |               |   |                |         |  |   |          |            |  
|                                  | Current liabilities                               |                                         | $ | 367,094           |           |              | $ | 361,547       |           |               | $ | 310,476        |         |  | $ | (370,275 | )          |   | $ | 668,842   |          
|                                  | Long-term debt                                    |                                         |   | 340,658           |           |              |   | 375,184       |           |               |   |               |         |  |   |         |            |   |   | 715,842   |          
|                                  | Intercompany notes payable                        |                                         |   |                  |           |              |   | 45,410        |           |               |   | 294,801        |         |  |   | (340,211 | )          |   |   |          |          
|                                  | Other long term liabilities and minority interest |                                         |   |                  |           |              |   | 22,994        |           |               |   | 231            |         |  |   | 8,628    |            |   |   | 31,853    |          
|                                  | Redeemable Class B Units held by related party    |                                         |   | 105,630           |           |              |   |              |           |               |   |               |         |  |   |         |            |   |   | 105,630   |          
|                                  | Total partners capital                           |                                         |   | 563,505           |           |              |   | 669,370       |           |               |   | 243,925        |         |  |   | (933,619 | )          |   |   | 543,181   |          
|                                  |                                                   |                                         |   |                   |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |           |          
|                                  |                                                   | Total liabilities and partners capital |   | $                 | 1,376,887 |              |   | $             | 1,474,505 |               |   | $              | 849,433 |  |   | $        | (1,635,477 | ) |   | $         | 2,065,348 | 
|                                  |                                                   |                                         |   |                   |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |           |          

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TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

|                       |                  |   |                                       |        |              |   |               |        |               |   |                      |        |  |   |         |         |   |   |         |        | 
|---------------------- | ---------------- | - | ------------------------------------- | ------ | ------------ | - | ------------- | ------ | ------------- | - | -------------------- | ------ |  | - | ------- | ------- | - | - | ------- | ------ | 
|                       |                  |   | Three Months Ended September 30, 2002
|                       |                  |   |                                      
|                       |                  |   | TEPPCO                                |        | Guarantor    |   | Non-Guarantor |        | Consolidating |   | TEPPCOPartners, L.P.
|                       |                  |   | Partners, L.P.                        |        | Subsidiaries |   | Subsidiaries  |        | Adjustments   |   | Consolidated        
|                       |                  |   |                                       |        |              |   |               |        |               |   |                     
|                       |                  |   |                                       |        |              |   |               |        |               |   | (in thousands)       |        |  |   |         |         |   |   |        
|Operating revenues     |                  | $ |                                      |        |              | $ | 92,005        |        |               | $ | 788,995              |        |  | $ | (196    | )       |   | $ | 880,804 |       
|Costs and expenses     |                  |   |                                      |        |              |   | 60,027        |        |               |   | 774,338              |        |  |   | (196    | )       |   |   | 834,169 |       
|                       |                  |   |                                       |        |              |   |               |        |               |   |                      |        |  |   |         |         |   |   |         |       
|                       | Operating income |   |                                       |       |              |   |               | 31,978 |               |   |                      | 14,657 |  |   |         |        |   |   |         | 46,635 | 
|                       |                  |   |                                       |        |              |   |               |        |               |   |                      |        |  |   |         |         |   |   |         |       
|Interest expense  net |                  |   | (15,184                               | )      |              |   | (12,741       | )      |               |   | (6,050               | )      |  |   | 15,550  |         |   |   | (18,425 | )     
|Equity earnings        |                  |   | 32,093                                |        |              |   | 19,615        |        |               |   | 5,166                |        |  |   | (53,727 | )       |   |   | 3,147   |       
|Other income  net     |                  |   | 15,184                                |        |              |   | 69            |        |               |   | 1,033                |        |  |   | (15,550 | )       |   |   | 736     |       
|                       |                  |   |                                       |        |              |   |               |        |               |   |                      |        |  |   |         |         |   |   |         |       
|                       | Net income       |   | $                                     | 32,093 |              |   | $             | 38,921 |               |   | $                    | 14,806 |  |   | $       | (53,727 | ) |   | $       | 32,093 | 
|                       |                  |   |                                       |        |              |   |               |        |               |   |                      |        |  |   |         |         |   |   |         |       

|                       |                                 |   |                                       |        |              |   |               |        |               |   |                      |       |  |   |         |         |   |   |         |        | 
|---------------------- | ------------------------------- | - | ------------------------------------- | ------ | ------------ | - | ------------- | ------ | ------------- | - | -------------------- | ----- |  | - | ------- | ------- | - | - | ------- | ------ | 
|                       |                                 |   | Three Months Ended September 30, 2001
|                       |                                 |   |                                      
|                       |                                 |   | TEPPCO                                |        | Guarantor    |   | Non-Guarantor |        | Consolidating |   | TEPPCOPartners, L.P.
|                       |                                 |   | Partners, L.P.                        |        | Subsidiaries |   | Subsidiaries  |        | Adjustments   |   | Consolidated        
|                       |                                 |   |                                       |        |              |   |               |        |               |   |                     
|                       |                                 |   |                                       |        |              |   |               |        |               |   | (in thousands)       |       |  |   |         |         |   |   |        
|Operating revenues     |                                 | $ |                                      |        |              | $ | 58,527        |        |               | $ | 932,289              |       |  | $ |        |         |   | $ | 990,816 |       
|Costs and expenses     |                                 |   |                                      |        |              |   | 36,458        |        |               |   | 927,237              |       |  |   |        |         |   |   | 963,695 |       
|                       |                                 |   |                                       |        |              |   |               |        |               |   |                      |       |  |   |         |         |   |   |         |       
|                       | Operating income                |   |                                       |       |              |   |               | 22,069 |               |   |                      | 5,052 |  |   |         |        |   |   |         | 27,121 | 
|                       |                                 |   |                                       |        |              |   |               |        |               |   |                      |       |  |   |         |         |   |   |         |       
|Interest expense  net |                                 |   | (8,774                                | )      |              |   | (7,181        | )      |               |   | (7,393               | )     |  |   | 8,774   |         |   |   | (14,574 | )     
|Equity earnings        |                                 |   | 19,092                                |        |              |   | 3,868         |        |               |   | 5,941                |       |  |   | (23,256 | )       |   |   | 5,645   |       
|Other income  net     |                                 |   | 8,774                                 |        |              |   | 433           |        |               |   | 564                  |       |  |   | (8,774  | )       |   |   | 997     |       
|                       |                                 |   |                                       |        |              |   |               |        |               |   |                      |       |  |   |         |         |   |   |         |       
|                       | Income before minority interest |   |                                       | 19,092 |              |   |               | 19,189 |               |   |                      | 4,164 |  |   |         | (23,256 | ) |   |         | 19,189 | 
|Minority interest      |                                 |   |                                      |        |              |   |              |        |               |   |                     |       |  |   | (97     | )       |   |   | (97     | )     
|                       |                                 |   |                                       |        |              |   |               |        |               |   |                      |       |  |   |         |         |   |   |         |       
|                       | Net income                      |   | $                                     | 19,092 |              |   | $             | 19,189 |               |   | $                    | 4,164 |  |   | $       | (23,353 | ) |   | $       | 19,092 | 
|                       |                                 |   |                                       |        |              |   |               |        |               |   |                      |       |  |   |         |         |   |   |         |       

|                       |                  |   |                                      |        |              |   |               |        |               |   |                      |        |  |   |          |          |   |   |           |         | 
|---------------------- | ---------------- | - | ------------------------------------ | ------ | ------------ | - | ------------- | ------ | ------------- | - | -------------------- | ------ |  | - | -------- | -------- | - | - | --------- | ------- | 
|                       |                  |   | Nine Months Ended September 30, 2002
|                       |                  |   |                                     
|                       |                  |   | TEPPCO                               |        | Guarantor    |   | Non-Guarantor |        | Consolidating |   | TEPPCOPartners, L.P.
|                       |                  |   | Partners, L.P.                       |        | Subsidiaries |   | Subsidiaries  |        | Adjustments   |   | Consolidated        
|                       |                  |   |                                      |        |              |   |               |        |               |   |                     
|                       |                  |   |                                      |        |              |   |               |        |               |   | (in thousands)       |        |  |   |          |          |   |   |          
|Operating revenues     |                  | $ |                                     |        |              | $ | 228,367       |        |               | $ | 2,173,278            |        |  | $ | (1,375   | )        |   | $ | 2,400,270 |        
|Costs and expenses     |                  |   |                                     |        |              |   | 146,663       |        |               |   | 2,134,002            |        |  |   | (1,375   | )        |   |   | 2,279,290 |        
|                       |                  |   |                                      |        |              |   |               |        |               |   |                      |        |  |   |          |          |   |   |           |        
|                       | Operating income |   |                                      |       |              |   |               | 81,704 |               |   |                      | 39,276 |  |   |          |         |   |   |           | 120,980 | 
|                       |                  |   |                                      |        |              |   |               |        |               |   |                      |        |  |   |          |          |   |   |           |        
|Interest expense  net |                  |   | (38,323                              | )      |              |   | (29,279       | )      |               |   | (19,990              | )      |  |   | 38,689   |          |   |   | (48,903   | )      
|Equity earnings        |                  |   | 83,278                               |        |              |   | 40,165        |        |               |   | 14,138               |        |  |   | (128,448 | )        |   |   | 9,133     |        
|Other income  net     |                  |   | 38,323                               |        |              |   | 422           |        |               |   | 2,012                |        |  |   | (38,689  | )        |   |   | 2,068     |        
|                       |                  |   |                                      |        |              |   |               |        |               |   |                      |        |  |   |          |          |   |   |           |        
|                       | Net income       |   | $                                    | 83,278 |              |   | $             | 93,012 |               |   | $                    | 35,436 |  |   | $        | (128,448 | ) |   | $         | 83,278  | 
|                       |                  |   |                                      |        |              |   |               |        |               |   |                      |        |  |   |          |          |   |   |           |        

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TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

|                       |                                 |   |                                      |        |              |   |               |        |               |   |                      |        |  |   |          |          |   |   |           |         | 
|---------------------- | ------------------------------- | - | ------------------------------------ | ------ | ------------ | - | ------------- | ------ | ------------- | - | -------------------- | ------ |  | - | -------- | -------- | - | - | --------- | ------- | 
|                       |                                 |   | Nine Months Ended September 30, 2001
|                       |                                 |   |                                     
|                       |                                 |   | TEPPCO                               |        | Guarantor    |   | Non-Guarantor |        | Consolidating |   | TEPPCOPartners, L.P.
|                       |                                 |   | Partners, L.P.                       |        | Subsidiaries |   | Subsidiaries  |        | Adjustments   |   | Consolidated        
|                       |                                 |   |                                      |        |              |   |               |        |               |   |                     
|                       |                                 |   |                                      |        |              |   |               |        |               |   | (in thousands)       |        |  |   |          |          |   |   |          
|Operating revenues     |                                 | $ |                                     |        |              | $ | 199,374       |        |               | $ | 2,650,359            |        |  | $ |         |          |   | $ | 2,849,733 |        
|Costs and expenses     |                                 |   |                                     |        |              |   | 107,712       |        |               |   | 2,625,525            |        |  |   |         |          |   |   | 2,733,237 |        
|                       |                                 |   |                                      |        |              |   |               |        |               |   |                      |        |  |   |          |          |   |   |           |        
|                       | Operating income                |   |                                      |       |              |   |               | 91,662 |               |   |                      | 24,834 |  |   |          |         |   |   |           | 116,496 | 
|                       |                                 |   |                                      |        |              |   |               |        |               |   |                      |        |  |   |          |          |   |   |           |        
|Interest expense  net |                                 |   | (26,577                              | )      |              |   | (22,160       | )      |               |   | (23,165              | )      |  |   | 26,577   |          |   |   | (45,325   | )      
|Equity earnings        |                                 |   | 87,865                               |        |              |   | 18,048        |        |               |   | 15,905               |        |  |   | (106,548 | )        |   |   | 15,270    |        
|Other income  net     |                                 |   | 26,577                               |        |              |   | 1,115         |        |               |   | 1,109                |        |  |   | (26,577  | )        |   |   | 2,224     |        
|                       |                                 |   |                                      |        |              |   |               |        |               |   |                      |        |  |   |          |          |   |   |           |        
|                       | Income before minority interest |   |                                      | 87,865 |              |   |               | 88,665 |               |   |                      | 18,683 |  |   |          | (106,548 | ) |   |           | 88,665  | 
|Minority interest      |                                 |   |                                     |        |              |   |              |        |               |   |                     |        |  |   | (800     | )        |   |   | (800      | )      
|                       |                                 |   |                                      |        |              |   |               |        |               |   |                      |        |  |   |          |          |   |   |           |        
|                       | Net income                      |   | $                                    | 87,865 |              |   | $             | 88,665 |               |   | $                    | 18,683 |  |   | $        | (107,348 | ) |   | $         | 87,865  | 
|                       |                                 |   |                                      |        |              |   |               |        |               |   |                      |        |  |   |          |          |   |   |           |        

|                                                     |            |                                                                                             |                                             |        |                                      |          |              |        |               |        |               |        |                      |        |          |          |   |         |          |        |  |         |  
|---------------------------------------------------- | ---------- | ------------------------------------------------------------------------------------------- | ------------------------------------------- | ------ | ------------------------------------ | -------- | ------------ | ------ | ------------- | ------ | ------------- | ------ | -------------------- | ------ | -------- | -------- | - | ------- | -------- | ------ |  | ------- | -
|                                                     |            |                                                                                             |                                             |        | Nine Months Ended September 30, 2002
|                                                     |            |                                                                                             |                                             |        |                                     
|                                                     |            |                                                                                             |                                             |        | TEPPCO                               |          | Guarantor    |        | Non-Guarantor |        | Consolidating |        | TEPPCOPartners, L.P.
|                                                     |            |                                                                                             |                                             |        | Partners, L.P.                       |          | Subsidiaries |        | Subsidiaries  |        | Adjustments   |        | Consolidated        
|                                                     |            |                                                                                             |                                             |        |                                      |          |              |        |               |        |               |        |                     
|                                                     |            |                                                                                             |                                             |        |                                      |          |              |        |               |        |               |        | (in thousands)       |        |          |          |   |         |          |        | 
|Cash flows from operating activities                 |            |                                                                                             |                                             |        |                                      |          |              |        |               |        |               |        |                      |        |          |          |   |         |          |       
|                                                     | Net income |                                                                                             | $                                           | 83,278 |                                      |          | $            | 93,012 |               |        | $             | 35,436 |                      |        | $        | (128,448 | ) |         | $        | 83,278 | 
|                                                     |            | Adjustments to reconcile net income to net cash provided by (used in)
operating activities: |                                             |        |                                      |          |              |        |               |        |               |        |                      |        |          |          |   |         |          |        |  |        
|                                                     |            |                                                                                             | Depreciation and amortization               |        |                                      |         |              |        |               | 45,723 |               |        |                      | 12,468 |          |          |   |        |          |        |  | 58,191  |  
|                                                     |            |                                                                                             | Equity earnings, net of distributions       |        |                                      | 25,101   |              |        |               | (2,185 | )             |        |                      | 9,317  |          |          |   | (17,911 | )        |        |  | 14,322  |  
|                                                     |            |                                                                                             | Changes in assets and liabilities and other |        |                                      | (382,191 | )            |        |               | 33,146 |               |        |                      | 78,364 |          |          |   | 255,476 |          |        |  | (15,205 | )
|                                                     |            |                                                                                             |                                             |        |                                      |          |              |        |               |        |               |        |                      |        |          |          |   |         |          |        | 
|Net cash provided by (used in) operating
activities  |            |                                                                                             | (273,812                                    | )      |                                      |          | 169,696      |        |               |        | 135,585       |        |                      |        | 109,117  |          |   |         | 140,586  |       
|                                                     |            |                                                                                             |                                             |        |                                      |          |              |        |               |        |               |        |                      |        |          |          |   |         |          |        | 
|Cash flows from investing activities                 |            |                                                                                             | (278,811                                    | )      |                                      |          | (964,960     | )      |               |        | (251,458      | )      |                      |        | 808,684  |          |   |         | (686,545 | )     
|Cash flows from financing activities                 |            |                                                                                             | 552,623                                     |        |                                      |          | 805,568      |        |               |        | 112,227       |        |                      |        | (917,801 | )        |   |         | 552,617  |       
|                                                     |            |                                                                                             |                                             |        |                                      |          |              |        |               |        |               |        |                      |        |          |          |   |         |          |        | 
|Net increase (decrease) in cash and cash equivalents |            |                                                                                             |                                            |        |                                      |          | 10,304       |        |               |        | (3,646        | )      |                      |        |         |          |   |         | 6,658    |       
|Cash and cash equivalents at beginning of period     |            |                                                                                             |                                            |        |                                      |          | 3,655        |        |               |        | 21,824        |        |                      |        |         |          |   |         | 25,479   |       
|                                                     |            |                                                                                             |                                             |        |                                      |          |              |        |               |        |               |        |                      |        |          |          |   |         |          |        | 
|Cash and cash equivalents at end of period           |            | $                                                                                           |                                            |        |                                      | $        | 13,959       |        |               | $      | 18,178        |        |                      | $      |         |          |   | $       | 32,137   |       
|                                                     |            |                                                                                             |                                             |        |                                      |          |              |        |               |        |               |        |                      |        |          |          |   |         |          |        | 

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TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

|                                                     |            |                                                                                             |                                             |        |                                      |         |              |        |               |        |               |        |                      |         |          |          |   |        |          |        |  |         |  
|---------------------------------------------------- | ---------- | ------------------------------------------------------------------------------------------- | ------------------------------------------- | ------ | ------------------------------------ | ------- | ------------ | ------ | ------------- | ------ | ------------- | ------ | -------------------- | ------- | -------- | -------- | - | ------ | -------- | ------ |  | ------- | -
|                                                     |            |                                                                                             |                                             |        | Nine Months Ended September 30, 2001
|                                                     |            |                                                                                             |                                             |        |                                     
|                                                     |            |                                                                                             |                                             |        | TEPPCO                               |         | Guarantor    |        | Non-Guarantor |        | Consolidating |        | TEPPCOPartners, L.P.
|                                                     |            |                                                                                             |                                             |        | Partners, L.P.                       |         | Subsidiaries |        | Subsidiaries  |        | Adjustments   |        | Consolidated        
|                                                     |            |                                                                                             |                                             |        |                                      |         |              |        |               |        |               |        |                     
|                                                     |            |                                                                                             |                                             |        |                                      |         |              |        |               |        |               |        | (in thousands)       |         |          |          |   |        |          |        | 
|Cash flows from operating activities                 |            |                                                                                             |                                             |        |                                      |         |              |        |               |        |               |        |                      |         |          |          |   |        |          |       
|                                                     | Net income |                                                                                             | $                                           | 87,865 |                                      |         | $            | 88,665 |               |        | $             | 18,683 |                      |         | $        | (107,348 | ) |        | $        | 87,865 | 
|                                                     |            | Adjustments to reconcile net income to
net cash provided by (used in)
operating activities: |                                             |        |                                      |         |              |        |               |        |               |        |                      |         |          |          |   |        |          |        |  |        
|                                                     |            |                                                                                             | Depreciation and amortization               |        |                                      |        |              |        |               | 20,051 |               |        |                      | 11,124  |          |          |   |       |          |        |  | 31,175  |  
|                                                     |            |                                                                                             | Equity earnings, net of distributions       |        |                                      | (13,340 | )            |        |               | 3,375  |               |        |                      | 5,600   |          |          |   | 10,455 |          |        |  | 6,090   |  
|                                                     |            |                                                                                             | Changes in assets and liabilities
and other |        |                                      | 2,601   |              |        |               | 2,822  |               |        |                      | (17,896 | )        |          |   | 801    |          |        |  | (11,672 | )
|                                                     |            |                                                                                             |                                             |        |                                      |         |              |        |               |        |               |        |                      |         |          |          |   |        |          |        | 
|Net cash provided by (used in) operating
activities  |            |                                                                                             | 77,126                                      |        |                                      |         | 114,913      |        |               |        | 17,511        |        |                      |         | (96,092  | )        |   |        | 113,458  |       
|                                                     |            |                                                                                             |                                             |        |                                      |         |              |        |               |        |               |        |                      |         |          |          |   |        |          |        | 
|Cash flows from investing activities                 |            |                                                                                             | (446,301                                    | )      |                                      |         | (83,599      | )      |               |        | (388,000      | )      |                      |         | 446,301  |          |   |        | (471,599 | )     
|Cash flows from financing activities                 |            |                                                                                             | 369,175                                     |        |                                      |         | (34,452      | )      |               |        | 379,562       |        |                      |         | (350,209 | )        |   |        | 364,076  |       
|                                                     |            |                                                                                             |                                             |        |                                      |         |              |        |               |        |               |        |                      |         |          |          |   |        |          |        | 
|Net increase (decrease) in cash and cash
equivalents |            |                                                                                             |                                            |        |                                      |         | (3,138       | )      |               |        | 9,073         |        |                      |         |         |          |   |        | 5,935    |       
|Cash and cash equivalents at beginning of
period     |            |                                                                                             |                                            |        |                                      |         | 9,167        |        |               |        | 17,929        |        |                      |         |         |          |   |        | 27,096   |       
|                                                     |            |                                                                                             |                                             |        |                                      |         |              |        |               |        |               |        |                      |         |          |          |   |        |          |        | 
|Cash and cash equivalents at end of period           |            | $                                                                                           |                                            |        |                                      | $       | 6,029        |        |               | $      | 27,002        |        |                      | $       |         |          |   | $      | 33,031   |       
|                                                     |            |                                                                                             |                                             |        |                                      |         |              |        |               |        |               |        |                      |         |          |          |   |        |          |        | 

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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

General

You should read the following review of our financial position and results
of operations in conjunction with the Consolidated Financial Statements.
Material period-to-period variances in the consolidated statements of income
are discussed under Results of Operations. The Financial Condition and
Liquidity section analyzes cash flows and financial position. Other
Considerations addresses certain trends, future plans or contingencies that
could affect future liquidity or earnings. These Consolidated Financial
Statements should be read in conjunction with the financial statements and
related notes, together with our discussion and analysis of financial position
and results of operations included in our Annual Report on Form 10-K, as
amended, for the year ended December 31, 2001.

We operate and report in three business segments:



| |  |  | Downstream Segment  transportation and storage of refined products, LPGs and petrochemicals;                                                      
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Upstream Segment  gathering, transportation, marketing and
storage of crude oil; and distribution of lubrication oils and
specialty chemicals; and
|
| |  |  | Midstream Segment  gathering of natural gas, fractionation
of NGLs and transportation of NGLs.                                                    

Our reportable segments offer different products and services and are
managed separately because each requires different business strategies. TEPPCO
GP, our wholly-owned subsidiary, acts as managing general partner with a 0.001%
general partner interest and manages our subsidiaries.

Effective January 1, 2002, we realigned our three business segments to
reflect our entry into the natural gas gathering business and the expanded
scope of NGLs operations. We transferred the fractionation of NGLs, which were
previously reflected as part of the Downstream Segment, to the Midstream
Segment. The operation of NGL pipelines, which was previously reflected as
part of the Upstream Segment, was also transferred to the Midstream Segment.
We have adjusted our period-to-period comparisons to conform with the current
presentation.

Our Downstream Segment revenues are derived from transportation and
storage of refined products and LPGs, storage and short-haul shuttle
transportation of LPGs at the Mont Belvieu complex, intrastate transportation
of petrochemicals, sale of product inventory and other ancillary services. The
two largest operating expense items of the Downstream Segment are labor and
electric power. We generally realize higher revenues during the first and
fourth quarters of each year since our operations are somewhat seasonal.
Refined products volumes are generally higher during the second and third
quarters because of greater demand for gasolines during the spring and summer
driving seasons. LPGs volumes are generally higher from November through March
due to higher demand in the Northeast for propane, a major fuel for residential
heating. Our Downstream Segment also includes our equity investment in
Centennial Pipeline LLC (Centennial).

The Upstream Segment revenues are earned from gathering, transportation,
marketing and storage of crude oil, and distribution of lubrication oils and
specialty chemicals, principally in Oklahoma, Texas and the Rocky Mountain
region. Marketing operations consist primarily of aggregating purchased crude
oil along our pipeline systems, or from third party pipeline systems, and
arranging the necessary logistics for the ultimate sale of the crude oil to
local refineries, marketers or other end users. Our Upstream Segment also
includes the equity earnings from our investment in Seaway Crude Pipeline
Company (Seaway). Seaway is a large diameter pipeline that transports crude
oil from the U.S. Gulf Coast to Cushing, Oklahoma, a central crude oil
distribution point for the Central United States.

The Midstream Segment revenues are earned from fractionation of NGLs in
Colorado, transportation of NGLs and gathering of natural gas. The Midstream
Segment includes the operations from the acquisition of Jonah on September 30,
2001, from Alberta Energy Company for $359.8 million. We paid an additional
$7.3 million on

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February 4, 2002, for final purchase adjustments related primarily to
construction projects in progress at the time of closing. The results of
operations of the acquisition are included in our consolidated financial
statements beginning in the fourth quarter of 2001. The Jonah assets are
managed and operated by DEFS under a contractual arrangement.

On March 1, 2002, we completed the purchase of the Chaparral NGL system
(Chaparral) for $132.4 million from Diamond-Koch II, L.P. and Diamond-Koch
III, L.P., including acquisition costs of approximately $0.4 million. The
Chaparral NGL system has an 800-mile pipeline that extends from West Texas and
New Mexico to Mont Belvieu. The pipeline delivers NGLs to fractionators and to
our existing storage in Mont Belvieu. The Chaparral NGL system also has an
approximately 170-mile NGL gathering system located in West Texas, which begins
in Sutton County, Texas, and connects to the 800-mile pipeline near Midland.
The pipelines are connected to 27 gas plants in West Texas and have
approximately 28,000 horsepower of pumping capacity at 14 stations. The
Chaparral NGL system is managed and operated by DEFS under a contractual
arrangement. These assets are included in the Midstream Segment.

On June 30, 2002, we completed the purchase of the Val Verde Gathering
System (Val Verde) for $444.2 million from Burlington Resources Gathering
Inc., a subsidiary of Burlington Resources Inc., including acquisition costs of
approximately $1.2 million. The Val Verde Gathering System gathers coal seam
gas from the Fruitland Coal Formation of the San Juan Basin in New Mexico. The
system is one of the largest coal seam gas gathering and treating facilities in
the United States, gathering coal seam gas from more than 544 separate wells
throughout New Mexico. The system provides gathering and treating services
pursuant to approximately 60 long-term contracts with approximately 40
different gas producers in the San Juan Basin. Gas gathered on the Val Verde
Gathering System is delivered to several interstate pipeline systems serving
the western United States and to local New Mexico markets. The Val Verde
Gathering System consists of 360 miles of pipeline ranging in size from 4
inches to 36 inches in diameter, 14 compressor stations operating over 93,000
horsepower of compression and a large amine treating facility for the removal
of carbon dioxide. The system has a pipeline capacity of approximately one
billion cubic feet per day. The assets are managed and operated by DEFS under
a contractual arrangement. These assets are included in the Midstream Segment.

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Results of Operations

The following table summarizes financial data by business segment (in
thousands):

|                          |                           |                          |                                |         |                    |        |                   |         |         |        |         |           |           |         |         |           |           |         | 
|------------------------- | ------------------------- | ------------------------ | ------------------------------ | ------- | ------------------ | ------ | ----------------- | ------- | ------- | ------ | ------- | --------- | --------- | ------- | ------- | --------- | --------- | ------- | 
|                          |                           |                          |                                |         | Three Months Ended |        | Nine Months Ended
|                          |                           |                          |                                |         | September 30,      |        | September 30,    
|                          |                           |                          |                                |         |                    |        |                  
|                          |                           |                          |                                |         | 2002               |        | 2001              |         | 2002    |        | 2001   
|                          |                           |                          |                                |         |                    |        |                   |         |         |        |        
|Operating revenues:       |                           |                          |                                |         |                    |        |                   |         |         |        |         |           |           |         |         |          
|                          | Downstream Segment        |                          | $                              | 58,754  |                    |        | $                 | 58,527  |         |        | $       | 172,996   |           |         | $       | 199,374   |          
|                          | Upstream Segment          |                          |                                | 776,036 |                    |        |                   | 925,256 |         |        |         | 2,139,703 |           |         |         | 2,629,360 |          
|                          | Midstream Segment         |                          |                                | 46,210  |                    |        |                   | 7,033   |         |        |         | 88,946    |           |         |         | 20,999    |          
|                          | Intercompany eliminations |                          |                                | (196    | )                  |        |                   |        |         |        |         | (1,375    | )         |         |         |          |          
|                          |                           |                          |                                |         |                    |        |                   |         |         |        |         |           |           |         |         |           |          
|                          |                           | Total operating revenues |                                |         | 880,804            |        |                   |         | 990,816 |        |         |           | 2,400,270 |         |         |           | 2,849,733 |        
|                          |                           |                          |                                |         |                    |        |                   |         |         |        |         |           |           |         |         |           |          
|                          |                           |                          |                                |         |                    |        |                   |         |         |        |         |           |           |         |         |          
|Operating income:         |                           |                          |                                |         |                    |        |                   |         |         |        |         |           |           |         |         |          
|                          | Downstream Segment        |                          |                                | 19,728  |                    |        |                   | 22,068  |         |        |         | 61,952    |           |         |         | 91,662    |          
|                          | Upstream Segment          |                          |                                | 7,908   |                    |        |                   | 1,455   |         |        |         | 20,580    |           |         |         | 12,483    |          
|                          | Midstream Segment         |                          |                                | 18,999  |                    |        |                   | 3,598   |         |        |         | 38,448    |           |         |         | 12,351    |          
|                          |                           |                          |                                |         |                    |        |                   |         |         |        |         |           |           |         |         |           |          
|                          |                           | Total operating income   |                                |         | 46,635             |        |                   |         | 27,121  |        |         |           | 120,980   |         |         |           | 116,496   |        
|                          |                           |                          |                                |         |                    |        |                   |         |         |        |         |           |           |         |         |           |          
|                          |                           |                          |                                |         |                    |        |                   |         |         |        |         |           |           |         |         |          
|Earnings before interest: |                           |                          |                                |         |                    |        |                   |         |         |        |         |           |           |         |         |          
|                          | Downstream Segment        |                          |                                | 17,786  |                    |        |                   | 22,205  |         |        |         | 57,218    |           |         |         | 92,141    |          
|                          | Upstream Segment          |                          |                                | 14,059  |                    |        |                   | 7,945   |         |        |         | 36,660    |           |         |         | 29,492    |          
|                          | Midstream Segment         |                          |                                | 19,039  |                    |        |                   | 3,613   |         |        |         | 38,669    |           |         |         | 12,357    |          
|                          | Intercompany eliminations |                          |                                | (366    | )                  |        |                   |        |         |        |         | (366      | )         |         |         |          |          
|                          |                           |                          |                                |         |                    |        |                   |         |         |        |         |           |           |         |         |           |          
|                          |                           |                          | Total earnings before interest |         |                    | 50,518 |                   |         |         | 33,763 |         |           |           | 132,181 |         |           |           | 133,990 | 
|                          |                           |                          |                                |         |                    |        |                   |         |         |        |         |           |           |         |         |           |          
|                          |                           |                          |                                |         |                    |        |                   |         |         |        |         |           |           |         |         |          
|Interest expense          |                           |                          | (19,763                        | )       |                    |        | (15,679           | )       |         |        | (53,379 | )         |           |         | (47,365 | )        
|Interest capitalized      |                           |                          | 1,338                          |         |                    |        | 1,105             |         |         |        | 4,476   |           |           |         | 2,040   |          
|Minority interest         |                           |                          |                               |         |                    |        | (97               | )       |         |        |        |           |           |         | (800    | )        
|                          |                           |                          |                                |         |                    |        |                   |         |         |        |         |           |           |         |         |           |          
|                          |                           |                          | Net income                     |         | $                  | 32,093 |                   |         | $       | 19,092 |         |           | $         | 83,278  |         |           | $         | 87,865  | 
|                          |                           |                          |                                |         |                    |        |                   |         |         |        |         |           |           |         |         |           |          

Below is a detailed analysis of the results of operations, including
reasons for changes in results, by each of our operating segments.

Downstream Segment

The following table presents volume and average rate information for the
three months and nine months ended September 30, 2002, and 2001:

|                          |                         |  |                                  |        |                    |        |            |        |                                           |        |                   |     |      |     |            |         |   |         |   |        |   |         |  |     |    |     |   
|------------------------- | ----------------------- |  | -------------------------------- | ------ | ------------------ | ------ | ---------- | ------ | ----------------------------------------- | ------ | ----------------- | --- | ---- | --- | ---------- | ------- | - | ------- | - | ------ | - | ------- |  | --- | -- | --- | --
|                          |                         |  |                                  |        | Three Months Ended |        |            |        |                                           |        | Nine Months Ended |     |      |     |           
|                          |                         |  |                                  |        | September 30,      |        | Percentage |        | September 30,                             |        | Percentage       
|                          |                         |  |                                  |        |                    |        | Increase   |        |                                           |        | Increase         
|                          |                         |  |                                  |        | 2002               |        | 2001       |        | (Decrease)                                |        | 2002              |     | 2001 |     | (Decrease)
|                          |                         |  |                                  |        |                    |        |            |        |                                           |        |                   |     |      |     |           
|                          |                         |  |                                  |        |                    |        |            |        | (in thousands, except tariff information) |        |                   |     |     
|Volumes Delivered         |                         |  |                                  |        |                    |        |            |        |                                           |        |                   |     |      |     |            |         |   |         |   |        |   |         |  |    
|                          | Refined products        |  |                                  | 40,065 |                    |        |            | 32,387 |                                           |        |                   | 24  | %    |     |            | 101,174 |   |         |   | 92,935 |   |         |  | 9   | % 
|                          | LPGs                    |  |                                  | 8,689  |                    |        |            | 8,864  |                                           |        |                   | (2  | %)   |     |            | 27,780  |   |         |   | 27,422 |   |         |  | 1   | % 
|                          | Mont Belvieu operations |  |                                  | 6,128  |                    |        |            | 5,352  |                                           |        |                   | 15  | %    |     |            | 21,385  |   |         |   | 16,188 |   |         |  | 32  | % 
|                          |                         |  |                                  |        |                    |        |            |        |                                           |        |                   |     |      |     |            |         |   |         |   |        |   |         |  |     |    |    
|                          |                         |  | Total                            |        |                    | 54,882 |            |        |                                           | 46,603 |                   |     |      | 18  | %          |         |   | 150,339 |   |        |   | 136,545 |  |     |    | 10  | % 
|                          |                         |  |                                  |        |                    |        |            |        |                                           |        |                   |     |      |     |            |         |   |         |   |        |   |         |  |     |    |    
|                          |                         |  |                                  |        |                    |        |            |        |                                           |        |                   |     |      |     |            |         |   |         |   |        |   |         |  |    
|Average Tariff per Barrel |                         |  |                                  |        |                    |        |            |        |                                           |        |                   |     |      |     |            |         |   |         |   |        |   |         |  |    
|                          | Refined products        |  | $                                | 0.88   |                    |        | $          | 0.99   |                                           |        |                   | (11 | %)   |     | $          | 0.91    |   |         | $ | 0.98   |   |         |  | (7  | %)
|                          | LPGs                    |  |                                  | 1.44   |                    |        |            | 1.77   |                                           |        |                   | (19 | %)   |     |            | 1.68    |   |         |   | 1.98   |   |         |  | (15 | %)
|                          | Mont Belvieu operations |  |                                  | 0.14   |                    |        |            | 0.18   |                                           |        |                   | (22 | %)   |     |            | 0.14    |   |         |   | 0.18   |   |         |  | (22 | %)
|                          |                         |  | Average system tariff per barrel |        | $                  | 0.89   |            |        | $                                         | 1.05   |                   |     |      | (15 | %)         |         | $ | 0.94    |   |        | $ | 1.08    |  |     |    | (13 | %)
|                          |                         |  |                                  |        |                    |        |            |        |                                           |        |                   |     |      |     |            |         |   |         |   |        |   |         |  |     |    |    

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Three Months ended September 30, 2002 Compared to Three Months ended
September 30, 2001

Our Downstream Segment reported earnings before interest of $17.8 million
for the three months ended September 30, 2002, compared with earnings before
interest of $22.2 million for the three months ended September 30, 2001.
Earnings before interest decreased $4.4 million primarily due to an increase of
$2.6 million in costs and expenses, additional losses of $1.7 million from
equity investments and a decrease of $0.3 million in other income -net,
partially offset by an increase of $0.2 million in operating revenues. We
discuss the factors influencing these variances below.

Revenues from refined products transportation increased $3.1 million for
the three months ended September 30, 2002, compared with the three months ended
September 30, 2001, due primarily to a 24% increase in refined products volumes
delivered during the third quarter of 2002. This increase in refined products
volumes delivered is primarily due to barrels received into our pipeline from
Centennial at Creal Springs, Illinois. Centennial commenced refined products
deliveries to us beginning in April 2002. The refined products average rate
per barrel decreased 11% from the prior-year period due to the impact of the
Midwest origin point for volumes received from Centennial.

Revenues from LPGs transportation decreased $3.2 million for the three
months ended September 30, 2002, compared with the three months ended September
30, 2001, primarily due to decreased deliveries of propane in the upper Midwest
and Northeast market areas caused by lower prices from competing Canadian and
mid-continent propane supply as compared to propane originating from the Gulf
Coast. Total LPGs volumes delivered decreased 2% as a result of increased
short-haul deliveries to a petrochemical facility on the upper Texas Gulf
Coast. The LPGs average rate per barrel decreased 19% from the prior-year
period as a result of a decreased percentage of long-haul deliveries during the
three months ended September 30, 2002.

Revenues generated from Mont Belvieu operations decreased $0.2 million
during the three months ended September 30, 2002, compared with the three
months ended September 30, 2001, as a result of increased contract shuttle
deliveries. Mont Belvieu shuttle volumes delivered increased 15% during the
three months ended September 30, 2002, compared with the three months ended
September 30, 2001, due to increased petrochemical demand. The Mont Belvieu
average rate per barrel decreased 22% during the three months ended September
30, 2002, as a result of increased contract shuttle deliveries, which generally
carry lower rates.

Other operating revenues increased $0.5 million during the three months
ended September 30, 2002, compared with the three months ended September 30,
2001, primarily due to increased refined products and LPGs loading fees. These
increases were partially offset by lower propane deliveries at our Providence,
Rhode Island, import facility and lower refined products storage revenues.

Costs and expenses increased $2.6 million for the three months ended
September 30, 2002, compared with the three months ended September 30, 2001.
The increase was comprised of a $1.1 million increase in operating, general and
administrative expenses, a $0.8 million increase in depreciation and
amortization expense, and a $1.4 million increase in taxes  other than income
taxes, partially offset by a $0.7 million decrease in operating fuel and power
expense. Operating, general and administrative expenses increased primarily due
to increased consulting and contract services, increased rental charges and
increased insurance costs. Depreciation expense increased from the prior-year
period because of assets placed in service during 2001. Taxes  other than
income taxes increased as a result of a higher property base in 2002. Operating
fuel and power expense decreased as a result of decreased long-haul volumes
delivered related to Midwest volumes received from Centennial and lower
electric power costs.

Net losses from equity investments totaled $2.0 million during the three
months ended September 30, 2002, due to start-up expenses of Centennial, which
commenced operations in early April 2002.

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Nine Months Ended September 30, 2002 Compared to Nine Months Ended
September 30, 2001

Our Downstream Segment reported earnings before interest of $57.2 million
for the nine months ended September 30, 2002, compared with earnings before
interest of $92.1 million for the nine months ended September 30, 2001.
Earnings before interest decreased $34.9 million primarily due to a decrease of
$26.4 million in operating revenues, an increase of $3.3 million in costs and
expenses, additional losses of $4.4 million from equity investments and a
decrease of $0.8 million in other income  net. We discuss the factors
influencing these variances below.

Revenues from refined products transportation decreased $17.5 million for
the nine months ended September 30, 2002, compared with the nine months ended
September 30, 2001, due primarily to $18.9 million of revenue recognized in the
2001 period from a cash settlement received from a canceled transportation
agreement with Pennzoil-Quaker State Company (Pennzoil) and the recognition
of $1.7 million of previously deferred revenue related to the approval of
market-based-rates during the second quarter of 2001. These decreases were
partially offset by a 9% increase in refined products volumes delivered during
the nine months ended September 30, 2002, primarily due to barrels received
into our pipeline from Centennial at Creal Springs, Illinois. Centennial
commenced refined products deliveries to us beginning in April 2002. The
overall increase in refined products deliveries was partially offset by a 1.3
million barrel decrease in methyl tertiary butyl ether (MTBE) deliveries as a
result of the expiration of contract deliveries to our marine terminal near
Beaumont, Texas, effective April 2001. As a result of the contract expiration,
we no longer transport MTBE through our Products pipeline system. The refined
products average rate per barrel decreased 7% from the prior-year period due to
the impact of the Midwest origin point for volumes received from Centennial,
which was partially offset by decreased short-haul MTBE volumes delivered and
higher market-based tariff rates, which went into effect in July 2001.

Revenues from LPGs transportation decreased $7.5 million for the nine
months ended September 30, 2002, compared with the nine months ended September
30, 2001, primarily due to decreased deliveries of propane in the upper Midwest
and Northeast market areas attributable to warmer than normal weather. The
decrease was also due to lower prices from competing Canadian and mid-continent
propane supply as compared to propane originating from the Gulf Coast. Total
LPGs volumes delivered increased 1% as a result of increased short-haul
deliveries to a petrochemical facility on the upper Texas Gulf Coast. The LPGs
average rate per barrel decreased 15% from the prior-year period as a result of
a decreased percentage of long-haul deliveries during the nine months ended
September 30, 2002.

Revenues generated from Mont Belvieu operations increased $1.2 million
during the nine months ended September 30, 2002, compared with the nine months
ended September 30, 2001, as a result of increased storage revenue and receipt
revenue. Mont Belvieu shuttle volumes delivered increased 32% during the nine
months ended September 30, 2002, compared with the nine months ended September
30, 2001, due to increased petrochemical demand. The Mont Belvieu average rate
per barrel decreased 22% during the nine months ended September 30, 2002, as a
result of increased contract shuttle deliveries, which generally carry lower
rates.

Other operating revenues decreased $2.6 million during the nine months
ended September 30, 2002, compared with the nine months ended September 30,
2001, primarily due to lower propane deliveries at our Providence, Rhode
Island, import facility, lower refined products storage revenue, lower margins
on product inventory sales, and increased losses as a result of exchanging
products at different geographic points of delivery to position product in the
Midwest market area. These decreases were partially offset by increased
refined products and LPGs loading fees.

Costs and expenses increased $3.3 million for the nine months ended
September 30, 2002, compared with the nine months ended September 30, 2001.
The increase was made up of a $4.7 million increase in operating, general and
administrative expenses, a $1.6 million increase in depreciation and
amortization expense, and a $2.4 million increase in taxes  other than income
taxes. These increases were partially offset by a $5.4 million decrease in
operating fuel and power expense. Operating, general and administrative
expenses increased, primarily due to higher pipeline maintenance and
rehabilitation expenses, increased consulting and contract services and
increased labor costs. Depreciation expense increased from the prior-year
period because of assets placed in service during

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2001. Taxes  other than income taxes increased as a result of a higher
property base in 2002. Operating fuel and power expense decreased as a result
of decreased long-haul volumes delivered related to Midwest volumes received
from Centennial and lower power costs.

Net losses from equity investments totaled $5.0 million during the nine
months ended September 30, 2002, due to pre-operating expenses and start-up
costs of Centennial, which commenced operations in early April 2002.

Upstream Segment

We calculate the margin of the Upstream Segment as revenues generated from
the sale of crude oil and lubrication oil, and transportation of crude oil,
less the costs of purchases of crude oil and lubrication oil. Margin is a more
meaningful measure of financial performance than operating revenues and
operating expenses due to the significant fluctuations in revenues and expenses
caused by variations in the level of marketing activity and prices for products
marketed. Margin and volume information for the three months and nine months
ended September 30, 2002, and 2001 is presented below (in thousands, except per
barrel and per gallon amounts):

|                                       |                          |              |       |                    |        |            |       |               |        |                   |    |      |    |            |       |         |        |   |       |         |        |  |   |    |    |  
|-------------------------------------- | ------------------------ | ------------ | ----- | ------------------ | ------ | ---------- | ----- | ------------- | ------ | ----------------- | -- | ---- | -- | ---------- | ----- | ------- | ------ | - | ----- | ------- | ------ |  | - | -- | -- | -
|                                       |                          |              |       | Three Months Ended |        |            |       |               |        | Nine Months Ended |    |      |    |           
|                                       |                          |              |       | September 30,      |        | Percentage |       | September 30, |        | Percentage       
|                                       |                          |              |       |                    |        | Increase   |       |               |        | Increase         
|                                       |                          |              |       | 2002               |        | 2001       |       | (Decrease)    |        | 2002              |    | 2001 |    | (Decrease)
|                                       |                          |              |       |                    |        |            |       |               |        |                   |    |      |    |           
|Margins:                               |                          |              |       |                    |        |            |       |               |        |                   |    |      |    |            |       |         |        |   |       |         |        |  |   |   
|                                       | Crude oil transportation |              | $     | 9,517              |        |            | $     | 9,119         |        |                   |    | 4    | %  |            | $     | 28,211  |        |   | $     | 26,165  |        |  |   | 8  | % 
|                                       | Crude oil marketing      |              |       | 6,249              |        |            |       | 6,945         |        |                   |    | (10  | %) |            |       | 16,319  |        |   |       | 16,772  |        |  |   | (3 | %)
|                                       | Crude oil terminaling    |              |       | 2,606              |        |            |       | 2,831         |        |                   |    | (8   | %) |            |       | 7,695   |        |   |       | 7,505   |        |  |   | 3  | % 
|                                       | Lubrication oil sales    |              |       | 1,166              |        |            |       | 1,030         |        |                   |    | 13   | %  |            |       | 3,531   |        |   |       | 3,148   |        |  |   | 12 | % 
|                                       |                          |              |       |                    |        |            |       |               |        |                   |    |      |    |            |       |         |        |   |       |         |        |  |   |    |   
|                                       |                          | Total margin |       | $                  | 19,538 |            |       | $             | 19,925 |                   |    |      | (2 | %)         |       | $       | 55,756 |   |       | $       | 53,590 |  |   |    | 4  | %
|                                       |                          |              |       |                    |        |            |       |               |        |                   |    |      |    |            |       |         |        |   |       |         |        |  |   |    |   
|                                       |                          |              |       |                    |        |            |       |               |        |                   |    |      |    |            |       |         |        |   |       |         |        |  |   |   
|Total barrels:                         |                          |              |       |                    |        |            |       |               |        |                   |    |      |    |            |       |         |        |   |       |         |        |  |   |   
|                                       | Crude oil transportation |              |       | 18,916             |        |            |       | 19,795        |        |                   |    | (4   | %) |            |       | 61,704  |        |   |       | 57,391  |        |  |   | 8  | % 
|                                       | Crude oil marketing      |              |       | 30,064             |        |            |       | 37,135        |        |                   |    | (19  | %) |            |       | 103,343 |        |   |       | 109,586 |        |  |   | (6 | %)
|                                       | Crude oil terminaling    |              |       | 31,361             |        |            |       | 30,130        |        |                   |    | 4    | %  |            |       | 93,700  |        |   |       | 87,252  |        |  |   | 7  | % 
|                                       |                          |              |       |                    |        |            |       |               |        |                   |    |      |    |            |       |         |        |   |       |         |        |  |   |   
|Lubrication oil volume (total gallons) |                          |              | 2,079 |                    |        |            | 2,257 |               |        |                   | (8 | %)   |    |            | 6,971 |         |        |   | 6,646 |         |        |  | 5 | % 
|                                       |                          |              |       |                    |        |            |       |               |        |                   |    |      |    |            |       |         |        |   |       |         |        |  |   |   
|Margin per barrel:                     |                          |              |       |                    |        |            |       |               |        |                   |    |      |    |            |       |         |        |   |       |         |        |  |   |   
|                                       | Crude oil transportation |              | $     | 0.503              |        |            | $     | 0.461         |        |                   |    | 9    | %  |            | $     | 0.457   |        |   | $     | 0.456   |        |  |   |   |   
|                                       | Crude oil marketing      |              |       | 0.208              |        |            |       | 0.187         |        |                   |    | 11   | %  |            |       | 0.158   |        |   |       | 0.153   |        |  |   | 3  | % 
|                                       | Crude oil terminaling    |              |       | 0.083              |        |            |       | 0.094         |        |                   |    | (12  | %) |            |       | 0.082   |        |   |       | 0.086   |        |  |   | (5 | %)
|                                       |                          |              |       |                    |        |            |       |               |        |                   |    |      |    |            |       |         |        |   |       |         |        |  |   |   
|Lubrication oil margin (per gallon)    |                          | $            | 0.561 |                    |        | $          | 0.456 |               |        |                   | 23 | %    |    | $          | 0.507 |         |        | $ | 0.474 |         |        |  | 7 | % 

Three Months ended September 30, 2002 Compared to Three Months ended
September 30, 2001

Our Upstream Segment reported earnings before interest of $14.1 million
for the three months ended September 30, 2002, compared with earnings before
interest of $7.9 million for the three months ended September 30, 2001.
Earnings before interest increased $6.2 million primarily due to a decrease of
$7.4 million in costs and expenses (excluding purchases of crude oil and
lubrication oil), an increase of $0.4 million in other income  net, partially
offset by a decrease of $0.8 million in equity earnings of Seaway, a decrease
of $0.4 million in margin and a decrease of $0.4 million in other revenue. We
discuss the factors influencing these variances below.

Our margin decreased $0.4 million during the three months ended September
30, 2002, compared with the three months ended September 30, 2001. Crude oil
marketing margin decreased $0.7 million primarily due to

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reduced volumes marketed on Seaway by our marketing affiliate, partially offset
by renegotiated supply contracts and lower trucking expenses. Crude oil
terminaling margin decreased $0.2 million as a result of lower volumes at
Midland, Texas, and Cushing, Oklahoma. Crude oil transportation margin
increased $0.4 million primarily due to higher revenues on our Red River
system. Lubrication oil sales margin increased $0.1 million due to increased
volumes related to the acquisition of a lubrication oil distributor in
Amarillo, Texas, in the fourth quarter of 2001.

Other operating revenues of the Upstream Segment decreased $0.4 million
for the three months ended September 30, 2002, compared with the three months
ended September 30, 2001, due to lower revenue from documentation and other
services to support customers trading activity at Midland, Texas, and Cushing,
Oklahoma.

Costs and expenses, excluding expenses associated with purchases of crude
oil and lubrication oil, decreased $7.4 million during the three months ended
September 30, 2002, compared with the three months ended September 30, 2001.
Operating, general and administrative expenses decreased $6.1 million due to
$4.3 million of environmental costs recognized in 2001, lower labor related
costs and decreased general and administrative supplies and services expense
during the 2002 period. Taxes  other than income taxes decreased by $1.0
million due to a reduction in estimated property taxes for the period.
Depreciation and amortization expense decreased by $0.2 million due to the
adoption of SFAS 142 effective January 1, 2002, (see Note 3. Goodwill and
Other Intangible Assets), in which goodwill and excess investment are no longer
being amortized. Operating fuel and power expense decreased by $0.1 million
due to lower electric power costs.

Equity earnings in Seaway for the three months ended September 30, 2002,
decreased $0.8 million from the three months ended September 30, 2001, due to
our portion of equity earnings being reduced from 80 percent to 60 percent on a
pro-rated basis in 2002 (averaging approximately 67 percent for the year ended
December 31, 2002), coupled with lower third-party transportation volumes.

Nine Months ended September 30, 2002 Compared to Nine Months ended
September 30, 2001

Our Upstream Segment reported earnings before interest of $36.7 million
for the nine months ended September 30, 2002, compared with earnings before
interest of $29.5 million for the nine months ended September 30, 2001.
Earnings before interest increased $7.2 million primarily due to an increase of
$2.1 million in margin, a decrease of $7.1 million in costs and expenses
(excluding purchases of crude oil and lubrication oil) and an increase of $0.8
million in other income  net. These increases were partially offset by a
decrease of $1.8 million in equity earnings of Seaway and a decrease of $1.0
million in other revenue. We discuss the factors influencing these variances
below.

Our margin increased $2.1 million during the nine months ended September
30, 2002, compared with the nine months ended September 30, 2001. Crude oil
transportation margin increased $2.0 million primarily due to volumes
transported on the pipeline assets acquired from Valero Energy Corp. (Valero)
in March 2001, and higher revenues on our Basin, Red River and West Texas
systems. Crude oil terminaling margin increased $0.2 million as a result of
higher volumes at Midland, Texas, and Cushing, Oklahoma. Lubrication oil sales
margin increased $0.4 million due to increased volumes related to the
acquisition of a lubrication oil distributor in Amarillo, Texas, in the fourth
quarter of 2001. Crude oil marketing margin decreased $0.5 million primarily
due to decreased volumes marketed, partially offset by renegotiated supply
contracts and lower trucking expenses.

Other operating revenues of the Upstream Segment decreased $1.0 million
for the nine months ended September 30, 2002, compared with the nine months
ended September 30, 2001, due to lower revenue from documentation and other
services to support customers trading activity at Midland, Texas, and Cushing,
Oklahoma.

Costs and expenses, excluding expenses associated with purchases of crude
oil and lubrication oil, decreased $7.1 million during the nine months ended
September 30, 2002, compared with the nine months ended September 30, 2001.
Operating, general and administrative expenses decreased from the prior year
period due to $4.3 million of environmental costs recognized in 2001 and
decreased labor related costs, partially offset by increased general and
administrative supplies and services expense. Taxes  other than income taxes
decreased $2.0

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million due to reductions in property tax accruals. Depreciation and
amortization expense decreased $0.7 million due to the adoption of SFAS 142
effective January 1, 2002, in which goodwill and excess investment are no
longer being amortized, partially offset by increased depreciation expense on
the assets acquired from Valero. These decreases were partially offset by a
$0.3 million increase in operating fuel and power costs attributed to higher
transportation volumes.

Equity earnings in Seaway for the nine months ended September 30, 2002,
decreased $1.8 million from the nine months ended September 30, 2001, due to
our portion of equity earnings being reduced from 80 percent to 60 percent on a
pro rated basis in 2002 (averaging approximately 67 percent for the year ended
December 31, 2002), coupled with lower third-party transportation volumes.

Midstream Segment

The following table presents volume and average rate information for the
three months and nine months ended September 30, 2002, and 2001:

|                         |                                         |  |                    |         |            |  |               |       |                   |  |      |     |            |  |   |         |  |  |   |        |  |  |  |     |   
|------------------------ | --------------------------------------- |  | ------------------ | ------- | ---------- |  | ------------- | ----- | ----------------- |  | ---- | --- | ---------- |  | - | ------- |  |  | - | ------ |  |  |  | --- | --
|                         |                                         |  | Three Months Ended |         |            |  |               |       | Nine Months Ended |  |      |     |           
|                         |                                         |  | September 30,      |         | Percentage |  | September 30, |       | Percentage       
|                         |                                         |  |                    |         | Increase   |  |               |       | Increase         
|                         |                                         |  | 2002               |         | 2001       |  | (Decrease)    |       | 2002              |  | 2001 |     | (Decrease)
|                         |                                         |  |                    |         |            |  |               |       |                   |  |      |     |           
|Gathering  Natural Gas: |                                         |  |                    |         |            |  |               |       |                   |  |      |     |            |  |   |         |  |  |   |        |  |  |  |    
|                         | Million cubic feet                      |  |                    | 111,197 |            |  |               |      |                   |  |      |    |            |  |   | 221,173 |  |  |   |       |  |  |  |    |   
|                         | Million British
thermal units
(MMBtu) |  |                    | 110,571 |            |  |               |      |                   |  |      |    |            |  |   | 232,792 |  |  |   |       |  |  |  |    |   
|                         | Average fee per MMBtu                   |  | $                  | 0.299   |            |  |               |      |                   |  |      |    |            |  | $ | 0.232   |  |  |   |       |  |  |  |    |   
|                         |                                         |  |                    |         |            |  |               |       |                   |  |      |     |            |  |   |         |  |  |   |        |  |  |  |    
|Transportation  NGLs:   |                                         |  |                    |         |            |  |               |       |                   |  |      |     |            |  |   |         |  |  |   |        |  |  |  |    
|                         | Thousand barrels                        |  |                    | 15,568  |            |  |               | 5,828 |                   |  |      | 167 | %          |  |   | 39,039  |  |  |   | 16,026 |  |  |  | 144 | % 
|                         | Average rate per barrel                 |  | $                  | 0.717   |            |  | $             | 0.929 |                   |  |      | (23 | %)         |  | $ | 0.717   |  |  | $ | 0.989  |  |  |  | (28 | %)
|                         |                                         |  |                    |         |            |  |               |       |                   |  |      |     |            |  |   |         |  |  |   |        |  |  |  |    
|Fractionation  NGLs:    |                                         |  |                    |         |            |  |               |       |                   |  |      |     |            |  |   |         |  |  |   |        |  |  |  |    
|                         | Thousand barrels                        |  |                    | 992     |            |  |               | 1,004 |                   |  |      | (1  | %)         |  |   | 3,036   |  |  |   | 3,062  |  |  |  | (1  | %)
|                         | Average rate per barrel                 |  | $                  | 1.841   |            |  | $             | 1.828 |                   |  |      | 1   | %          |  | $ | 1.830   |  |  | $ | 1.813  |  |  |  | 1   | % 
|                         |                                         |  |                    |         |            |  |               |       |                   |  |      |     |            |  |   |         |  |  |   |        |  |  |  |    
|Sales  Condensate:      |                                         |  |                    |         |            |  |               |       |                   |  |      |     |            |  |   |         |  |  |   |        |  |  |  |    
|                         | Thousand barrels                        |  |                    | 7.0     |            |  |               |      |                   |  |      |    |            |  |   | 57.7    |  |  |   |       |  |  |  |    |   
|                         | Average rate per barrel                 |  | $                  | 27.78   |            |  |               |      |                   |  |      |    |            |  | $ | 24.46   |  |  |   |       |  |  |  |    |   

Three Months ended September 30, 2002 Compared to Three Months ended
September 30, 2001

Our Midstream Segments earnings before interest totaled $19.0 million for
the three months ended September 30, 2002, compared with earnings before
interest of $3.6 million for the three months ended September 30, 2001.
Earnings before interest increased $15.4 million due to an increase of $39.2
million in operating revenues, partially offset by an increase of $23.8 million
in costs and expenses. We discuss the factors influencing these variances
below.

Operating revenues increased $39.2 million during the three months ended
September 30, 2002, compared with the three months ended September 30, 2001.
Natural gas gathering revenues from the Jonah system (acquired on September 30,
2001) totaled $13.1 million and volumes delivered totaled 63.0 billion cubic
feet during the three months ended September 30, 2002. Natural gas gathering
revenues from the Val Verde system (acquired on June 30, 2002) totaled $20.0
million and volumes delivered totaled 48.2 billion cubic feet during the three
months ended September 30, 2002. Other revenues increased $0.2 million due to
sales of gas condensate from the Jonah system. NGL transportation revenues
increased $5.9 million, primarily due to the acquisition of Chaparral on March
1, 2002,

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partially offset by lower revenues on a take-or-pay contract on the Dean system
that was in effect until the bankruptcy of Enron Corp. in December 2001. The
decrease in the NGL transportation average rate per barrel resulted from the
cancellation of the Enron Corp. take-or-pay contract, and a lower average rate
per barrel on volumes transported on Chaparral in 2002.

Costs and expenses increased $23.8 million during the three months ended
September 30, 2002, compared with the three months ended September 30, 2001.
The increase was comprised of an increase of $13.6 million in depreciation and
amortization expense, an increase of $8.3 million in operating, general and
administrative expense, an increase of $1.3 million in operating fuel and power
costs and an increase of $0.6 million in taxes  other than income taxes. Of
these increases, $22.8 million related to the Jonah, Chaparral and Val Verde
assets acquired on September 30, 2001, March 1, 2002, and June 30, 2002,
respectively, and an increase of $1.0 million in general and administrative
labor and supplies expenses.

Nine Months ended September 30, 2002 Compared to Nine Months ended
September 30, 2001

Our Midstream Segments earnings before interest totaled $38.7 million for
the nine months ended September 30, 2002, compared with earnings before
interest of $12.4 million for the nine months ended September 30, 2001.
Earnings before interest increased $26.3 million due to an increase of $67.9
million in operating revenues and an increase of $0.2 million in other income -
net, partially offset by an increase of $41.8 million in costs and expenses.
We discuss the factors influencing these variances below.

Operating revenues increased $67.9 million during the nine months ended
September 30, 2002, compared with the nine months ended September 30, 2001.
Natural gas gathering revenues from the Jonah system totaled $34.0 million and
volumes delivered totaled 173.0 billion cubic feet during the nine months ended
September 30, 2002. Natural gas gathering revenues from the Val Verde system
totaled $20.0 million and volumes delivered totaled 48.2 billion cubic feet
during the nine months ended September 30, 2002. Other revenues increased $1.5
million primarily due to sales of gas condensate from the Jonah system. NGL
transportation revenues increased $12.4 million, primarily due to the
acquisition of Chaparral on March 1, 2002, partially offset by lower revenues
on a take-or-pay contract on the Dean system that was in effect until the
bankruptcy of Enron Corp. in December 2001. The decrease in the NGL
transportation average rate per barrel resulted from the cancellation of the
Enron Corp. take-or-pay contract, and a lower average rate per barrel on
volumes transported on Chaparral.

Costs and expenses increased $41.8 million during the nine months ended
September 30, 2002, compared with the nine months ended September 30, 2001. The
increase was comprised of a $26.0 million increase in depreciation and
amortization expense, a $12.1 million increase in operating, general and
administrative expense, a $2.7 million increase in operating fuel and power
costs and a $1.0 million increase in taxes  other than income taxes. Of these
increases, $41.5 million related to the Jonah, Chaparral and Val Verde assets
acquired on September 30, 2001, March 1, 2002, and June 30, 2002, respectively.
The remaining $0.4 million increase was attributable to higher general and
administrative labor and supplies expense, partially offset by decreased
operating expenses.

Interest Expense and Capitalized Interest

Three Months ended September 30, 2002 Compared to Three Months ended
September 30, 2001

Interest expense increased $4.1 million during the three months ended
September 30, 2002, compared with the three months ended September 30, 2001,
primarily due to higher outstanding debt, partially offset by lower LIBOR rates
in effect during 2002.

Capitalized interest increased $0.2 million during the three months ended
September 30, 2002, compared with the three months ended September 30, 2001,
due to increased balances on construction work-in-progress during the third
quarter of 2002.

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Nine Months ended September 30, 2002 Compared to Nine Months ended
September 30, 2001

Interest expense increased $6.0 million during the nine months ended
September 30, 2002, compared with the nine months ended September 30, 2001,
primarily due to higher outstanding debt, partially offset by lower LIBOR rates
in effect during 2002.

Capitalized interest increased $2.4 million during the nine months ended
September 30, 2002, compared with the nine months ended September 30, 2001, due
to interest capitalized on the investment during the construction of Centennial
and increased balances during 2002 on construction work-in-progress.

Financial Condition and Liquidity

Net cash from operations totaled $140.6 million for the nine months ended
September 30, 2002. This cash was made up of $141.5 million of income before
charges for depreciation and amortization, partially offset by $0.9 million of
cash used for working capital changes. This compares with net cash from
operations of $113.5 million for the corresponding period in 2001, comprised of
$119.0 million of income before charges for depreciation and amortization,
partially offset by $5.5 million of cash used for working capital changes. Net
cash from operations for the nine months ended September 30, 2002, and 2001,
included interest payments of $30.5 million and $52.0 million, respectively.

Cash flows used in investing activities totaled $686.5 million during the
nine months ended September 30, 2002, and were comprised of $7.3 million for
the final purchase price adjustments on the acquisition of Jonah, $98.3 million
of capital expenditures, $7.7 million of cash contributions for our interest in
Centennial, $132.4 million for the purchase of Chaparral on March 1, 2002, and
$444.2 million for the purchase of Val Verde on June 30, 2002. These uses of
cash were partially offset by $3.4 million in cash proceeds from the sale of
assets. Cash flows used in investing activities totaled $471.6 million during
the nine months ended September 30, 2001, and were comprised of $359.8 million
for the purchase of Jonah on September 30, 2001, $62.0 million of capital
expenditures, $34.3 million of cash contributions for our interest in
Centennial, and $20.0 million for the purchase of assets from Valero on March
1, 2001. These uses of cash were partially offset by $1.3 million of cash
received from the sale of vehicles and $3.2 million received on matured cash
investments.

Cash flows provided by financing activities totaled $552.6 million during
the nine months ended September 30, 2002, and were comprised of $662.0 million
in proceeds from term and revolving credit facilities; $497.8 million from the
issuance of our 7.625% Senior Notes due 2012, partially offset by debt issuance
costs of $7.0 million; $275.3 million from the issuance of 9.5 million Limited
Partner Units in March, July, and September 2002, and $5.6 million of related
general partner contributions; and $18.0 million of proceeds from the
termination of our interest rate swaps on the 7.625% Senior Notes due 2012.
These sources of cash in 2002 were partially offset by $790.7 million of
repayments on our term and revolving credit facilities and $108.4 million of
distributions to Limited Partner unitholders. Cash flows provided by financing
activities totaled $364.1 million during the nine months ended September 30,
2001, and were comprised of $427.0 million of proceeds from term and revolving
credit facilities, partially offset by debt issuance costs of $2.6 million; and
$54.6 million from the issuance of 2.3 million Limited Partner Units in
February 2001, and $1.1 million of related general partner contributions.
These sources of cash in 2001 were partially offset by $41.0 million of
repayments on our term and revolving credit facilities and $75.0 million in
distributions to Limited Partner unitholders.

Centennial entered into credit facilities totaling $150.0 million, and as
of September 30, 2002, $150.0 million was outstanding under those credit
facilities. The proceeds were used to fund construction and conversion costs
of its pipeline system. Each of the participants in Centennial originally
guaranteed one-third of Centennials debt, which included TE Products, who had
guaranteed one-third of the debt up to a maximum amount of $50.0 million.
During the third quarter of 2002, PEPL, one of the participants in Centennial,
was downgraded by Moodys and Standard & Poors to below investment grade, which
resulted in PEPL being in default under its portion of the Centennial guaranty.
Effective September 27, 2002, the two remaining participants, TE Products and
Marathon, increased their guaranteed amounts to one-half of the debt of
Centennial, up to a maximum amount of $75.0 million

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each, to avoid a default on the Centennial debt. As compensation to TE
Products and Marathon for providing their additional guarantees, PEPL is
required to pay interest at a rate of 4% per annum to each of TE Products and
Marathon on the portion of the additional guaranty that each has provided for
PEPL.

In February 2000, we entered into a joint marketing and development
alliance with Louis Dreyfus Plastics Corporation, now known as Louis Dreyfus
Energy Services, L.P. (Louis Dreyfus), in which our Mont Belvieu LPGs storage
and transportation shuttle system services are jointly marketed by Louis
Dreyfus and us. The purpose of the alliance is to expand services to the upper
Texas Gulf Coast energy marketplace by increasing pipeline throughput and the
mix of products handled through the existing system and establishing new
receipt and delivery connections. TE Products operates the facilities for the
alliance. Under the alliance, Louis Dreyfus has invested $6.1 million for
expansion projects at Mont Belvieu. The alliance is a service-oriented,
fee-based venture with no commodity trading activity. The alliance is
scheduled to terminate on December 31, 2002, at which time a partnership may be
established between TE Products and Louis Dreyfus, if the terms of the joint
development agreement are met. We anticipate that the terms in the joint
development agreement will be met during the fourth quarter of 2002, and the
partnership will be created effective January 1, 2003. Under the terms of the
joint development agreement, we would contribute our Mont Belvieu assets to a
newly formed partnership. The economic terms of the partnership will be the
same as those under the joint development and marketing alliance.

Credit Facilities and Interest Rate Swap Agreements

On April 6, 2001, we entered into an Amended and Restated Credit Agreement
(Three Year Facility) which provides for revolving borrowings of up to $500.0
million for a period of three years including the issuance of letters of credit
of up to $20.0 million. The interest rate is based, at our option, on either
the lenders base rate plus a spread, or LIBOR plus a spread in effect at the
time of the borrowings. The credit agreement for the Three Year Facility
contains restrictive financial covenants that require us to maintain a minimum
level of partners capital as well as maximum debt-to-EBITDA (earnings before
interest expense, income tax expense and depreciation and amortization expense)
and minimum fixed charge coverage ratios. On February 20, 2002, we repaid
$115.7 million of the then outstanding balance of the Three Year Facility with
proceeds from the issuance of our 7.625% Senior Notes. On March 1, 2002, we
borrowed $132.0 million under the Three Year Facility to finance the
acquisition of Chaparral. On March 22, 2002, we repaid a portion of the Three
Year Facility with proceeds we received from the issuance of additional Limited
Partner Units (see Note 9. Partners Capital). To facilitate our financing of
a portion of the purchase price of the Val Verde assets, on June 27, 2002, the
Three Year Facility was amended to increase the maximum debt-to-EBITDA ratio
covenant to allow us to incur additional indebtedness. We then drew down the
existing capacity of the Three Year Facility. At September 30, 2002, $500.0
million was outstanding under the Three Year Facility at a weighted average
interest rate of 2.9%. As of September 30, 2002, we were in compliance with
the covenants contained in this credit agreement.

On April 6, 2001, we entered into a 364-day, $200.0 million revolving
credit agreement (Short-term Revolver). The interest rate is based, at our
option, on either the lenders base rate plus a spread, or LIBOR plus a spread
in effect at the time of the borrowings. The credit agreement contains
restrictive financial covenants that require us to maintain a minimum level of
partners capital as well as maximum debt-to-EBITDA and minimum fixed charge
coverage ratios. On March 28, 2002, the Short-term Revolver was extended for
an additional period of 364 days, ending in March 2003. To facilitate our
financing of a portion of the purchase price of the Val Verde assets, on June
27, 2002, the Short-term Revolver was amended to increase the maximum
debt-to-EBITDA ratio covenant to allow us to incur additional indebtedness. We
then drew down $72.0 million under the Short-term Revolver. At September 30,
2002, $72.0 million was outstanding under the Short-term Revolver at an
interest rate of 2.9%. As of September 30, 2002, we were in compliance with
the covenants contained in this credit agreement.

On September 28, 2001, we entered into a $400.0 million credit facility
with SunTrust Bank (Bridge Facility) payable in June 2002. We borrowed
$360.0 million under the Bridge Facility to acquire the Jonah assets (see Note
5. Acquisitions). During the fourth quarter of 2001, we repaid $160.0 million
of the outstanding principal from proceeds received from the issuance of
Limited Partner Units in November 2001. On February 5, 2002, we drew down an
additional $15.0 million under the Bridge Facility. On February 20, 2002, we
repaid the outstanding balance of the Bridge Facility of $215.0 million, with proceeds from the
issuance of the 7.625% Senior Notes and canceled the facility.

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On February 20, 2002, we received $494.6 million in net proceeds from the
issuance of $500.0 million principal amount of 7.625% Senior Notes due 2012.
The 7.625% Senior Notes were issued at a discount and are being accreted to
their face value over the term of the notes. We used the proceeds from the
offering to reduce a portion of the outstanding balances of our credit
facilities, described above, including those issued in connection with the
acquisition of Jonah. The Senior Notes may be redeemed at any time at our
option with the payment of accrued interest and a make-whole premium determined
by discounting remaining interest and principal payments using a discount rate
equal to the rate of the United States Treasury securities of comparable
remaining maturity plus 35 basis points. The indenture governing the 7.625%
Senior Notes contains covenants, including, but not limited to, covenants
limiting the creation of liens securing indebtedness and sale and leaseback
transactions. However, the indenture does not limit our ability to incur
additional indebtedness. As of September 30, 2002, we were in compliance with
the covenants of these Senior Notes.

On June 27, 2002, we entered into a $200.0 million six-month term loan
with SunTrust Bank (Six-Month Term Loan) payable in December 2002. We
borrowed $200.0 million under the Six-Month Term Loan to acquire the Val Verde
assets (see Note 5. Acquisitions). The interest rate was based, at our
option, on either the lenders base rate plus a spread, or LIBOR plus a spread
in effect at the time of the borrowings. The credit agreement contained
restrictive financial covenants that require us to maintain a minimum level of
partners capital as well as maximum debt-to-EBITDA and minimum fixed charge
coverage ratios. On July 11, 2002, we repaid $90.0 million of the outstanding
principal from proceeds primarily received from the issuance of Limited Partner
Units in July 2002. On September 10, 2002, we repaid the remaining outstanding
balance of $110.0 million with proceeds received from the issuance of Limited
Partner Units in September 2002 (see Note 9. Partners Capital), and canceled
the facility.

We entered into interest rate swap agreements to hedge our exposure to
cash flows and fair value changes. These agreements are more fully described
in Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The following table summarizes our credit facilities as of September 30,
2002 (in millions):

|                    |  |                          |       |           |  |           |       |  |  |               |  | 
|------------------- |  | ------------------------ | ----- | --------- |  | --------- | ----- |  |  | ------------- |  | 
|                    |  | As of September 30, 2002
|                    |  |                         
|                    |  |                          |       |           |  | Available |       |  |  |              
|                    |  | Outstanding              |       | Borrowing |  | Maturity 
|Description:        |  | Principal                |       | Capacity  |  | Date     
|                    |  |                          |       |           |  |          
|Short-term Revolver |  | $                        | 72.0  |           |  | $         | 128.0 |  |  | March 2003   
|Three Year Facility |  |                          | 500.0 |           |  |           |      |  |  | April 2004   
|6.45% Senior Notes  |  |                          | 180.0 |           |  |           |      |  |  | January 2008 
|7.625% Senior Notes |  |                          | 500.0 |           |  |           |      |  |  | February 2012
|7.51% Senior Notes  |  |                          | 210.0 |           |  |           |      |  |  | January 2028 

Distributions and Issuance of Additional Limited Partner Units

We paid cash distributions of $108.4 million ($1.75 per Unit) and $75.0
million ($1.575 per Unit) for each of the nine months ended September 30, 2002,
and 2001, respectively. Additionally, on October 16, 2002, we declared a cash
distribution of $0.60 per Limited Partner Unit and Class B Unit for the quarter
ended September 30, 2002. We will pay the distribution of approximately $43.5
million on November 8, 2002, to unitholders of record on October 31, 2002.

On February 6, 2001, we sold in an underwritten public offering 2.0
million Limited Partner Units at $25.50 per Unit. The proceeds from the
offering, net of underwriting discount, totaled approximately $48.7 million and

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were used to reduce borrowings under the Three Year Facility. On March 6,
2001, 250,000 Units were sold upon exercise of the underwriters over-allotment
option granted in connection with the offering on February 6, 2001. Proceeds
from that sale totaled $6.1 million and were used for general purposes.

On November 14, 2001, we sold in an underwritten public offering 5.5
million Limited Partner Units at $34.25 per Unit. The proceeds from the
offering, net of underwriting discount, totaled approximately $180.3 million
and were used to repay $160.0 million under the Bridge Facility that was used
to fund the Jonah acquisition. The remaining proceeds were used to finance
contributions to Centennial and for other capital expenditures.

On March 22, 2002, we sold in an underwritten public offering 1.92 million
Limited Partner Units at $31.18 per Unit. The proceeds from the offering, net
of underwriting discount, totaled approximately $57.3 million and were used to
repay $50.0 million of the outstanding balance on the Three Year Facility, with
the remaining amount being used for general purposes.

On July 11, 2002, we sold in an underwritten public offering 3.0 million
Limited Partner Units at $30.15 per Unit. The proceeds from the offering, net
of underwriting discount, totaled approximately $86.6 million and were used to
reduce borrowings under our Six-Month Term Loan. On August 14, 2002, 175,000
Units were sold upon exercise of the underwriters over-allotment option
granted in connection with the offering on July 11, 2002. Proceeds from that
sale totaled $5.1 million and were used for general purposes.

On September 6, 2002, we sold in an underwritten public offering 3.8
million Limited Partner Units at $29.72 per Unit. The proceeds from the
offering, net of underwriting discount, totaled approximately $108.1 million
and were used to reduce borrowings under our Six-Month Term Loan. On September
19, 2002, 570,000 Units were sold upon exercise of the underwriters
over-allotment option granted in connection with the offering on September 6,
2002. Proceeds from that sale totaled $16.2 million and were used to repay a
portion of the Short-term Revolver.

Future Capital Needs and Commitments

We estimate that capital expenditures, excluding acquisitions, for 2002
will be approximately $141.0 million (which includes $6.0 million of
capitalized interest). We expect to use approximately $110.0 million for
revenue generating projects, approximately $18.0 million for maintenance
capital spending and approximately $7.0 million for system upgrade projects.
Revenue generating projects will include approximately $45.0 million for Phase
II expansion of the Jonah system, $17.0 million for expansion of other
Midstream assets and $38.0 million to expand our service capabilities including
the installation of a brine pond at our Mont Belvieu LPGs storage facility, the
installation of improvements at our Princeton, Indiana, LPGs truck loading
facilities, and the completion of facilities to support receipt and delivery
locations with Centennial. We expect to use approximately $4.1 million of
maintenance capital spending for pipeline rehabilitation projects to comply
with regulations enacted by the United States Department of Transportation
Office of Pipeline Safety. We continually review and evaluate potential
capital improvements and expansions that would be complementary to our present
business segments. These expenditures can vary greatly depending on the
magnitude of our transactions. We may finance capital expenditures through
internally generated funds, debt or the issuance of additional equity.

As of September 30, 2002, we had a working capital deficit of $51.4
million. Of this amount, $72.0 million was due to short-term borrowings
outstanding under our Short-term Revolver, which is payable in March 2003.
These borrowings were used to finance a portion of the purchase price of Val
Verde. We anticipate that we will issue additional Limited Partner Units and
additional long-term debt in the fourth quarter of 2002 and use the proceeds to
repay balances outstanding under our short-term revolving credit facilities.

Our debt repayment obligations consist of payments for principal and
interest on (i) outstanding principal amounts under the Short-term Revolver due
in March 2003 ($72.0 million at September 30, 2002), (ii) outstanding principal
amounts under the Three Year Facility due in April 2004 ($500.0 million at
September 30, 2002), (iii) the TE Products Senior Notes, $180.0 million
principal amount due January 15, 2008, and $210.0 million principal amount due
January 15, 2028, and (iv) our $500.0 million 7.625% Senior Notes due February
15, 2012.

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TE Products is contingently liable as guarantor for the lesser of one-half
or $75.0 million principal amount (plus interest) of the borrowings of
Centennial. We expect to contribute an additional $2.0 million to Centennial
for the remaining three months of 2002 to provide for operating
problems associated with the pipeline start-up, which have restricted
the flexibility of Centennial's Creal Springs tank farm. We may make additional contributions
to Centennial in 2003. We expect that if any contributions are made they would
not have a material adverse effect on our consolidated financial position,
results of operations or cash flows. We do not rely on off-balance sheet
borrowings to fund our acquisitions. We have no off-balance sheet commitments
for indebtedness other than the limited guaranty of Centennial debt and leases
covering assets utilized in several areas of our operations.

The following table summarizes our debt repayment obligations and material
contractual commitments as of September 30, 2002 (in millions).

|                                |       |   |                                            |         |        |   |           |      |           |   |         |       |  |   |     |     |       |   |       |       | 
|------------------------------- | ----- | - | ------------------------------------------ | ------- | ------ | - | --------- | ---- | --------- | - | ------- | ----- |  | - | --- | --- | ----- | - | ----- | ----- | 
|                                |       |   | Amount of Commitment Expiration Per Period
|                                |       |   |                                           
|                                |       |   |                                            |         |        |   | Less than |      |           |   |         |       |  |   |     |     | After
|                                |       |   | Total                                      |         | 1 Year |   | 2-3 Years |      | 4-5 Years |   | 5 Years
|                                |       |   |                                            |         |        |   |           |      |           |   |        
|Short-term Revolver             |       | $ | 72.0                                       |         |        | $ | 72.0      |      |           | $ |        |       |  | $ |    |     |       | $ |      |      
|Three Year Facility             |       |   | 500.0                                      |         |        |   |          |      |           |   | 500.0   |       |  |   |    |     |       |   |      |      
|6.45% Senior Notes due 2008 (1) |       |   | 180.0                                      |         |        |   |          |      |           |   |        |       |  |   |    |     |       |   | 180.0 |      
|7.51% Senior Notes due 2028 (1) |       |   | 210.0                                      |         |        |   |          |      |           |   |        |       |  |   |    |     |       |   | 210.0 |      
|7.625% Senior Notes due 2012    |       |   | 500.0                                      |         |        |   |          |      |           |   |        |       |  |   |    |     |       |   | 500.0 |      
|Centennial cash contributions   |       |   | 2.0                                        |         |        |   | 2.0       |      |           |   |        |       |  |   |    |     |       |   |      |      
|Operating leases                |       |   | 31.3                                       |         |        |   | 8.4       |      |           |   | 14.9    |       |  |   | 7.3 |     |       |   | 0.7   |      
|                                |       |   |                                            |         |        |   |           |      |           |   |         |       |  |   |     |     |       |   |       |      
|                                | Total |   | $                                          | 1,495.3 |        |   | $         | 82.4 |           |   | $       | 514.9 |  |   | $   | 7.3 |       |   | $     | 890.7 | 
|                                |       |   |                                            |         |        |   |           |      |           |   |         |       |  |   |     |     |       |   |       |      



---

|(1) |  | Obligations of TE Products.
|--- |  | ---------------------------

We expect to repay the long-term, senior unsecured obligations and bank
debt through the issuance of additional long-term senior unsecured debt at the
time the 2008, 2012 and 2028 debt matures, issuance of additional equity,
proceeds from dispositions of assets, or any combination of the above items.

Sources of Future Capital

Historically, we have funded our capital commitments from operating cash
flow and borrowings under bank credit facilities or bridge loans. We repaid
these loans in part by the issuance of long term debt in capital markets and
the public offering of Limited Partner Units. We expect future capital needs
to be similarly funded to the extent not otherwise available from cash flow
from operations.

As of September 30, 2002, we had approximately $128.0 million in available
borrowing capacity under the Short-term Revolver.

We expect cash flows from operating activities will be adequate to fund
cash distributions and capital additions necessary to maintain existing
operations. However, expansionary capital projects and acquisitions may
require funding through proceeds from the sale of additional debt or equity
capital markets offerings.

In connection with our acquisition of Val Verde, we amended our Short-term
Revolver and Three Year Facility to increase the maximum permitted
debt-to-EBITDA ratio. For the twelve month period ending September 30, 2002,
the maximum permitted ratio is 5.0-to-1 on a pro forma basis. At September 30,
2002, we are in compliance with this covenant. At December 31, 2002, the
maximum permitted debt-to-EBITDA ratio returns to its pre-amendment level of
4.5-to-1. This ratio is determined for each fiscal quarter based on the
preceding twelve months on a pro forma basis. Although we expect to satisfy
this additional requirement by reducing debt through sales of additional units
or other possible alternatives or combinations thereof, we cannot assure you
that we will be successful in these efforts. If we cannot obtain a waiver of
these restrictions, we could be in default under our credit

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facilities, which could result in the acceleration of the amount
outstanding thereunder at the time. A default under our credit facilities
could result in a default under our 7.625% Senior Notes and our guarantee of a
portion of the indebtedness of Centennial.

On May 29, 2002, Moodys Investors Service downgraded our senior unsecured
debt rating to Baa3 from Baa2. Our subsidiary, TE Products was also included
in this downgrade. These ratings were given with stable outlooks and followed
our announcement of the acquisition of Val Verde. The downgrades reflect
Moodys concern that we have a high level of debt relative to many of our peers
and that our debt may be continually higher than our long-term targets if we
continue to make a series of acquisitions of increasingly larger size. Because
of our high distribution rate, we are particularly reliant on external
financing to finance our acquisitions. Moodys indicated that our cash flows
are becoming less predictable as a result of our acquisitions and expansion
into the crude oil and natural gas gathering businesses. We are evaluating
alternatives to lowering our debt-to-EBITDA ratio. Further reductions in our
credit ratings could increase the debt financing costs or possibly reduce the
availability of financing. A rating reflects only the view of a rating agency
and is not a recommendation to buy, sell or hold any indebtedness. Any rating
can be revised upward or downward or withdrawn at any time by a rating agency
if it decides that the circumstances warrant such a change. On September 17,
2002, Moodys reaffirmed the Baa3 ratings on us and our subsidiary, TE
Products.

Other Considerations

Our operations are subject to federal, state and local laws and
regulations governing the discharge of materials into the environment. Failure
to comply with these laws and regulations may result in the assessment of
administrative, civil, and criminal penalties, imposition of injunctions
delaying or prohibiting certain activities, and the need to perform
investigatory and remedial activities. Although we believe our operations are
in material compliance with applicable environmental laws and regulations,
risks of significant costs and liabilities are inherent in pipeline operations,
and we cannot assure you that significant costs and liabilities will not be
incurred. Moreover, it is possible that other developments, such as
increasingly strict environmental laws and regulations and enforcement policies
thereunder, and claims for damages to property or persons resulting from our
operations, could result in substantial costs and liabilities to us. We
believe that changes in environmental laws and regulations will not have a
material adverse effect on our financial position, results of operations or
cash flows in the near term.

In 1994, we entered into an Agreed Order with the Indiana Department of
Environmental Management (IDEM) that resulted in the implementation of a
remediation program for groundwater contamination attributable to our
operations at the Seymour, Indiana, terminal. In 1999, the IDEM approved a
Feasibility Study, which includes our proposed remediation program. We expect
the IDEM to issue a Record of Decision formally approving the remediation
program. After the Record of Decision is issued, we will enter into a
subsequent Agreed Order for the continued operation and maintenance of the
remediation program. We have an accrued liability of $0.2 million at September
30, 2002, for future remediation costs at the Seymour terminal. We do not
expect that the completion of the remediation program will have a future
material adverse effect on our financial position, results of operations or
cash flows.

In 1994, the Louisiana Department of Environmental Quality (LDEQ) issued
a compliance order for environmental contamination at our Arcadia, Louisiana,
facility. This contamination may be attributable to our operations, as well as
adjacent petroleum terminals operated by other companies. In 1999, our Arcadia
facility and adjacent terminals were directed by the Remediation Services
Division of the LDEQ to pursue remediation of this containment phase. At
September 30, 2002, we have an accrued liability of $0.2 million for
remediation costs at our Arcadia facility. We do not expect that the
completion of the remediation program that we have proposed will have a future
material adverse effect on our financial position, results of operations or
cash flows.

At September 30,
2002, we have an accrued liability of $5.6 million and a
receivable of $4.2 million related to various TCTM sites
requiring environmental remediation activities (included in our
Upstream Segment). The receivable is based on a contractual indemnity
obligation for specified environmental liabilities that DEFS owes to us
in connection with our acquisition of the Upstream Segment from DEFS
in November 1998. Under this indemnity obligation, we are responsible for

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the first $3.0 million in specified environmental liabilities, and DEFS is
responsible for those environmental liabilities in excess of $3.0 million, up
to a maximum amount of $25.0 million. The majority of the indemnified costs
relate to remediation activities at the Velma crude oil site in Stephens
County, Oklahoma, attributable to operations prior to our acquisition of the
Upstream Segment. We do not
expect that the completion of remediation programs associated with
TCTM activities will have a future material adverse effect on our financial position, results
of operations or cash flows.

New Accounting Pronouncements

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS 143 requires us to record the fair value of an
asset retirement obligation as a liability in the period in which we incur a
legal obligation for the retirement of tangible long-lived assets. A
corresponding asset is also recorded and depreciated over the life of the
asset. After the initial measurement of the asset retirement obligation, the
obligation will be adjusted at the end of each period to reflect the passage of
time and changes in the estimated future cash flows underlying the obligation.
We are required to adopt SFAS 143 effective January 1, 2003. We are currently
evaluating the impact of adopting SFAS 143.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS 144 supercedes SFAS No. 121,
Accounting for Long-Lived Assets and For Long-Lived Assets to be Disposed Of,
but retains its fundamental provisions for reorganizing and measuring
impairment losses on long-lived assets held for use and long-lived assets to be
disposed of by sale. We adopted SFAS 144 effective January 1, 2002. The
adoption of SFAS 144 did not have a material effect on our financial position,
results of operations or cash flows.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections.SFAS 145 eliminates the requirement to classify gains and losses
from the extinguishment of indebtedness as extraordinary, requires certain
lease modifications to be treated the same as a sale-leaseback transaction, and
makes other non-substantive technical corrections to existing pronouncements.
SFAS 145 is effective for fiscal years beginning after May 15, 2002, with
earlier adoption encouraged. We are required to adopt SFAS 145 effective
January 1, 2003. We do not believe that the adoption of SFAS 145 will have a
material effect on our financial position, results of operations or cash flows.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring). SFAS 146
requires recognition of a liability for a cost associated with an exit or
disposal activity when the liability is incurred, as opposed to when the entity
commits to an exit plan under EITF No. 94-3. SFAS 146 is to be applied
prospectively to exit or disposal activities initiated after December 31, 2002.
We do not believe that the adoption of SFAS 146 will have a material effect on
our financial position, results of operations or cash flows.

In June 2002, the EITF reached a consensus on certain issues contained in
Topic 02-03, Recognition and Reporting of Gains and Losses on Energy Trading
Contracts under EITF Issue No. 98-10, Accounting for Contracts Involved in
Energy Trading and Risk Management Activities. We do not believe that this
consensus, as currently interpreted by the EITF, applies to us, as we engage in
the marketing of crude oil owned by us and third parties, rather than energy
trading as contemplated by EITF No. 98-10. We do not engage in material energy
trading activities. While certain accounting bodies have requested
clarification from the EITF, the EITF has not expanded its definition of energy
trading activities to include the marketing activities in which we engage.
However, if the EITF does expand its definition of energy trading activities to
include our marketing activities, we may be required to present sales of crude
oil and petroleum products in the statement of income on a net margin basis.
Any such

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change would significantly decrease our reported sales and purchases of crude
oil and petroleum products, but would have no effect on our operating income or
cash flow.




Forward-Looking Statements

The matters discussed in this Report include forward-looking statements
within the meaning of various provisions of the Securities Act of 1933 and the
Securities Exchange Act of 1934. All statements, other than statements of
historical facts, included in this document that address activities, events or
developments that we expect or anticipate will or may occur in the future,
including such things as estimated future capital expenditures (including the
amount and nature thereof), business strategy and measures to implement
strategy, competitive strengths, goals, expansion and growth of our business
and operations, plans, references to future success, references to intentions
as to future matters and other such matters are forward-looking statements.
These statements are based on certain assumptions and analyses based on our
experience and our perception of historical trends, current conditions and
expected future developments as well as other factors we believe are
appropriate under the circumstances. However, whether actual results and
developments will conform with our expectations and predictions is subject to a
number of risks and uncertainties, including general economic, market or
business conditions, the opportunities (or lack thereof) that may be presented
to and pursued by us, competitive actions by other pipeline companies, changes
in laws or regulations, and other factors, many of which are beyond our
control. Consequently, all of the forward-looking statements made in this
document are qualified by these cautionary statements and we cannot assure you
that actual results or developments that we anticipate will be realized or,
even if substantially realized, will have the expected consequences to or
effect on us or our business or operations. For additional discussion of such
risks and uncertainties, see our 2001 Annual Report on Form 10-K, as amended,
and other filings we have made with the Securities and Exchange Commission.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

We may be exposed to market risk through changes in commodity prices and
interest rates. We do not have foreign exchange risks. Our Risk Management
Committee has established policies to monitor and control these market risks.
The Risk Management Committee is comprised, in part, of senior executives of
the Company.

At September 30,
2002, we had $572.0 million outstanding under our variable
interest rate revolving credit agreements. The interest rate is based, at our
option, on either the lenders base rate plus a spread or LIBOR plus a spread
in effect at the time of the borrowings and is adjusted monthly, bimonthly,
quarterly or semiannually. Utilizing the balances of variable interest rate
debt outstanding at September 30, 2002, and assuming market interest rates
increase 100 basis points, the potential annual increase in interest expense is
$5.7 million.

We have utilized and expect to continue to utilize interest rate swap
agreements to hedge a portion of our cash flow and fair value risks. Interest
rate swap agreements are used to manage the fixed and floating interest rate
mix of our total debt portfolio and overall cost of borrowing. The interest
rate swap related to our cash flow risk is intended to reduce our exposure to
increases in the benchmark interest rates underlying our variable rate
revolving credit facility. The interest rate swaps related to our fair value
risks are intended to reduce our exposure to changes in the fair value of the
fixed rate Senior Notes. The interest rate swap agreements involve the
periodic exchange of payments without the exchange of the notional amount upon
which the payments are based. The related amount payable to or receivable from
counterparties is included as an adjustment to accrued interest.

At September 30, 2002, our subsidiary, TE Products had outstanding $180.0
million principal amount of 6.45% Senior Notes due 2008, and $210.0 million
principal amount of 7.51% Senior Notes due 2028 (collectively the TE Products
Senior Notes). At September 30, 2002, the estimated fair value of the TE
Products Senior Notes was approximately $392.0 million. At September 30, 2002,
$500.0 million principal amount of 7.625% Senior Notes due 2012 was
outstanding. At September 30, 2002, the estimated fair value of the $500.0
million Senior Notes was approximately $527.0 million.

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As of September 30, 2002, TE Products had an interest rate swap agreement
in place to hedge its exposure to changes in the fair value of its fixed rate
7.51% TE Products Senior Notes due 2028. We designated this swap agreement as
a fair value hedge. The swap agreement has a notional amount of $210.0 million
and matures in January 2028 to match the principal and maturity of the TE
Products Senior Notes. Under the swap agreement, TE Products pays a floating
rate based on a three month U.S. Dollar LIBOR rate, plus a spread, and receives
a fixed rate of interest of 7.51%. During the nine months ended September 30,
2002, we recognized a gain of $5.4 million, recorded as a reduction of interest
expense, on the interest rate swap. During the quarter ended September 30,
2002, we measured the hedge effectiveness of this interest rate swap, and noted
that no gain or loss from ineffectiveness was required to be recognized. The
fair value of this interest rate swap agreement was a gain of approximately
$5.2 million at September 30, 2002, and a loss of approximately $14.6 million
at December 31, 2001.

As of September 30, 2002, we had an interest rate swap agreement in place
to hedge our exposure to increases in the benchmark interest rate underlying
our variable rate revolving credit facility. The term of the interest rate
swap matches the maturity of the credit facility. We designated this swap
agreement, which hedges exposure to variability in expected future cash flows
attributed to changes in interest rates, as a cash flow hedge. The swap
agreement is based on a notional amount of $250.0 million. Under the swap
agreement, we pay a fixed rate of interest of 6.955% and receive a floating
rate based on a three month U.S. Dollar LIBOR rate. Since this swap is
designated as a cash flow hedge, the changes in fair value, to the extent the
swap is effective, are recognized in other comprehensive income until the
hedged interest costs are recognized in earnings. During the nine months ended
September 30, 2002, and 2001, we recognized $9.6 million and $4.0 million,
respectively, in losses, included in interest expense, on the interest rate
swap. During the quarter ended September 30, 2002, we measured the hedge
effectiveness of this interest rate swap, and noted that no gain or loss from
ineffectiveness was required to be recognized. The fair value of the interest
rate swap agreement was a loss of approximately $22.2 million and $20.3 million
at September 30, 2002, and December 31, 2001, respectively. We anticipate that
approximately $13.1 million of the fair value will be transferred into earnings
over the next twelve months.

On February 20, 2002, we entered into interest rate swap agreements to
hedge our exposure to changes in the fair value of our fixed rate 7.625% Senior
Notes due 2012. We designated these swap agreements as fair value hedges. The
swap agreements had a combined notional amount of $500.0 million and matured in
2012 to match the principal and maturity of the Senior Notes. Under the swap
agreements, we paid a floating rate based on a six month U.S. Dollar LIBOR
rate, plus a spread, and received a fixed rate of interest of 7.625%. On July
16, 2002, we terminated these interest rate swap agreements. Upon termination,
the fair value of the interest rate swap agreements was $25.8 million. From
inception of the swap agreements on February 20, 2002, through the termination
on July 16, 2002, $7.8 million had been recognized as a reduction to interest
expense. The remaining gain of approximately $18.0 million is being amortized
as a reduction to future interest expense over the remaining term of the Senior
Notes. In the event of early extinguishment of the Senior Notes, any remaining
unamortized gain would be recognized in the consolidated statement of income at
the time of extinguishment.

Additionally, on July 16, 2002, we entered into new interest rate swap
agreements to hedge our exposure to changes in the fair value of our $500.0
million principal amount of 7.625% fixed rate Senior Notes due 2012. We
designated these swap agreements as fair value hedges. The swap agreements have
a combined notional amount of $500.0 million and mature in 2012 to match the
principal and maturity of the Senior Notes. Under these swap agreements, we pay
a floating rate based on a six month U.S. Dollar LIBOR rate, plus a spread,
which increased by approximately 50 basis points from the previous swap
agreements, and receive a fixed rate of interest of 7.625%. During the quarter
ended September 30, 2002, we recognized a gain of $4.0 million, recorded as a
reduction of interest expense, on these interest rate swaps. During the
quarter ended September 30, 2002, we measured the hedge effectiveness of these
interest rate swaps and noted that no gain or loss from ineffectiveness was
required to be recognized. The fair value of these interest rate swap
agreements was a gain of approximately $39.0 million at September 30, 2002.

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Item 4. Controls and Procedures

Included in its recent Release No. 34-46427, effective August 29, 2002,
the Securities and Exchange Commission adopted rules requiring reporting
companies to maintain disclosure controls and procedures to provide reasonable
assurance that a registrant is able to record, process, summarize and report
the information required in the registrants quarterly and annual reports under
the Securities Exchange Act of 1934 (the Exchange Act). While we believe
that our existing disclosure controls and procedures have been effective to
accomplish these objectives, we intend to continue to examine, refine and
formalize our disclosure controls and procedures and to monitor ongoing
developments in this area.

The principal executive officer and principal financial officer of our
general partner have informed us that, based upon their evaluation as of
October 29, 2002, of our disclosure controls and procedures (as defined in Rule
13a-14(c) and Rule 15d-14(c) under the Exchange Act), they have concluded that
those disclosure controls and procedures are effective.

There have been no changes in our internal controls or in other factors
known to us that could significantly affect those controls subsequent to their
evaluation, nor any corrective actions with regard to significant deficiencies
and material weaknesses.




PART II. OTHER INFORMATION




Item 6. Exhibits and Reports on Form 8-K.

(a)  Exhibits:

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|3.1     |  | Certificate of Limited Partnership of TEPPCO Partners, L.P.
(Filed as Exhibit 3.2 to the Registration Statement of TEPPCO
Partners, L.P. (Commission File No. 33-32203) and incorporated
herein by reference).                                                                                                                                                                                                                                                    
|3.2     |  | Third Amended and Restated Agreement of Limited Partnership
of TEPPCO Partners, L.P., dated September 21, 2001 (Filed as Exhibit
3.7 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended September 30, 2001 and incorporated
herein by reference).                                                                                                                                                                          
|4.1     |  | Form of Certificate representing Limited Partner Units (Filed
as Exhibit 4.1 to the Registration Statement of TEPPCO Partners,
L.P. (Commission File No. 33-32203) and incorporated herein by
reference).                                                                                                                                                                                                                                                         
|4.2     |  | Form of Indenture between TE Products Pipeline Company,
Limited Partnership and The Bank of New York, as Trustee, dated as
of January 27, 1998 (Filed as Exhibit 4.3 to TE Products Pipeline
Company, Limited Partnerships Registration Statement on Form S-3
(Commission File No. 333-38473) and incorporated herein by
reference).                                                                                                                             
|4.3     |  | Form of Certificate representing Class B Units (Filed as
Exhibit 4.3 to Form 10-K of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the year ended December 31, 1998 and incorporated
herein by reference).                                                                                                                                                                                                                                              
|4.4     |  | Form of Indenture between TEPPCO Partners, L.P., as issuer,
TE Products Pipeline Company, Limited Partnership, TCTM, L.P.,
TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering Company, as
subsidiary guarantors, and First Union National Bank, NA, as
trustee, dated as of February 20, 2002 (Filed as Exhibit 99.2 to
Form 8-K of TEPPCO Partners, L.P. (Commission File No. 1-10403)
dated as of February 20, 2002 and incorporated herein by reference).

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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.5     |  | First Supplemental Indenture between TEPPCO Partners, L.P.,
as issuer, TE Products Pipeline Company, Limited Partnership, TCTM,
L.P., TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering
Company, as subsidiary guarantors, and First Union National Bank,
NA, as trustee, dated as of February 20, 2002 (Filed as Exhibit 99.3
to Form 8-K of TEPPCO Partners, L.P. (Commission File No. 1-10403)
dated as of February 20, 2002 and incorporated herein by reference).                                                                                                                               
|4.6     |  | Supplemental Indenture, dated as of June 27, 2002, among
TEPPCO Partners, L.P., as issuer, TE Products Pipeline Company,
Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P.,
and Jonah Gas Gathering Company, as Initial Subsidiary Guarantors,
and Val Verde Gas Gathering Company, L.P., as New Subsidiary
Guarantor, and Wachovia Bank, National Association, formerly known
as First Union National Bank, as trustee (Filed as Exhibit 4.6 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the quarter ended June 30, 2002 and incorporated herein by
reference).
|10.1+   |  | Duke Energy Corporation Executive Savings Plan (Filed as
Exhibit 10.7 to Form 10-K of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the year ended December 31, 1999 and incorporated
herein by reference).                                                                                                                                                                                                                                                                                                                                                                                       
|10.2+   |  | Duke Energy Corporation Executive Cash Balance Plan (Filed
as Exhibit 10.8 to Form 10-K of TEPPCO Partners, L.P. (Commission
File No. 1-10403) for the year ended December 31, 1999 and
incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                  
|10.3+   |  | Duke Energy Corporation Retirement Benefit Equalization Plan
(Filed as Exhibit 10.9 to Form 10-K for TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended December 31, 1999
and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                        
|10.4+   |  | Texas Eastern Products Pipeline Company 1994 Long Term
Incentive Plan executed on March 8, 1994 (Filed as Exhibit 10.1 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the quarter ended March 31, 1994 and incorporated herein by
reference).                                                                                                                                                                                                                                                                                                                                      
|10.5+   |  | Texas Eastern Products Pipeline Company 1994 Long Term
Incentive Plan, Amendment 1, effective January 16, 1995 (Filed as
Exhibit 10.12 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended June 30, 1999 and incorporated
herein by reference).                                                                                                                                                                                                                                                                                                                       
|10.6    |  | Asset Purchase Agreement between Duke Energy Field Services,
Inc. and TEPPCO Colorado, LLC, dated March 31, 1998 (Filed as
Exhibit 10.14 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended March 31, 1998 and incorporated
herein by reference).                                                                                                                                                                                                                                                                                                                    
|10.7    |  | Contribution Agreement between Duke Energy Transport and
Trading Company and TEPPCO Partners, L.P., dated October 15, 1998
(Filed as Exhibit 10.16 to Form 10-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended December 31, 1998
and incorporated herein by reference).                                                                                                                                                                                                                                                                                                          
|10.8    |  | Guaranty Agreement by Duke Energy Natural Gas Corporation for
the benefit of TEPPCO Partners, L.P., dated November 30, 1998,
effective November 1, 1998 (Filed as Exhibit 10.17 to Form 10-K of
TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year
ended December 31, 1998 and incorporated herein by reference).                                                                                                                                                                                                                                                                             
|10.9+   |  | Form of Employment Agreement between the Company and Thomas
R. Harper, Charles H. Leonard, James C. Ruth, John N. Goodpasture,
Leonard W. Mallett, Stephen W. Russell, David E. Owen, and Barbara
A. Carroll (Filed as Exhibit 10.20 to Form 10-K of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the year ended December 31,
1998 and incorporated herein by reference).                                                                                                                                                                                                                        
|10.10   |  | Services and Transportation Agreement between TE Products
Pipeline Company, Limited Partnership and Fina Oil and Chemical
Company, BASF Corporation and BASF Fina Petrochemical Limited
Partnership, dated February 9, 1999 (Filed as Exhibit 10.22 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1999 and incorporated herein by reference).                                                                                                                                                                                                         

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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.11   |  | Call Option Agreement, dated February 9, 1999 (Filed as
Exhibit 10.23 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended March 31, 1999 and incorporated
herein by reference).                                                                                                                                                                             
|10.12+  |  | Texas Eastern Products Pipeline Company Retention Incentive
Compensation Plan, effective January 1, 1999 (Filed as Exhibit 10.24
to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended March 31, 1999 and incorporated herein by
reference).                                                                                                                  
|10.13+  |  | Form of Employment and Non-Compete Agreement between the Company
and J. Michael Cockrell effective January 1, 1999 (Filed as Exhibit
10.29 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended September 30, 1999 and incorporated
herein by reference).                                                                                                    
|10.14+  |  | Texas Eastern Products Pipeline Company Non-employee Directors
Unit Accumulation Plan, effective April 1, 1999 (Filed as Exhibit
10.30 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended September 30, 1999 and incorporated
herein by reference).                                                                                                        
|10.15+  |  | Texas Eastern Products Pipeline Company Non-employee Directors
Deferred Compensation Plan, effective November 1, 1999 (Filed as
Exhibit 10.31 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended September 30, 1999 and
incorporated herein by reference).                                                                                                 
|10.16+  |  | Texas Eastern Products Pipeline Company Phantom Unit Retention
Plan, effective August 25, 1999 (Filed as Exhibit 10.32 to Form 10-Q
of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended September 30, 1999 and incorporated herein by
reference).                                                                                                                        
|10.17   |  | Amended and Restated Purchase Agreement By and Between
Atlantic Richfield Company and Texas Eastern Products Pipeline
Company With Respect to the Sale of ARCO Pipe Line Company, dated as
of May 10, 2000. (Filed as Exhibit 2.1 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the quarter ended
March 31, 2000 and incorporated herein by reference).                 
|10.18+  |  | Texas Eastern Products Pipeline Company, LLC 2000 Long Term
Incentive Plan, Amendment and Restatement, effective January 1, 2000
(Filed as Exhibit 10.28 to Form 10-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended December 31, 2000
and incorporated herein by reference).                                                                                          
|10.19+  |  | TEPPCO Supplemental Benefit Plan, effective April 1, 2000 (Filed
as Exhibit 10.29 to Form 10-K of TEPPCO Partners, L.P. (Commission
File No. 1-10403) for the year ended December 31, 2000 and
incorporated herein by reference).                                                                                                                                                                 
|10.20+  |  | Employment Agreement with Barry R. Pearl (Filed as Exhibit 10.30
to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended March 31, 2001 and incorporated herein by
reference).                                                                                                                                                                                  
|10.21   |  | Amended and Restated Credit Agreement among TEPPCO Partners,
L.P. as Borrower, SunTrust Bank as Administrative Agent and LC
Issuing Bank, and Certain Lenders, dated as of April 6, 2001
($500,000,000 Revolving Facility) (Filed as Exhibit 10.31 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 2001 and incorporated herein by reference).
|10.22   |  | Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent, and Certain Lenders, dated as
of April 6, 2001 ($200,000,000 Revolving Facility) (Filed as Exhibit
10.32 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended March 31, 2001 and incorporated
herein by reference).                                         
|10.23   |  | Purchase and Sale Agreement By and Among Green River
Pipeline, LLC and McMurry Oil Company, Sellers, and TEPPCO Partners,
L.P., Buyer, dated as of September 7, 2000. (Filed as Exhibit 10.31
to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended September 30, 2001 and incorporated herein by
reference).                                                 

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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.24   |  | Credit Agreement Among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank, as Administrative Agent and Certain Lenders, dated as
of September 28, 2001 ($400,000,000 Term Facility) (Filed as Exhibit
10.32 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended September 30, 2001 and incorporated
herein by reference).                                                                                                             
|10.25   |  | Amendment 1, dated as of September 28, 2001, to the Amended
and Restated Credit Agreement among TEPPCO Partners, L.P. as
Borrower, SunTrust Bank as Administrative Agent and LC Issuing Bank,
and Certain Lenders, dated as of April 6, 2001 ($500,000,000
Revolving Facility) (Filed as Exhibit 10.33 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the quarter ended
September 30, 2001 and incorporated herein by reference).                
|10.26   |  | Amendment 1, dated as of September 28, 2001, to the Credit
Agreement among TEPPCO Partners, L.P. as Borrower, SunTrust Bank as
Administrative Agent, and Certain Lenders, dated as of April 6, 2001
($200,000,000 Revolving Facility) (Filed as Exhibit 10.34 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended September 30, 2001 and incorporated herein by
reference).                                                         
|10.27   |  | Amendment and Restatement, dated as of November 13, 2001, to
the Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent, and Certain Lenders, dated as
of April 6, 2001 ($200,000,000 Revolving Facility) (Filed as Exhibit
10.35 to Form 10-K of TEPPCO Partners, L.P (Commission File No.
1-10403) for the year ended December 31, 2001 and incorporated
herein by reference).                                                 
|10.28   |  | Second Amendment and Restatement, dated as of November 13,
2001, to the Amended and Restated Credit Agreement amount TEPPCO
Partners, L.P. as Borrower, SunTrust Bank as Administrative Agent
and LC Issuing Bank, and Certain Lenders, dated as of April 6, 2001
($500,000,000 Revolving Facility) (Filed as Exhibit 10.36 to Form
10-K of TEPPCO Partners, L.P (Commission File No. 1-10403) for the
year ended December 31, 2001 and incorporated herein by reference).
|10.29   |  | Second Amended and Restated Agreement of Limited Partnership
of TE Products Pipeline Company, Limited Partnership, dated
September 21, 2001 (Filed as Exhibit 3.8 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the quarter ended
September 30, 2001 and incorporated herein by reference).                                                                                                                                                     
|10.30   |  | Amended and Restated Agreement of Limited Partnership of
TCTM, L.P., dated September 21, 2001 (Filed as Exhibit 3.9 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended September 30, 2001 and incorporated herein by
reference).                                                                                                                                                                                                   
|10.31   |  | Contribution, Assignment and Amendment Agreement among
TEPPCO Partners, L.P., TE Products Pipeline Company, Limited
Partnership, TCTM, L.P., Texas Eastern Products Pipeline Company,
LLC, and TEPPCO GP, Inc., dated July 26, 2001 (Filed as Exhibit 3.6
to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended June 30, 2001 and incorporated herein by
reference).                                                                  
|10.32   |  | Certificate of Formation of TEPPCO Colorado, LLC (Filed as
Exhibit 3.2 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended March 31, 1998 and incorporated
herein by reference).                                                                                                                                                                                                                                                    
|10.33   |  | Agreement of Limited Partnership of TEPPCO Midstream
Companies, L.P., dated September 24, 2001 (Filed as Exhibit 3.10 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the quarter ended September 30, 2001 and incorporated herein by
reference).                                                                                                                                                                                                 
|10.34   |  | Agreement of Partnership of Jonah Gas Gathering Company
dated June 20, 1996 as amended by that certain Assignment of
Partnership Interests dated September 28, 2001 (Filed as Exhibit
10.40 to Form 10-K of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the year ended December 31, 2001 and incorporated
herein by reference).                                                                                                                               
|10.35   |  | Unanimous Written Consent of the Board of Directors of
TEPPCO GP, Inc. dated February 13, 2002 (Filed as Exhibit 10.41 to
Form 10-K of TEPPCO Partners, L.P.                                                                                                                                                                                                                                                                                                              

49



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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |  | (Commission File No. 1-10403) for the year ended December 31,
2001 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                             
|10.36   |  | Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent and Certain Lenders, as
Lenders dated as of March 28, 2002 ($200,000,000 Revolving Credit
Facility) (Filed as Exhibit 10.44 to Form 10-Q of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the three months ended March
31, 2002 and incorporated herein by reference).                                      
|10.37   |  | Amended and Restated Credit Agreement among TEPPCO Partners,
L.P. as Borrower, SunTrust Bank, as Administrative Agent and LC
Issuing Bank and Certain Lenders, as Lenders dated as of March 28,
2002 ($500,000,000 Revolving Facility) (Filed as Exhibit 10.45 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the three months ended March 31, 2002 and incorporated herein by
reference).   
|10.38   |  | Purchase and Sale Agreement between Burlington Resources
Gathering Inc. as Seller and TEPPCO Partners, L.P., as Buyer, dated
May 24, 2002 (Filed as Exhibit 99.1 to Form 8-K of TEPPCO Partners,
L.P. (Commission File No. 1-10403) dated as of July 2, 2002 and
incorporated herein by reference).                                                                                                                   
|10.39   |  | Credit Agreement among TEPPCO Partners, L.P., as Borrower,
SunTrust Bank, as Administrative Agent and Certain Lenders, as
Lenders dated as of June 27, 2002 ($200,000,000 Term Facility)
(Filed as Exhibit 99.2 to Form 8-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) dated as of July 2, 2002 and
incorporated herein by reference).                                                                    
|10.40   |  | Amendment, dated as of June 27, 2002 to the Amended and
Restated Credit Agreement among TEPPCO Partners, L.P., as Borrower,
SunTrust Bank, as Administrative Agent, and Certain Lenders, dated
as of March 28, 2002 ($500,000,000 Revolving Credit Facility) (Filed
as Exhibit 99.3 to Form 8-K of TEPPCO Partners, L.P. (Commission
File No. 1-10403) dated as of July 2, 2002 and incorporated herein
by reference).
|10.41   |  | Amendment 1, dated as of June 27, 2002 to the Credit
Agreement among TEPPCO Partners, L.P., as Borrower, SunTrust Bank,
as Administrative Agent and Certain Lenders, dated as of March 28,
2002 ($200,000,000 Revolving Credit Facility) (Filed as Exhibit 99.4
to Form 8-K of TEPPCO Partners, L.P. (Commission File No. 1-10403)
dated as of July 2, 2002 and incorporated herein by reference).                    
|10.42   |  | Agreement of Limited Partnership of Val Verde Gas Gathering
Company, L.P., dated May 29, 2002 (Filed as Exhibit 10.48 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended June 30, 2002 and incorporated herein by reference).                                                                                                                                                  
|10.43+  |  | Texas Eastern Products Pipeline Company, LLC 2002 Phantom Unit
Retention Plan, effective June 1, 2002 (Filed as Exhibit 10.49 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the quarter ended June 30, 2002 and incorporated herein by
reference).                                                                                                                                          
|12.1*   |  | Statement of Computation of Ratio of Earnings to Fixed Charges.                                                                                                                                                                                                                                                                                                                                                       
|21      |  | Subsidiaries of the Partnership (Filed as Exhibit 21 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended June 30, 2002 and incorporated herein by reference).                                                                                                                                                                                                                   



---

|* |  | Filed herewith.                                           
|- |  | ----------------------------------------------------------
| 
|+ |  | A management contract or compensation plan or arrangement.



| |                                                                           
| | --------------------------------------------------------------------------
| | (b) Reports on Form 8-K filed during the quarter ended September
30, 2002:



| |                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------
| | Reports on Form 8-K were filed on July 2, 2002, July 15,
2002, August 12, 2002, September 3, 2002, and September 6,
2002.

50



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on its behalf by the
undersigned duly authorized officer and principal financial officer.

|                       |  |                                  |  |                                                                                            
|---------------------- |  | -------------------------------- |  | -------------------------------------------------------------------------------------------
|                       |  |                                  |  | TEPPCO Partners, L.P.(Registrant)
(A Delaware Limited Partnership)                         
|                      
|                       |  | By:                              |  | Texas Eastern Products Pipeline                                                            
|                       |  | Company, LLC, as General Partner |  |                                                                                            
|                      
|                       |  | By:                              |  | /s/   BARRY R. PEARLBarry R. Pearl,
President and Chief Executive Officer                  
|                      
|Date: November 1, 2002 |  | By:                              |  | /s/ CHARLES H. LEONARDCharles H. Leonard,
Senior Vice President and Chief
Financial Officer

51



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##### Table of Contents





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

I, BARRY R. PEARL, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of TEPPCO Partners,
L.P.;
|-- |  | ----------------------------------------------------------------------------



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



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



|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

November 1, 2002
Date

/s/ BARRY R. PEARL
Barry R. Pearl
President and Chief Executive Officer

52



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##### Table of Contents





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

I, CHARLES H. LEONARD, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of TEPPCO Partners,
L.P.;
|-- |  | ----------------------------------------------------------------------------



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



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



|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

November 1, 2002
Date

/s/ CHARLES H. LEONARD
Charles H. Leonard
Senior Vice President and
Chief Financial Officer

53



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##### Table of Contents





CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, being the Chief Executive Officer of Texas Eastern Products
Pipeline Company, LLC, the sole general partner of TEPPCO Partners, L.P. (the
Company), hereby certifies that, to his knowledge, the Companys Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 2002, filed
with the United States Securities and Exchange Commission pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)), fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that information contained in such
Quarterly Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.

Dated, November 1, 2002

/s/ BARRY R. PEARLBarry R. PearlPresident and Chief Executive Officer

54



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##### Table of Contents





CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, being the Chief Financial Officer of Texas Eastern Products
Pipeline Company, LLC, the sole general partner of TEPPCO Partners, L.P. (the
Company), hereby certifies that, to his knowledge, the Companys Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 2002, filed
with the United States Securities and Exchange Commission pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)), fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that information contained in such
Quarterly Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.

Dated, November 1, 2002

/s/ CHARLES H. LEONARDCharles H. Leonard
Senior Vice President and Chief Financial Officer

55



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##### Table of Contents






EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|3.1     |  | Certificate of Limited Partnership of TEPPCO Partners, L.P.
(Filed as Exhibit 3.2 to the Registration Statement of TEPPCO
Partners, L.P. (Commission File No. 33-32203) and incorporated
herein by reference).                                                                                                                                                                                                                                                    
|3.2     |  | Third Amended and Restated Agreement of Limited Partnership
of TEPPCO Partners, L.P., dated September 21, 2001 (Filed as Exhibit
3.7 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended September 30, 2001 and incorporated
herein by reference).                                                                                                                                                                          
|4.1     |  | Form of Certificate representing Limited Partner Units (Filed
as Exhibit 4.1 to the Registration Statement of TEPPCO Partners,
L.P. (Commission File No. 33-32203) and incorporated herein by
reference).                                                                                                                                                                                                                                                         
|4.2     |  | Form of Indenture between TE Products Pipeline Company,
Limited Partnership and The Bank of New York, as Trustee, dated as
of January 27, 1998 (Filed as Exhibit 4.3 to TE Products Pipeline
Company, Limited Partnerships Registration Statement on Form S-3
(Commission File No. 333-38473) and incorporated herein by
reference).                                                                                                                             
|4.3     |  | Form of Certificate representing Class B Units (Filed as
Exhibit 4.3 to Form 10-K of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the year ended December 31, 1998 and incorporated
herein by reference).                                                                                                                                                                                                                                              
|4.4     |  | Form of Indenture between TEPPCO Partners, L.P., as issuer,
TE Products Pipeline Company, Limited Partnership, TCTM, L.P.,
TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering Company, as
subsidiary guarantors, and First Union National Bank, NA, as
trustee, dated as of February 20, 2002 (Filed as Exhibit 99.2 to
Form 8-K of TEPPCO Partners, L.P. (Commission File No. 1-10403)
dated as of February 20, 2002 and incorporated herein by reference).





---



##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.5     |  | First Supplemental Indenture between TEPPCO Partners, L.P.,
as issuer, TE Products Pipeline Company, Limited Partnership, TCTM,
L.P., TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering
Company, as subsidiary guarantors, and First Union National Bank,
NA, as trustee, dated as of February 20, 2002 (Filed as Exhibit 99.3
to Form 8-K of TEPPCO Partners, L.P. (Commission File No. 1-10403)
dated as of February 20, 2002 and incorporated herein by reference).                                                                                                                               
|4.6     |  | Supplemental Indenture, dated as of June 27, 2002, among
TEPPCO Partners, L.P., as issuer, TE Products Pipeline Company,
Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P.,
and Jonah Gas Gathering Company, as Initial Subsidiary Guarantors,
and Val Verde Gas Gathering Company, L.P., as New Subsidiary
Guarantor, and Wachovia Bank, National Association, formerly known
as First Union National Bank, as trustee (Filed as Exhibit 4.6 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the quarter ended June 30, 2002 and incorporated herein by
reference).
|10.1+   |  | Duke Energy Corporation Executive Savings Plan (Filed as
Exhibit 10.7 to Form 10-K of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the year ended December 31, 1999 and incorporated
herein by reference).                                                                                                                                                                                                                                                                                                                                                                                       
|10.2+   |  | Duke Energy Corporation Executive Cash Balance Plan (Filed
as Exhibit 10.8 to Form 10-K of TEPPCO Partners, L.P. (Commission
File No. 1-10403) for the year ended December 31, 1999 and
incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                                  
|10.3+   |  | Duke Energy Corporation Retirement Benefit Equalization Plan
(Filed as Exhibit 10.9 to Form 10-K for TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended December 31, 1999
and incorporated herein by reference).                                                                                                                                                                                                                                                                                                                                                                        
|10.4+   |  | Texas Eastern Products Pipeline Company 1994 Long Term
Incentive Plan executed on March 8, 1994 (Filed as Exhibit 10.1 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the quarter ended March 31, 1994 and incorporated herein by
reference).                                                                                                                                                                                                                                                                                                                                      
|10.5+   |  | Texas Eastern Products Pipeline Company 1994 Long Term
Incentive Plan, Amendment 1, effective January 16, 1995 (Filed as
Exhibit 10.12 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended June 30, 1999 and incorporated
herein by reference).                                                                                                                                                                                                                                                                                                                       
|10.6    |  | Asset Purchase Agreement between Duke Energy Field Services,
Inc. and TEPPCO Colorado, LLC, dated March 31, 1998 (Filed as
Exhibit 10.14 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended March 31, 1998 and incorporated
herein by reference).                                                                                                                                                                                                                                                                                                                    
|10.7    |  | Contribution Agreement between Duke Energy Transport and
Trading Company and TEPPCO Partners, L.P., dated October 15, 1998
(Filed as Exhibit 10.16 to Form 10-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended December 31, 1998
and incorporated herein by reference).                                                                                                                                                                                                                                                                                                          
|10.8    |  | Guaranty Agreement by Duke Energy Natural Gas Corporation for
the benefit of TEPPCO Partners, L.P., dated November 30, 1998,
effective November 1, 1998 (Filed as Exhibit 10.17 to Form 10-K of
TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year
ended December 31, 1998 and incorporated herein by reference).                                                                                                                                                                                                                                                                             
|10.9+   |  | Form of Employment Agreement between the Company and Thomas
R. Harper, Charles H. Leonard, James C. Ruth, John N. Goodpasture,
Leonard W. Mallett, Stephen W. Russell, David E. Owen, and Barbara
A. Carroll (Filed as Exhibit 10.20 to Form 10-K of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the year ended December 31,
1998 and incorporated herein by reference).                                                                                                                                                                                                                        
|10.10   |  | Services and Transportation Agreement between TE Products
Pipeline Company, Limited Partnership and Fina Oil and Chemical
Company, BASF Corporation and BASF Fina Petrochemical Limited
Partnership, dated February 9, 1999 (Filed as Exhibit 10.22 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1999 and incorporated herein by reference).                                                                                                                                                                                                         





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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.11   |  | Call Option Agreement, dated February 9, 1999 (Filed as
Exhibit 10.23 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended March 31, 1999 and incorporated
herein by reference).                                                                                                                                                                             
|10.12+  |  | Texas Eastern Products Pipeline Company Retention Incentive
Compensation Plan, effective January 1, 1999 (Filed as Exhibit 10.24
to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended March 31, 1999 and incorporated herein by
reference).                                                                                                                  
|10.13+  |  | Form of Employment and Non-Compete Agreement between the Company
and J. Michael Cockrell effective January 1, 1999 (Filed as Exhibit
10.29 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended September 30, 1999 and incorporated
herein by reference).                                                                                                    
|10.14+  |  | Texas Eastern Products Pipeline Company Non-employee Directors
Unit Accumulation Plan, effective April 1, 1999 (Filed as Exhibit
10.30 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended September 30, 1999 and incorporated
herein by reference).                                                                                                        
|10.15+  |  | Texas Eastern Products Pipeline Company Non-employee Directors
Deferred Compensation Plan, effective November 1, 1999 (Filed as
Exhibit 10.31 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended September 30, 1999 and
incorporated herein by reference).                                                                                                 
|10.16+  |  | Texas Eastern Products Pipeline Company Phantom Unit Retention
Plan, effective August 25, 1999 (Filed as Exhibit 10.32 to Form 10-Q
of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended September 30, 1999 and incorporated herein by
reference).                                                                                                                        
|10.17   |  | Amended and Restated Purchase Agreement By and Between
Atlantic Richfield Company and Texas Eastern Products Pipeline
Company With Respect to the Sale of ARCO Pipe Line Company, dated as
of May 10, 2000. (Filed as Exhibit 2.1 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the quarter ended
March 31, 2000 and incorporated herein by reference).                 
|10.18+  |  | Texas Eastern Products Pipeline Company, LLC 2000 Long Term
Incentive Plan, Amendment and Restatement, effective January 1, 2000
(Filed as Exhibit 10.28 to Form 10-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended December 31, 2000
and incorporated herein by reference).                                                                                          
|10.19+  |  | TEPPCO Supplemental Benefit Plan, effective April 1, 2000 (Filed
as Exhibit 10.29 to Form 10-K of TEPPCO Partners, L.P. (Commission
File No. 1-10403) for the year ended December 31, 2000 and
incorporated herein by reference).                                                                                                                                                                 
|10.20+  |  | Employment Agreement with Barry R. Pearl (Filed as Exhibit 10.30
to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended March 31, 2001 and incorporated herein by
reference).                                                                                                                                                                                  
|10.21   |  | Amended and Restated Credit Agreement among TEPPCO Partners,
L.P. as Borrower, SunTrust Bank as Administrative Agent and LC
Issuing Bank, and Certain Lenders, dated as of April 6, 2001
($500,000,000 Revolving Facility) (Filed as Exhibit 10.31 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 2001 and incorporated herein by reference).
|10.22   |  | Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent, and Certain Lenders, dated as
of April 6, 2001 ($200,000,000 Revolving Facility) (Filed as Exhibit
10.32 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended March 31, 2001 and incorporated
herein by reference).                                         
|10.23   |  | Purchase and Sale Agreement By and Among Green River
Pipeline, LLC and McMurry Oil Company, Sellers, and TEPPCO Partners,
L.P., Buyer, dated as of September 7, 2000. (Filed as Exhibit 10.31
to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended September 30, 2001 and incorporated herein by
reference).                                                 





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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.24   |  | Credit Agreement Among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank, as Administrative Agent and Certain Lenders, dated as
of September 28, 2001 ($400,000,000 Term Facility) (Filed as Exhibit
10.32 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended September 30, 2001 and incorporated
herein by reference).                                                                                                             
|10.25   |  | Amendment 1, dated as of September 28, 2001, to the Amended
and Restated Credit Agreement among TEPPCO Partners, L.P. as
Borrower, SunTrust Bank as Administrative Agent and LC Issuing Bank,
and Certain Lenders, dated as of April 6, 2001 ($500,000,000
Revolving Facility) (Filed as Exhibit 10.33 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the quarter ended
September 30, 2001 and incorporated herein by reference).                
|10.26   |  | Amendment 1, dated as of September 28, 2001, to the Credit
Agreement among TEPPCO Partners, L.P. as Borrower, SunTrust Bank as
Administrative Agent, and Certain Lenders, dated as of April 6, 2001
($200,000,000 Revolving Facility) (Filed as Exhibit 10.34 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended September 30, 2001 and incorporated herein by
reference).                                                         
|10.27   |  | Amendment and Restatement, dated as of November 13, 2001, to
the Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent, and Certain Lenders, dated as
of April 6, 2001 ($200,000,000 Revolving Facility) (Filed as Exhibit
10.35 to Form 10-K of TEPPCO Partners, L.P (Commission File No.
1-10403) for the year ended December 31, 2001 and incorporated
herein by reference).                                                 
|10.28   |  | Second Amendment and Restatement, dated as of November 13,
2001, to the Amended and Restated Credit Agreement amount TEPPCO
Partners, L.P. as Borrower, SunTrust Bank as Administrative Agent
and LC Issuing Bank, and Certain Lenders, dated as of April 6, 2001
($500,000,000 Revolving Facility) (Filed as Exhibit 10.36 to Form
10-K of TEPPCO Partners, L.P (Commission File No. 1-10403) for the
year ended December 31, 2001 and incorporated herein by reference).
|10.29   |  | Second Amended and Restated Agreement of Limited Partnership
of TE Products Pipeline Company, Limited Partnership, dated
September 21, 2001 (Filed as Exhibit 3.8 to Form 10-Q of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the quarter ended
September 30, 2001 and incorporated herein by reference).                                                                                                                                                     
|10.30   |  | Amended and Restated Agreement of Limited Partnership of
TCTM, L.P., dated September 21, 2001 (Filed as Exhibit 3.9 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended September 30, 2001 and incorporated herein by
reference).                                                                                                                                                                                                   
|10.31   |  | Contribution, Assignment and Amendment Agreement among
TEPPCO Partners, L.P., TE Products Pipeline Company, Limited
Partnership, TCTM, L.P., Texas Eastern Products Pipeline Company,
LLC, and TEPPCO GP, Inc., dated July 26, 2001 (Filed as Exhibit 3.6
to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended June 30, 2001 and incorporated herein by
reference).                                                                  
|10.32   |  | Certificate of Formation of TEPPCO Colorado, LLC (Filed as
Exhibit 3.2 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended March 31, 1998 and incorporated
herein by reference).                                                                                                                                                                                                                                                    
|10.33   |  | Agreement of Limited Partnership of TEPPCO Midstream
Companies, L.P., dated September 24, 2001 (Filed as Exhibit 3.10 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the quarter ended September 30, 2001 and incorporated herein by
reference).                                                                                                                                                                                                 
|10.34   |  | Agreement of Partnership of Jonah Gas Gathering Company
dated June 20, 1996 as amended by that certain Assignment of
Partnership Interests dated September 28, 2001 (Filed as Exhibit
10.40 to Form 10-K of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the year ended December 31, 2001 and incorporated
herein by reference).                                                                                                                               
|10.35   |  | Unanimous Written Consent of the Board of Directors of
TEPPCO GP, Inc. dated February 13, 2002 (Filed as Exhibit 10.41 to
Form 10-K of TEPPCO Partners, L.P.                                                                                                                                                                                                                                                                                                              





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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |  | (Commission File No. 1-10403) for the year ended December 31,
2001 and incorporated herein by reference).                                                                                                                                                                                                                                                                                                             
|10.36   |  | Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent and Certain Lenders, as
Lenders dated as of March 28, 2002 ($200,000,000 Revolving Credit
Facility) (Filed as Exhibit 10.44 to Form 10-Q of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the three months ended March
31, 2002 and incorporated herein by reference).                                      
|10.37   |  | Amended and Restated Credit Agreement among TEPPCO Partners,
L.P. as Borrower, SunTrust Bank, as Administrative Agent and LC
Issuing Bank and Certain Lenders, as Lenders dated as of March 28,
2002 ($500,000,000 Revolving Facility) (Filed as Exhibit 10.45 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the three months ended March 31, 2002 and incorporated herein by
reference).   
|10.38   |  | Purchase and Sale Agreement between Burlington Resources
Gathering Inc. as Seller and TEPPCO Partners, L.P., as Buyer, dated
May 24, 2002 (Filed as Exhibit 99.1 to Form 8-K of TEPPCO Partners,
L.P. (Commission File No. 1-10403) dated as of July 2, 2002 and
incorporated herein by reference).                                                                                                                   
|10.39   |  | Credit Agreement among TEPPCO Partners, L.P., as Borrower,
SunTrust Bank, as Administrative Agent and Certain Lenders, as
Lenders dated as of June 27, 2002 ($200,000,000 Term Facility)
(Filed as Exhibit 99.2 to Form 8-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) dated as of July 2, 2002 and
incorporated herein by reference).                                                                    
|10.40   |  | Amendment, dated as of June 27, 2002 to the Amended and
Restated Credit Agreement among TEPPCO Partners, L.P., as Borrower,
SunTrust Bank, as Administrative Agent, and Certain Lenders, dated
as of March 28, 2002 ($500,000,000 Revolving Credit Facility) (Filed
as Exhibit 99.3 to Form 8-K of TEPPCO Partners, L.P. (Commission
File No. 1-10403) dated as of July 2, 2002 and incorporated herein
by reference).
|10.41   |  | Amendment 1, dated as of June 27, 2002 to the Credit
Agreement among TEPPCO Partners, L.P., as Borrower, SunTrust Bank,
as Administrative Agent and Certain Lenders, dated as of March 28,
2002 ($200,000,000 Revolving Credit Facility) (Filed as Exhibit 99.4
to Form 8-K of TEPPCO Partners, L.P. (Commission File No. 1-10403)
dated as of July 2, 2002 and incorporated herein by reference).                    
|10.42   |  | Agreement of Limited Partnership of Val Verde Gas Gathering
Company, L.P., dated May 29, 2002 (Filed as Exhibit 10.48 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended June 30, 2002 and incorporated herein by reference).                                                                                                                                                  
|10.43+  |  | Texas Eastern Products Pipeline Company, LLC 2002 Phantom Unit
Retention Plan, effective June 1, 2002 (Filed as Exhibit 10.49 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the quarter ended June 30, 2002 and incorporated herein by
reference).                                                                                                                                          
|12.1*   |  | Statement of Computation of Ratio of Earnings to Fixed Charges.                                                                                                                                                                                                                                                                                                                                                       
|21      |  | Subsidiaries of the Partnership (Filed as Exhibit 21 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended June 30, 2002 and incorporated herein by reference).                                                                                                                                                                                                                   



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|* |  | Filed herewith.                                           
|- |  | ----------------------------------------------------------
| 
|+ |  | A management contract or compensation plan or arrangement.