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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 March 31, 2003

Commission File No. 1-10403

TEPPCO Partners, L.P.

(Exact name of Registrant as specified in its charter)


|                        |  |                       
|----------------------- |  | ----------------------
|Delaware                |  | 76-0291058            
|(State of Incorporation |  | (I.R.S. Employer      
|or Organization)        |  | 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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). 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 April 30, 2003: 57,751,447



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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                                       
|Joint Development Agreement                      
|Computation of Ratio of Earnings to Fixed Charges
|Certification of CEO Pursuant to Section 906     
|Certification of CFO Pursuant to Section 906     



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TEPPCO PARTNERS, L.P.

TABLE OF CONTENTS

|                                                                                              |                                                                                                      |  |      |    | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                              |                                                                                                      |  | Page
|                                                                                              |                                                                                                      |  |     
|PART I. FINANCIAL INFORMATION                                                                 |                                                                                                      |  |      |   
|Item 1. Financial Statements                                                                  |                                                                                                      |  |      |   
|                                                                                              | Consolidated Balance Sheets as of March 31, 2003 (unaudited) and December 31, 2002                   |  |      | 1  | 
|                                                                                              | Consolidated Statements of Income for the three months ended March 31, 2003
and 2002 (unaudited)     |  |      | 2  | 
|                                                                                              | Consolidated Statements of Cash Flows for the three months ended March 31, 2003
and 2002 (unaudited) |  |      | 3  | 
|                                                                                              | Notes to the Consolidated Financial Statements (unaudited)                                           |  |      | 4  | 
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                      |  | 24   |   
|                                                                                              | Forward-Looking Statements                                                                           |  |      | 37 | 
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                      |  | 38   |   
|Item 4. Controls and Procedures                                                               |                                                                                                      |  | 39   |   
|PART II. OTHER INFORMATION                                                                    |                                                                                                      |  |      |   
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                      |  | 40   |   

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PART I. FINANCIAL INFORMATION




Item 1. Financial Statements

TEPPCO PARTNERS, L.P.




CONSOLIDATED BALANCE SHEETS
(in thousands)

|                                                                                                                   |                                          |                                         |                         |                                   |           |             |           |              |           |         |  | 
|------------------------------------------------------------------------------------------------------------------ | ---------------------------------------- | --------------------------------------- | ----------------------- | --------------------------------- | --------- | ----------- | --------- | ------------ | --------- | ------- |  | 
|                                                                                                                   |                                          |                                         |                         |                                   |           | March 31,   |           | December 31,
|                                                                                                                   |                                          |                                         |                         |                                   |           | 2003        |           | 2002        
|                                                                                                                   |                                          |                                         |                         |                                   |           |             |           |             
|                                                                                                                   |                                          |                                         |                         |                                   |           | (Unaudited) |           |              |           |        
|                                                                                                                   |                                          |                                         |                         | ASSETS                            |           |             |           |              |           |         |  | 
|Current assets:                                                                                                    |                                          |                                         |                         |                                   |           |             |           |             
|                                                                                                                   | Cash and cash equivalents                |                                         | $                       | 13,939                            |           |             | $         | 30,968       |          
|                                                                                                                   | Accounts receivable, trade               |                                         |                         | 363,532                           |           |             |           | 276,450      |          
|                                                                                                                   | Accounts receivable, related party       |                                         |                         | 3,459                             |           |             |           | 4,313        |          
|                                                                                                                   | Inventories                              |                                         |                         | 23,562                            |           |             |           | 17,166       |          
|                                                                                                                   | Other                                    |                                         |                         | 25,854                            |           |             |           | 31,670       |          
|                                                                                                                   |                                          |                                         |                         |                                   |           |             |           |              |          
|                                                                                                                   |                                          | Total current assets                    |                         |                                   | 430,346   |             |           |              | 360,567   |        
|                                                                                                                   |                                          |                                         |                         |                                   |           |             |           |              |          
|Property, plant and equipment, at cost (net of accumulated
depreciation and amortization of $335,441 and $338,746) |                                          |                                         | 1,511,905               |                                   |           |             | 1,587,824 |             
|Equity investments                                                                                                 |                                          |                                         | 377,809                 |                                   |           |             | 284,705   |             
|Intangible assets                                                                                                  |                                          |                                         | 453,897                 |                                   |           |             | 465,374   |             
|Goodwill                                                                                                           |                                          |                                         | 16,944                  |                                   |           |             | 16,944    |             
|Other assets                                                                                                       |                                          |                                         | 54,544                  |                                   |           |             | 55,228    |             
|                                                                                                                   |                                          |                                         |                         |                                   |           |             |           |              |          
|                                                                                                                   |                                          | Total assets                            |                         | $                                 | 2,845,445 |             |           | $            | 2,770,642 |        
|                                                                                                                   |                                          |                                         |                         |                                   |           |             |           |              |          
|                                                                                                                   |                                          |                                         |                         | LIABILITIES AND PARTNERS CAPITAL |           |             |           |              |           |         |  | 
|Current liabilities:                                                                                               |                                          |                                         |                         |                                   |           |             |           |             
|                                                                                                                   | Accounts payable and accrued liabilities |                                         | $                       | 348,719                           |           |             | $         | 261,080      |          
|                                                                                                                   | Accounts payable, related parties        |                                         |                         | 10,085                            |           |             |           | 6,619        |          
|                                                                                                                   | Accrued interest                         |                                         |                         | 16,402                            |           |             |           | 29,726       |          
|                                                                                                                   | Other accrued taxes                      |                                         |                         | 8,930                             |           |             |           | 11,260       |          
|                                                                                                                   | Other                                    |                                         |                         | 50,168                            |           |             |           | 58,098       |          
|                                                                                                                   |                                          |                                         |                         |                                   |           |             |           |              |          
|                                                                                                                   |                                          | Total current liabilities               |                         |                                   | 434,304   |             |           |              | 366,783   |        
|                                                                                                                   |                                          |                                         |                         |                                   |           |             |           |              |          
|Senior Notes                                                                                                       |                                          |                                         | 1,142,163               |                                   |           |             | 945,692   |             
|Other long-term debt                                                                                               |                                          |                                         | 265,000                 |                                   |           |             | 432,000   |             
|Other liabilities and deferred credits                                                                             |                                          |                                         | 15,900                  |                                   |           |             | 30,962    |             
|Redeemable Class B Units held by related party                                                                     |                                          |                                         | 102,693                 |                                   |           |             | 103,363   |             
|Commitments and contingencies                                                                                      |                                          |                                         |                         |                                   |           |             |           |             
|Partners capital:                                                                                                 |                                          |                                         |                         |                                   |           |             |           |             
|                                                                                                                   | Accumulated other comprehensive loss     |                                         |                         | (14,586                           | )         |             |           | (20,055      | )        
|                                                                                                                   | General partners interest               |                                         |                         | 10,032                            |           |             |           | 12,770       |          
|                                                                                                                   | Limited partners interests              |                                         |                         | 889,939                           |           |             |           | 899,127      |          
|                                                                                                                   |                                          |                                         |                         |                                   |           |             |           |              |          
|                                                                                                                   |                                          |                                         | Total partners capital |                                   |           | 885,385     |           |              |           | 891,842 | 
|                                                                                                                   |                                          |                                         |                         |                                   |           |             |           |              |          
|                                                                                                                   |                                          | Total liabilities and partners capital |                         | $                                 | 2,845,445 |             |           | $            | 2,770,642 |        
|                                                                                                                   |                                          |                                         |                         |                                   |           |             |           |              |          

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
|                                             |                                       |                            |         | March 31,         
|                                             |                                       |                            |         |                   
|                                             |                                       |                            |         | 2003               |           | 2002
|                                             |                                       |                            |         |                    |           |     
|Operating revenues:                          |                                       |                            |         |                    |           |      |         |        
|                                             | Sales of petroleum products           |                            | $       | 975,960            |           |      | $       | 545,208 |        
|                                             | Transportation  Refined products     |                            |         | 26,894             |           |      |         | 25,144  |        
|                                             | Transportation  LPGs                 |                            |         | 30,821             |           |      |         | 23,360  |        
|                                             | Transportation  Crude oil            |                            |         | 6,905              |           |      |         | 6,128   |        
|                                             | Transportation  NGLs                 |                            |         | 9,899              |           |      |         | 6,306   |        
|                                             | Gathering  Natural gas               |                            |         | 34,282             |           |      |         | 9,520   |        
|                                             | Mont Belvieu operations               |                            |         |                   |           |      |         | 4,506   |        
|                                             | Other                                 |                            |         | 14,478             |           |      |         | 10,965  |        
|                                             |                                       |                            |         |                    |           |      |         |         |        
|                                             |                                       | Total operating revenues   |         |                    | 1,099,239 |      |         |         | 631,137 | 
|                                             |                                       |                            |         |                    |           |      |         |         |        
|Costs and expenses:                          |                                       |                            |         |                    |           |      |         |        
|                                             | Purchases of petroleum products       |                            |         | 962,844            |           |      |         | 532,971 |        
|                                             | Operating, general and administrative |                            |         | 42,635             |           |      |         | 31,445  |        
|                                             | Operating fuel and power              |                            |         | 10,177             |           |      |         | 8,589   |        
|                                             | Depreciation and amortization         |                            |         | 27,313             |           |      |         | 16,041  |        
|                                             | Taxes  other than income taxes       |                            |         | 4,928              |           |      |         | 4,505   |        
|                                             |                                       |                            |         |                    |           |      |         |         |        
|                                             |                                       | Total costs and expenses   |         |                    | 1,047,897 |      |         |         | 593,551 | 
|                                             |                                       |                            |         |                    |           |      |         |         |        
|                                             |                                       | Operating income           |         |                    | 51,342    |      |         |         | 37,586  | 
|Interest expense                             |                                       |                            | (21,905 | )                  |           |      | (16,787 | )      
|Interest capitalized                         |                                       |                            | 596     |                    |           |      | 2,109   |        
|Equity earnings                              |                                       |                            | 3,710   |                    |           |      | 3,572   |        
|Other income  net                           |                                       |                            | 182     |                    |           |      | 328     |        
|                                             |                                       |                            |         |                    |           |      |         |         |        
|                                             |                                       | Net income                 |         | $                  | 33,925    |      |         | $       | 26,808  | 
|                                             |                                       |                            |         |                    |           |      |         |         |        
|Net Income Allocation:                       |                                       |                            |         |                    |           |      |         |        
|Limited Partner Unitholders                  |                                       | $                          | 23,087  |                    |           | $    | 18,594  |        
|Class B Unitholder                           |                                       |                            | 1,680   |                    |           |      | 1,793   |        
|General Partner                              |                                       |                            | 9,158   |                    |           |      | 6,421   |        
|                                             |                                       |                            |         |                    |           |      |         |         |        
|                                             |                                       | Total net income allocated |         | $                  | 33,925    |      |         | $       | 26,808  | 
|                                             |                                       |                            |         |                    |           |      |         |         |        
|Basic and diluted net income per Limited     |                                       |                            |         |                    |           |      |         |        
|                                             |                                       | Partner and Class B Unit   |         | $                  | 0.43      |      |         | $       | 0.46    | 
|                                             |                                       |                            |         |                    |           |      |         |         |        
|Weighted average Limited Partner and Class B |                                       |                            |         |                    |           |      |         |        
|                                             |                                       | Units outstanding          |         |                    | 57,728    |      |         |         | 44,559  | 

See accompanying Notes to Consolidated Financial Statements.

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TEPPCO PARTNERS, L.P.

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

|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                    |         |        |          |         |          |  
|------------------------------------------------ | ----------------------------------------------------------------------------- | ------------------------------------------------------------- | ------------------------------------------------------------ | --------------------------------------------------- | -------- | ------------------ | ------- | ------ | -------- | ------- | -------- | -
|                                                 |                                                                               |                                                               |                                                              |                                                     |          | Three Months Ended
|                                                 |                                                                               |                                                               |                                                              |                                                     |          | March 31,         
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                   
|                                                 |                                                                               |                                                               |                                                              |                                                     |          | 2003               |         | 2002  
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                    |         |       
|Cash flows from operating activities:            |                                                                               |                                                               |                                                              |                                                     |          |                    |         |       
|                                                 | Net income                                                                    |                                                               | $                                                            | 33,925                                              |          |                    | $       | 26,808 |         
|                                                 | Adjustments to reconcile net income to cash provided by
operating activities: |                                                               |                                                              |                                                     |          |                    |         |        |         
|                                                 |                                                                               |                                                               | Depreciation and amortization                                |                                                     |          | 27,313             |         |        |          | 16,041  |         
|                                                 |                                                                               |                                                               | Earnings in equity investments, net of distributions         |                                                     |          | (3,779             | )       |        |          | 3,402   |         
|                                                 |                                                                               |                                                               | Non-cash portion of interest expense                         |                                                     |          | 1,031              |         |        |          | 1,587   |         
|                                                 |                                                                               |                                                               | Decrease (increase) in accounts receivable                   |                                                     |          | (87,082            | )       |        |          | 8,170   |         
|                                                 |                                                                               |                                                               | Increase in inventories                                      |                                                     |          | (6,396             | )       |        |          | (4,667  | )       
|                                                 |                                                                               |                                                               | Decrease (increase) in other current assets                  |                                                     |          | 5,816              |         |        |          | (4,955  | )       
|                                                 |                                                                               |                                                               | Increase (decrease) in accounts payable and accrued expenses |                                                     |          | 63,250             |         |        |          | (13,327 | )       
|                                                 |                                                                               |                                                               | Other                                                        |                                                     |          | 1,576              |         |        |          | (9,458  | )       
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                    |         |        |         
|                                                 |                                                                               |                                                               |                                                              | Net cash provided by operating activities           |          |                    | 35,654  |        |          |         | 23,601   |  
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                    |         |        |         
|Cash flows from investing activities:            |                                                                               |                                                               |                                                              |                                                     |          |                    |         |       
|                                                 |                                                                               | Purchase of Chaparral NGL System                              |                                                              |                                                     |         |                    |         |        | (132,000 | )      
|                                                 |                                                                               | Purchase of Jonah Gas Gathering Company                       |                                                              |                                                     |         |                    |         |        | (7,315   | )      
|                                                 |                                                                               | Acquisition of additional interest in Centennial Pipeline LLC |                                                              |                                                     | (20,000  | )                  |         |        |         |        
|                                                 |                                                                               | Investment in Centennial Pipeline LLC                         |                                                              |                                                     | (1,000   | )                  |         |        | (3,334   | )      
|                                                 |                                                                               | Capital expenditures                                          |                                                              |                                                     | (15,434  | )                  |         |        | (33,001  | )      
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                    |         |        |         
|                                                 |                                                                               |                                                               |                                                              | Net cash used in investing activities               |          |                    | (36,434 | )      |          |         | (175,650 | )
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                    |         |        |         
|Cash flows from financing activities:            |                                                                               |                                                               |                                                              |                                                     |          |                    |         |       
|                                                 |                                                                               | Proceeds from term and revolving credit facilities            |                                                              |                                                     | 40,000   |                    |         |        | 172,000  |        
|                                                 |                                                                               | Repayments on term and revolving credit facilities            |                                                              |                                                     | (207,000 | )                  |         |        | (540,658 | )      
|                                                 |                                                                               | Issuance of Senior Notes                                      |                                                              |                                                     | 198,570  |                    |         |        | 497,805  |        
|                                                 |                                                                               | Debt issuance costs                                           |                                                              |                                                     | (1,300   | )                  |         |        | (4,126   | )      
|                                                 |                                                                               | Issuance of Limited Partner Units, net                        |                                                              |                                                     | 12       |                    |         |        | 56,839   |        
|                                                 |                                                                               | General Partners contributions                               |                                                              |                                                     | 2        |                    |         |        | 1,172    |        
|                                                 |                                                                               | Distributions paid                                            |                                                              |                                                     | (46,533  | )                  |         |        | (33,545  | )      
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                    |         |        |         
|                                                 |                                                                               |                                                               |                                                              | Net cash provided by (used in) financing activities |          |                    | (16,249 | )      |          |         | 149,487  |  
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                    |         |        |         
|Net decrease in cash and cash equivalents        |                                                                               |                                                               | (17,029                                                      | )                                                   |          |                    | (2,562  | )     
|Cash and cash equivalents at beginning of period |                                                                               |                                                               | 30,968                                                       |                                                     |          |                    | 25,479  |       
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                    |         |        |         
|Cash and cash equivalents at end of period       |                                                                               | $                                                             | 13,939                                                       |                                                     |          | $                  | 22,917  |       
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                    |         |        |         
|Non-cash investing activities:                   |                                                                               |                                                               |                                                              |                                                     |          |                    |         |       
|                                                 |                                                                               | Net assets transferred to Mont Belvieu partnership            |                                                              | $                                                   | 69,459   |                    |         | $      |         |        
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                    |         |        |         
|Supplemental disclosure of cash flows:           |                                                                               |                                                               |                                                              |                                                     |          |                    |         |       
|                                                 |                                                                               | Interest paid during the period (net of capitalized interest) |                                                              | $                                                   | 32,491   |                    |         | $      | 16,799   |        
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                    |         |        |         

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 and owns a 2% general partner interest in us. The
General Partner is a wholly owned subsidiary of Duke Energy Field Services, LLC
(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 that are
managed by DEFS on our behalf. We reimburse the General Partner for all
reasonable direct and indirect expenses incurred in managing us.

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

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 March 31, 2003, and the results of our operations and cash flows
for the periods presented. The results of operations for the three months
ended March 31, 2003, are not necessarily indicative of results of our
operations for the full year 2003. 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 for
the year ended December 31, 2002. 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.

Basic net income per Limited Partner and Class B Unit (collectively,
Units) is computed by dividing net income, after deduction of the General
Partners interest, by the weighted average number of Units outstanding (a
total of 57.7 million Units for the three months ended March 31, 2003, and 44.6
million Units for the three months ended March 31, 2002). 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 $9.2
million (representing 26.99%) and $6.4 million (representing 23.95%) of net
income for the three months ended March 31, 2003, and 2002, respectively. The
General Partners percentage interest in our net income increases as cash
distributions paid per Unit increases.

Diluted net income per Unit is similar to the computation of basic net
income per Unit above, except that the denominator is increased to include the
dilutive effect of outstanding Unit options by application of the
treasury

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TEPPCO PARTNERS, L.P.

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

stock method. For the three months ended March 31, 2003, and 2002, the
denominator was increased by 18,313 Units and 40,620 Units, respectively.

NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS

In December 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure. SFAS 148 amends SFAS No.
123, Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS 148 amends the
disclosure requirements of SFAS 123 to require prominent disclosure in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on the
reported results. The provisions of SFAS 148 are effective for financial
statements for fiscal years ending after December 15, 2002. The adoption of
SFAS 148 did not affect our financial position, results of operations or cash
flows.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation
of Variable Interest Entities, an interpretation of ARB No. 51(FIN 46). FIN
46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. We are required
to apply FIN 46 to all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, we are required to apply FIN 46 on July 1, 2003. In
connection with the adoption of FIN 46, we evaluated our investments in
Centennial Pipeline LLC, Seaway Crude Pipeline Company and Mont Belvieu Storage
Partners, L.P. and determined that these entities are not variable interest
entities as defined by FIN 46, and thus we have accounted for them as equity
method investments (see Note 8. Equity Investments). The adoption of FIN 46
did not have an effect on our financial position, results of operations or cash
flows.

NOTE 3. ASSET RETIREMENT OBLIGATIONS

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
liability will be adjusted at the end of each reporting period to reflect
changes in the estimated future cash flows underlying the obligation.
Determination of any amounts recognized upon adoption is based upon numerous
estimates and assumptions, including future retirement costs, future inflation
rates and the credit-adjusted risk-free interest rates.

The Downstream Segment assets consist primarily of a pipeline system and a
series of storage facilities that originate along the upper Texas Gulf Coast
and extend through the Midwest and northeastern United States. We transport
refined products, LPGs and petrochemicals through the pipeline system. These
products are primarily received in the south end of the system and stored
and/or transported to various points along the system per customer nominations.
The Upstream Segments operations include purchasing crude oil from producers
at the wellhead and providing delivery, storage and other services to its
customers. The properties in the Upstream Segment consist of interstate trunk
pipelines, pump stations, trucking facilities, storage tanks and various
gathering systems primarily in Texas and Oklahoma. The Midstream Segment
gathers natural gas from wells owned by producers and transports natural gas
and NGLs on its pipeline systems, primarily in Texas, Wyoming, New Mexico and
Colorado. The Midstream Segment also owns and operates two NGL fractionator
facilities in Colorado.

5



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TEPPCO PARTNERS, L.P.

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

We have completed our assessment of SFAS 143, and we have determined that
we are obligated by contractual or regulatory requirements to remove facilities
or perform other remediation upon retirement of our assets. However, we are
not able to determine the fair value of the asset retirement obligations for
our trunk,
interstate and gathering pipelines and our surface facilities as they cannot be
reasonably estimated, since future dismantlement and removal dates are
indeterminate.

In order to determine a removal date for our gathering lines and related
surface assets, reserve information regarding the life of the specific field is
required. As a transporter of crude oil and natural gas, we are not a producer
of the field reserves and as such, we do not have access to reserve data on
those fields in which we gather crude oil and natural gas. The lack of
adequate reserve data does not allow us to reasonably estimate cash flows from
the fields for future periods, and we are not able to make a reasonable
estimate when future dismantlement and removal dates of our gathering assets
will occur. With regard to our trunk and interstate pipelines and their
related surface assets, it is impossible to predict when demand for
transportation of the related products will cease. Our rights-of-way
agreements allow us to renew the rights-of-way rather than remove the pipe
while we evaluate our trunk pipelines for alternative uses, which can be and
have been found, should the need arise.

We will record such asset retirement obligations in the period in which
more information becomes available for us to reasonably estimate the settlement
dates of the retirement obligations. The adoption of SFAS 143 did not have an
impact on our financial position, results of operations or cash flows.

NOTE 4. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill represents the excess of purchase price over fair value of net
assets acquired and is presented on the consolidated balance sheets net of
accumulated amortization. We account for goodwill under SFAS No. 142, Goodwill
and Other Intangible Assets,which was issued by the FASB in July 2001. SFAS
142 prohibits amortization of goodwill and intangible assets with indefinite
useful lives, but instead should be tested for impairment at least annually.
SFAS 142 requires that intangible assets with definite useful lives be
amortized over their respective estimated useful lives. We will assess the
useful lives and residual values of all intangible assets on an annual basis to
determine if adjustments are required.

To perform an impairment test of goodwill, we have identified our
reporting units and have determined the carrying value of each reporting unit
by assigning the assets and liabilities, including the existing goodwill and
intangible assets, to those reporting units. We would then determine the fair
value of each reporting unit and compare it to the carrying value of the
reporting unit. We will continue to compare the fair value of each reporting
unit to its carrying value on an annual basis to determine if an impairment
loss has occurred.

At March 31, 2003, we had $16.9 million of unamortized goodwill and $25.5
million of excess investment in our equity investment in Seaway Crude Pipeline
Company (equity method goodwill). The excess investment is included in our
equity investments account at March 31, 2003. The following table presents the
carrying amount of goodwill and equity method goodwill at March 31, 2003, by
business segment (in thousands):

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

6



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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):

|                             |                                 |       |   |                |         |                   |   |                |         |              |   |         |         |  |   |         |         |  
|---------------------------- | ------------------------------- | ----- | - | -------------- | ------- | ----------------- | - | -------------- | ------- | ------------ | - | ------- | ------- |  | - | ------- | ------- | -
|                             |                                 |       |   | March 31, 2003 |         | December 31, 2002
|                             |                                 |       |   |                |         |                  
|                             |                                 |       |   | Gross Carrying |         | Accumulated       |   | Gross Carrying |         | Accumulated 
|                             |                                 |       |   | Amount         |         | Amortization      |   | Amount         |         | Amortization
|                             |                                 |       |   |                |         |                   |   |                |         |             
|Amortized intangible assets: |                                 |       |   |                |         |                   |   |                |         |              |   |         |         |  |   |        
|                             | Fractionation agreement         |       | $ | 38,000         |         |                   | $ | (9,500         | )       |              | $ | 38,000  |         |  | $ | (9,025  | )      
|                             | Natural gas gathering contracts |       |   | 462,449        |         |                   |   | (39,541        | )       |              |   | 462,449 |         |  |   | (28,710 | )      
|                             | Other                           |       |   | 3,745          |         |                   |   | (1,256         | )       |              |   | 3,745   |         |  |   | (1,085  | )      
|                             |                                 |       |   |                |         |                   |   |                |         |              |   |         |         |  |   |         |        
|                             |                                 | Total |   | $              | 504,194 |                   |   | $              | (50,297 | )            |   | $       | 504,194 |  |   | $       | (38,820 | )
|                             |                                 |       |   |                |         |                   |   |                |         |              |   |         |         |  |   |         |        

Excluding goodwill, amortization expense on intangible assets was $11.5
million and $4.6 million for the three months ended March 31, 2003 and 2002,
respectively.

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

|     |  |   |        | 
|---- |  | - | ------ | 
|2003 |  | $ | 45,824 | 
|2004 |  |   | 47,653 | 
|2005 |  |   | 51,359 | 
|2006 |  |   | 48,619 | 
|2007 |  |   | 44,646 | 

NOTE 5. DERIVATIVE FINANCIAL INSTRUMENTS

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 three months ended March 31, 2003, and 2002, we
recognized increases in interest expense of $3.4 million and $3.2 million,
respectively, related to the difference between the fixed rate and the floating
rate of interest on the interest rate swap. During the three months ended
March 31, 2003, 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 $14.6 million and $20.1 million at March 31, 2003, and December
31, 2002, respectively. We anticipate that approximately $14.3 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 three months ended March 31,
2003, and 2002, we recognized reductions in interest

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TEPPCO PARTNERS, L.P.

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

expense of $2.4 million
and $1.7 million, respectively, related to the difference between the fixed
rate and the floating rate of interest on the interest rate swap. During the
three months ended March 31, 2003, 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 $12.3 million and $13.6 million at March 31, 2003,
and December 31, 2002, respectively.

On February 20, 2002, we entered into interest rate swap agreements,
designated as fair value hedges, to hedge our exposure to changes in the fair
value of our fixed rate 7.625% Senior Notes due 2012. 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 U.S. Dollar LIBOR rate, plus a spread, and received
a fixed rate of interest of 7.625%. On July 16, 2002, the swap agreements were
terminated resulting in a gain of approximately $18.0 million. Concurrent with
the swap terminations, we entered
into new interest rate swap agreements, with identical terms as the
previous swap agreements; however, the floating rate was based upon a spread of
an additional 50 basis points. In December 2002, the swap agreements entered
into on July 16, 2002, were terminated, resulting in a gain of approximately
$26.9 million. The gains realized from the July 2002 and December 2002 swap
terminations have been deferred as adjustments to the carrying value of the
Senior Notes and are being amortized using the effective interest method as
reductions 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 gains would be recognized in the consolidated statement of income
at the time of extinguishment.

NOTE 6. ACQUISITIONS

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 related costs of approximately $0.4 million.
We funded the purchase by a borrowing under our $500.0 million revolving credit
facility (see Note 9. Debt). 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. Under a contractual
agreement, DEFS manages and operates Chaparral on our behalf. We accounted for
the acquisition of these assets under the purchase method of accounting. We
allocated the purchase price to property, plant and equipment. Accordingly,
the results of the acquisition are included in the consolidated financial
statements from March 1, 2002.

On June 30, 2002, we completed the purchase of Val Verde Gas Gathering
Company (Val Verde) for $444.2 million from Burlington Resources Gathering
Inc., a subsidiary of Burlington Resources Inc., including acquisition related
costs of approximately $1.2 million. We funded the purchase by borrowings of
$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 9. Debt). The remaining
purchase price was funded through working capital sources of cash. The Val
Verde system gathers coal bed methane (CBM) from the Fruitland Coal Formation
of the San Juan Basin in New Mexico and Colorado. The system is one of the
largest CBM gathering and treating facilities in the United States. Under a
contractual agreement, DEFS manages and operates Val Verde on our behalf. We
accounted for the acquisition of these assets under the purchase method of
accounting. Accordingly, the results of the acquisition are included in the
consolidated financial statements from June 30, 2002.

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TEPPCO PARTNERS, L.P.

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

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

|                                                      |                     |   |         |         | 
|----------------------------------------------------- | ------------------- | - | ------- | ------- | 
|Property, plant and equipment                         |                     | $ | 205,146 |        
|Intangible assets (primarily gas gathering contracts) |                     |   | 239,649 |        
|                                                      |                     |   |         |        
|                                                      | Total assets        |   |         | 444,795 | 
|                                                      |                     |   |         |        
|Total liabilities assumed                             |                     |   | (645    | )      
|                                                      |                     |   |         |        
|                                                      | Net assets acquired |   | $       | 444,150 | 
|                                                      |                     |   |         |        

The value assigned to intangible assets relates to fixed-term contracts
with customers. We are amortizing the value assigned to intangible assets on a
unit of production basis, based upon the actual throughput of the system over
the expected total throughput for the contracts (averaging approximately 20
years).

The following table presents our unaudited pro forma results as though the
acquisition of Val Verde occurred at the beginning of 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
acquisition, 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.

|                                                                  |  |                    |         | 
|----------------------------------------------------------------- |  | ------------------ | ------- | 
|                                                                  |  | Three Months Ended
|                                                                  |  | March 31,         
|                                                                  |  | 2002              
|                                                                  |  |                   
|Revenues                                                          |  | $                  | 649,241 | 
|Operating income                                                  |  |                    | 42,505  | 
|Net income                                                        |  |                    | 30,677  | 
|Basic and diluted net income per
Limited Partner and Class B Unit |  | $                  | 0.42    | 

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 acquisition been consummated at the
beginning of 2002, or the results which may be attained in the future.

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TEPPCO PARTNERS, L.P.

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

NOTE 7. 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):

|                       |       |   |           |        |              |   |       |        | 
|---------------------- | ----- | - | --------- | ------ | ------------ | - | ----- | ------ | 
|                       |       |   | March 31, |        | December 31,
|                       |       |   | 2003      |        | 2002        
|                       |       |   |           |        |             
|Crude oil              |       | $ | 4,377     |        |              | $ |      |       
|Gasolines              |       |   | 4,580     |        |              |   | 4,700 |       
|Butanes                |       |   | 3,415     |        |              |   | 1,991 |       
|Transmix               |       |   | 1,934     |        |              |   | 2,526 |       
|Other products         |       |   | 4,419     |        |              |   | 3,836 |       
|Materials and supplies |       |   | 4,837     |        |              |   | 4,113 |       
|                       |       |   |           |        |              |   |       |       
|                       | Total |   | $         | 23,562 |              |   | $     | 17,166 | 
|                       |       |   |           |        |              |   |       |       

The costs of inventories did not exceed market values at March 31, 2003,
and December 31, 2002.

NOTE 8. EQUITY INVESTMENTS

Through one of our indirect wholly owned subsidiaries, we own a 50%
ownership interest in Seaway Crude Pipeline Company (Seaway). The remaining
50% interest is owned by ConocoPhillips. Seaway 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. 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, we received 80% of revenue and expense of Seaway. From June 2002 through
May 2006, we receive 60% of revenue and expense of Seaway. Thereafter, the
sharing ratio becomes 40% of revenue and expense to us. For the year ended
December 31, 2002, our portion of equity earnings on a pro-rated basis averaged
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 an interstate refined petroleum products
pipeline extending from the upper Texas Gulf Coast to Illinois. Through
February 9, 2003, each participant owned a one-third interest in Centennial.
On February 10, 2003, TE Products and Marathon each acquired an additional
interest in Centennial from PEPL for $20.0 million each, increasing their
percentage ownerships in Centennial to 50% each. During the three months ended
March 31, 2003, excluding the amount paid for the acquisition of the additional
ownership interest, TE Products contributed approximately $1.0 million for its
investment in Centennial, which is included in the equity investment balance at
March 31, 2003.

As of January 1, 2003, TE Products and Louis Dreyfus Energy Services, L.P.
(Louis Dreyfus) effectively formed Mont Belvieu Storage Partners, L.P. (MB
Storage). TE Products and Louis Dreyfus each own a 50% ownership interest in
MB Storage. The purpose of MB Storage 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. MB Storage is a service-oriented, fee-based venture with
no commodity trading activity. TE Products continues to operate the facilities
for MB Storage. Effective January 1, 2003, TE Products contributed property
and equipment with a net book value of $75.5 million to MB Storage.
Additionally, as of the contribution date, Louis Dreyfus had invested $6.1
million for expansion projects for MB

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TEPPCO PARTNERS, L.P.

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

Storage that TE Products was required to
reimburse if the original joint development and marketing agreement was
terminated by either party. This deferred liability was also contributed and
converted to the capital of Louis Dreyfus in MB Storage.

We use the equity method of accounting to account for our investments in
Seaway, Centennial and MB Storage. Summarized combined financial information
for Seaway and Centennial as of and for the three months ended March 31, 2003
and 2002, and MB Storage for the three months ended March 31, 2003, is
presented below (in thousands):

|           |  |                    |        |      |  |   |        | 
|---------- |  | ------------------ | ------ | ---- |  | - | ------ | 
|           |  | Three Months Ended
|           |  | March 31,         
|           |  |                   
|           |  | 2003               |        | 2002
|           |  |                    |        |     
|Revenues   |  | $                  | 24,322 |      |  | $ | 14,796 | 
|Net income |  |                    | 5,286  |      |  |   | 3,455  | 

Summarized combined balance sheet data for Seaway and Centennial as of
March 31, 2003, and December 31, 2002, and for MB Storage as of March 31, 2003,
is presented below (in thousands):

|                       |  |           |         |              |  |   |         | 
|---------------------- |  | --------- | ------- | ------------ |  | - | ------- | 
|                       |  | March 31, |         | December 31,
|                       |  | 2003      |         | 2002        
|                       |  |           |         |             
|Current assets         |  | $         | 48,465  |              |  | $ | 32,528  | 
|Noncurrent assets      |  |           | 622,254 |              |  |   | 551,324 | 
|Current liabilities    |  |           | 34,029  |              |  |   | 28,681  | 
|Long-term debt         |  |           | 140,000 |              |  |   | 140,000 | 
|Noncurrent liabilities |  |           | 13,758  |              |  |   | 14,875  | 
|Partners capital      |  |           | 482,932 |              |  |   | 400,296 | 

Our investments in Seaway and Centennial at March 31, 2003, and December
31, 2002, include excess net investment amounts of $25.5 million and $33.1
million, respectively. 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 9. 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 of $0.3
million 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

11



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##### Table of Contents



TEPPCO 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 March 31, 2003, TE Products
was in compliance with the covenants of the TE Products Senior Notes.

On February 20, 2002, we completed 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 of $2.2 million 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 Gas Gathering Company
(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 March 31, 2003, we were in compliance
with the covenants of these Senior Notes.

On January 30, 2003, we completed the issuance of $200.0 million principal
amount of 6.125% Senior Notes due 2013. The 6.125% Senior Notes were issued at
a discount of $1.4 million and are being accreted to their face value over the
term of the notes. We used $182.0 million of the proceeds from the offering to
reduce the outstanding principal on our $500.0 million revolving credit
facility to $250.0 million. The balance of the net proceeds received was used
for general purposes. 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 6.125%
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 March 31, 2003, 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 5. Derivative Financial Instruments.

Other Long Term Debt and Credit Facilities

On April 6, 2001, we entered into a $500.0 million revolving credit
facility including the issuance of letters of credit of up to $20.0 million
(Three Year Facility). 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 certain restrictive financial covenant ratios. During 2002,
borrowings under the Three Year Facility were used to finance the acquisitions
of the Chaparral NGL system on March 1, 2002, and Val Verde on June 30, 2002.
During 2002, repayments were made on the Three Year Facility with proceeds from
the issuance of our 7.625% Senior Notes, proceeds from the issuance of
additional Units and proceeds from the termination of interest rate swaps (see
Note 5. Derivative Financial Instruments). During the first quarter of 2003,
we repaid $182.0 million of the outstanding balance of the Three Year Facility
with proceeds from the issuance of our 6.125% Senior Notes on January 30, 2003.
At March 31, 2003, $265.0 million was outstanding under the Three Year
Facility at a weighted average interest rate of 2.3%. As of March 31, 2003, 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 a portion of the Three Year Facility
discussed above. See Note 5. Derivative Financial Instruments.

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TEPPCO PARTNERS, L.P.

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

Short Term Credit Facilities

On April 6, 2001, we entered into a 364-day, $200.0 million revolving
credit agreement (Short-term Revolver). 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 certain
restrictive financial covenant ratios. On March 28, 2002, the Short-term
Revolver was extended for an additional period of 364 days, ending in March
2003. During 2002, borrowings under the Short-term Revolver were used to
finance the acquisition of the Val Verde assets and for other purposes. During
2002, we repaid the existing amounts outstanding under the Short-term Revolver
with proceeds we received from the issuance of Units in 2002. The Short-term
Revolver expired on March 27, 2003.

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 6. 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
certain restrictive financial covenant ratios. On July 11, 2002, we repaid
$90.0 million of the outstanding principal from proceeds primarily received
from the issuance of 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 Units in September 2002, and canceled the facility.

The following table summarizes the principal outstanding under our credit
facilities as of March 31, 2003, and December 31, 2002 (in thousands):

|                             |  |                                                                   |                                   |   |           |           |              |   |         |           | 
|---------------------------- |  | ----------------------------------------------------------------- | --------------------------------- | - | --------- | --------- | ------------ | - | ------- | --------- | 
|                             |  |                                                                   |                                   |   | March 31, |           | December 31,
|                             |  |                                                                   |                                   |   | 2003      |           | 2002        
|                             |  |                                                                   |                                   |   |           |           |             
|Long Term Credit Facilities: |  |                                                                   |                                   |   |           |           |              |  
|                             |  | Three Year Facility, due April 2004                               |                                   | $ | 265,000   |           |              | $ | 432,000 |          
|                             |  | 6.45% TE Products Senior Notes, due January 2008                  |                                   |   | 179,853   |           |              |   | 179,845 |          
|                             |  | 7.51% TE Products Senior Notes, due January 2028                  |                                   |   | 210,000   |           |              |   | 210,000 |          
|                             |  | 7.625% Senior Notes, due February 2012                            |                                   |   | 498,051   |           |              |   | 497,995 |          
|                             |  | 6.125% Senior Notes, due February 2013                            |                                   |   | 198,594   |           |              |   |        |          
|                             |  |                                                                   |                                   |   |           |           |              |  
|                             |  |                                                                   | Total borrowings                  |   |           | 1,351,498 |              |   |         | 1,319,840 | 
|                             |  | Adjustment to carrying value associated with
hedges of fair value |                                   |   | 55,665    |           |              |   | 57,852  |          
|                             |  |                                                                   |                                   |   |           |           |              |  
|                             |  |                                                                   | Total Long Term Credit Facilities |   | $         | 1,407,163 |              |   | $       | 1,377,692 | 
|                             |  |                                                                   |                                   |   |           |           |              |  

NOTE 10. QUARTERLY DISTRIBUTIONS 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. Pursuant to the Partnership Agreement, the Company receives
incremental incentive cash distributions when cash distributions exceed certain
target thresholds as follows:

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TEPPCO PARTNERS, L.P.

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

|                                      |                                                                     |  |             |    |         |  |         |    |  
|------------------------------------- | ------------------------------------------------------------------- |  | ----------- | -- | ------- |  | ------- | -- | -
|                                      |                                                                     |  |             |    |         |  | 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 | %

The following table reflects the allocation of total distributions paid
during the three months ended March 31, 2003 and 2002 (in thousands, except per
Unit amounts).

|                                       |                                            |   |                              |        |      |   |        |        | 
|-------------------------------------- | ------------------------------------------ | - | ---------------------------- | ------ | ---- | - | ------ | ------ | 
|                                       |                                            |   | Three Months Ended March 31,
|                                       |                                            |   |                             
|                                       |                                            |   | 2003                         |        | 2002
|                                       |                                            |   |                              |        |     
|Limited Partner Units                  |                                            | $ | 32,286                       |        |      | $ | 23,259 |       
|General Partner Ownership Interest     |                                            |   | 707                          |        |      |   | 521    |       
|General Partner Incentive              |                                            |   | 11,191                       |        |      |   | 7,514  |       
|                                       |                                            |   |                              |        |      |   |        |       
|                                       | Total Partners Capital Cash Distributions |   |                              | 44,184 |      |   |        | 31,294 | 
|Class B Units                          |                                            |   | 2,349                        |        |      |   | 2,251  |       
|                                       |                                            |   |                              |        |      |   |        |       
|                                       | Total Cash Distributions Paid              |   | $                            | 46,533 |      |   | $      | 33,545 | 
|                                       |                                            |   |                              |        |      |   |        |       
|Total Cash Distributions Paid Per Unit |                                            | $ | 0.600                        |        |      | $ | 0.575  |       
|                                       |                                            |   |                              |        |      |   |        |       

On May 9, 2003, we will pay a cash distribution of $0.625 per Unit for the
quarter ended March 31, 2003. The first quarter 2003 cash distribution will
total $49.4 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.

Our Downstream Segment revenues are earned from transportation and storage
of refined products and LPGs, 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 the results of operations of the northern portion of the
Dean pipeline. Beginning in January 2003, the northern portion of the Dean
pipeline was converted to transport refinery grade propylene (RGPs) from Mont
Belvieu to Point Comfort, Texas. As a result, the revenues and expenses of the
northern portion of the Dean pipeline are included in the Downstream Segment.
Our Downstream Segment also includes our equity investments in Centennial and
MB Storage (see Note 8. Equity Investments).

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TEPPCO PARTNERS, L.P.

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

Our 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. Seaway consists of
large diameter pipelines that transport crude oil from Seaways marine
terminals on the U.S. Gulf Coast to Cushing, Oklahoma, a central crude oil
distribution point for the Central United States, and to refineries in the
Texas City and Houston areas.

Our Midstream Segment revenues are earned from the fractionation of NGLs
in Colorado, transportation of NGLs from two trunkline NGL pipelines in South
Texas, two NGL pipelines in East Texas and a pipeline system (Chaparral) from
West Texas and New Mexico to Mont Belvieu; the gathering of natural gas in the
Green River Basin in southwestern Wyoming, through Jonah and the gathering of
CBM from the Fruitland Coal Formation of the San Juan Basin in New Mexico and
Colorado, through Val Verde. Chaparral was acquired on March 1, 2002, for
$132.4 million from Diamond-Koch II, L.P. and Diamond-Koch III, L.P., including
acquisition related costs of approximately $0.4 million. The Val Verde assets
were acquired on June 30, 2002, for $444.2 million from a subsidiary of
Burlington Resources Inc., including acquisition related costs of approximately
$1.2 million. The Val Verde, Jonah and Chaparral assets are managed and
operated by DEFS under contractual agreements. The results of operations of
the Chaparral and Val Verde acquisitions are included in periods subsequent to
their respective acquisition dates (see Note 6. Acquisitions).

The table below includes interim financial information by reporting
segment for the interim periods ended March 31, 2003 and 2002 (in thousands):

|                                      |                          |   |                                   |        |          |   |           |       |          |   |             |        |              |   |           |        |  |   |        |     |   |   |           |        | 
|------------------------------------- | ------------------------ | - | --------------------------------- | ------ | -------- | - | --------- | ----- | -------- | - | ----------- | ------ | ------------ | - | --------- | ------ |  | - | ------ | --- | - | - | --------- | ------ | 
|                                      |                          |   | Three Months Ended March 31, 2003
|                                      |                          |   |                                  
|                                      |                          |   | Downstream                        |        | Upstream |   | Midstream |       | Segments |   | Partnership |        |              |   |          
|                                      |                          |   | Segment                           |        | Segment  |   | Segment   |       | Total    |   | and Other   |        | Consolidated
|                                      |                          |   |                                   |        |          |   |           |       |          |   |             |        |             
|Revenues                              |                          | $ | 67,965                            |        |          | $ | 985,380   |       |          | $ | 46,904      |        |              | $ | 1,100,249 |        |  | $ | (1,010 | )   |   | $ | 1,099,239 |       
|Purchases of petroleum
products       |                          |   |                                  |        |          |   | 963,854   |       |          |   |            |        |              |   | 963,854   |        |  |   | (1,010 | )   |   |   | 962,844   |       
|Operating expenses,
including power   |                          |   | 31,549                            |        |          |   | 14,837    |       |          |   | 11,354      |        |              |   | 57,740    |        |  |   |       |     |   |   | 57,740    |       
|Depreciation and
amortization expense |                          |   | 7,147                             |        |          |   | 3,065     |       |          |   | 17,101      |        |              |   | 27,313    |        |  |   |       |     |   |   | 27,313    |       
|                                      |                          |   |                                   |        |          |   |           |       |          |   |             |        |              |   |           |        |  |   |        |     |   |   |           |       
|                                      | Operating income         |   |                                   | 29,269 |          |   |           | 3,624 |          |   |             | 18,449 |              |   |           | 51,342 |  |   |        |    |   |   |           | 51,342 | 
|Equity earnings                       |                          |   | (1,259                            | )      |          |   | 4,969     |       |          |   |            |        |              |   | 3,710     |        |  |   |       |     |   |   | 3,710     |       
|Other income, net                     |                          |   | (6                                | )      |          |   | 189       |       |          |   | 37          |        |              |   | 220       |        |  |   | (38    | )   |   |   | 182       |       
|                                      |                          |   |                                   |        |          |   |           |       |          |   |             |        |              |   |           |        |  |   |        |     |   |   |           |       
|                                      | Earnings before interest |   | $                                 | 28,004 |          |   | $         | 8,782 |          |   | $           | 18,486 |              |   | $         | 55,272 |  |   | $      | (38 | ) |   | $         | 55,234 | 
|                                      |                          |   |                                   |        |          |   |           |       |          |   |             |        |              |   |           |        |  |   |        |     |   |   |           |       

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TEPPCO PARTNERS, L.P.

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

|                                      |                          |   |                                   |        |          |   |           |        |          |   |             |       |              |   |         |        |  |   |      |   |  |   |         |        | 
|------------------------------------- | ------------------------ | - | --------------------------------- | ------ | -------- | - | --------- | ------ | -------- | - | ----------- | ----- | ------------ | - | ------- | ------ |  | - | ---- | - |  | - | ------- | ------ | 
|                                      |                          |   | Three Months Ended March 31, 2002
|                                      |                          |   |                                  
|                                      |                          |   | Downstream                        |        | Upstream |   | Midstream |        | Segments |   | Partnership |       |              |   |        
|                                      |                          |   | Segment                           |        | Segment  |   | Segment   |        | Total    |   | and Other   |       | Consolidated
|                                      |                          |   |                                   |        |          |   |           |        |          |   |             |       |             
|Revenues                              |                          | $ | 59,586                            |        |          | $ | 553,888   |        |          | $ | 18,370      |       |              | $ | 631,844 |        |  | $ | (707 | ) |  | $ | 631,137 |       
|Purchases of petroleum
products       |                          |   |                                  |        |          |   | 533,678   |        |          |   |            |       |              |   | 533,678 |        |  |   | (707 | ) |  |   | 532,971 |       
|Operating expenses,
including power   |                          |   | 29,107                            |        |          |   | 11,939    |        |          |   | 3,493       |       |              |   | 44,539  |        |  |   |     |   |  |   | 44,539  |       
|Depreciation and
amortization expense |                          |   | 6,832                             |        |          |   | 2,064     |        |          |   | 7,145       |       |              |   | 16,041  |        |  |   |     |   |  |   | 16,041  |       
|                                      |                          |   |                                   |        |          |   |           |        |          |   |             |       |              |   |         |        |  |   |      |   |  |   |         |       
|                                      | Operating income         |   |                                   | 23,647 |          |   |           | 6,207  |          |   |             | 7,732 |              |   |         | 37,586 |  |   |      |  |  |   |         | 37,586 | 
|Equity earnings                       |                          |   | (796                              | )      |          |   | 4,368     |        |          |   |            |       |              |   | 3,572   |        |  |   |     |   |  |   | 3,572   |       
|Other income, net                     |                          |   | 124                               |        |          |   | 185       |        |          |   | 19          |       |              |   | 328     |        |  |   |     |   |  |   | 328     |       
|                                      |                          |   |                                   |        |          |   |           |        |          |   |             |       |              |   |         |        |  |   |      |   |  |   |         |       
|                                      | Earnings before interest |   | $                                 | 22,975 |          |   | $         | 10,760 |          |   | $           | 7,751 |              |   | $       | 41,486 |  |   | $    |  |  |   | $       | 41,486 | 
|                                      |                          |   |                                   |        |          |   |           |        |          |   |             |       |              |   |         |        |  |   |      |   |  |   |         |       

The following table provides the total assets, capital expenditures and
significant non-cash investing activities for each segment as of March 31,
2003, and December 31, 2002 (in thousands):

|                   |                               |  |            |         |          |  |           |         |          |  |                 |           |              |  |   |           |  |  |   |         |   |  |   |           | 
|------------------ | ----------------------------- |  | ---------- | ------- | -------- |  | --------- | ------- | -------- |  | --------------- | --------- | ------------ |  | - | --------- |  |  | - | ------- | - |  | - | --------- | 
|                   |                               |  | Downstream |         | Upstream |  | Midstream |         | Segments |  | Partnership and |           |              |  |  
|                   |                               |  | Segment    |         | Segment  |  | Segment   |         | Total    |  | Other           |           | Consolidated
|                   |                               |  |            |         |          |  |           |         |          |  |                 |           |             
|March 31, 2003:    |                               |  |            |         |          |  |           |         |          |  |                 |           |              |  |   |           |  |  |   |         |   |  |   |          
|                   | Total assets                  |  | $          | 911,820 |          |  | $         | 813,416 |          |  | $               | 1,156,816 |              |  | $ | 2,882,052 |  |  | $ | (36,607 | ) |  | $ | 2,845,445 | 
|                   | Capital expenditures          |  |            | 9,625   |          |  |           | 2,291   |          |  |                 | 3,518     |              |  |   | 15,434    |  |  |   |        |   |  |   | 15,434    | 
|                   | Non-cash investing activities |  |            | 69,459  |          |  |           |        |          |  |                 |          |              |  |   | 69,459    |  |  |   |        |   |  |   | 69,459    | 
|December 31, 2002: |                               |  |            |         |          |  |           |         |          |  |                 |           |              |  |   |           |  |  |   |         |   |  |   |          
|                   | Total assets                  |  |            | 883,450 |          |  |           | 724,860 |          |  |                 | 1,174,010 |              |  |   | 2,782,320 |  |  |   | (11,678 | ) |  |   | 2,770,642 | 
|                   | Capital expenditures          |  |            | 60,900  |          |  |           | 10,212  |          |  |                 | 62,260    |              |  |   | 133,372   |  |  |   |        |   |  |   | 133,372   | 

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

|                         |            |   |                              |        |      |   |         |        | 
|------------------------ | ---------- | - | ---------------------------- | ------ | ---- | - | ------- | ------ | 
|                         |            |   | Three Months Ended March 31,
|                         |            |   |                             
|                         |            |   | 2003                         |        | 2002
|                         |            |   |                              |        |     
|Earnings before interest |            | $ | 55,234                       |        |      | $ | 41,486  |       
|Interest expense         |            |   | (21,905                      | )      |      |   | (16,787 | )     
|Interest capitalized     |            |   | 596                          |        |      |   | 2,109   |       
|                         |            |   |                              |        |      |   |         |       
|                         | Net income |   | $                            | 33,925 |      |   | $       | 26,808 | 
|                         |            |   |                              |        |      |   |         |       

NOTE 12. COMMITMENTS AND CONTINGENCIES

In the fall of 1999 and on December 1, 2000, the General Partner and the
Partnership were named as defendants in two separate lawsuits in Jackson County
Circuit Court, Jackson County, Indiana, styled Ryan E. McCleery and Marcia S.
McCleery, et. al. v. Texas Eastern Corporation, et. al.(including the General
Partner and Partnership) and Gilbert Richards and Jean Richards v. Texas
Eastern Corporation, et. al.(including the General Partner and Partnership).
In both cases, the plaintiffs contend, among other things, that we and other
defendants

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TEPPCO PARTNERS, L.P.

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

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. We have
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 we are defending ourselves 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, styled 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 ourselves 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. If D.R.D. should be successful,
management believes that 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 sent a letter to Alberta
Energy Company implying that as a result of our acquisition of the Jonah
system, it may have a right to acquire all or a portion of the assets
comprising the Jonah system pursuant to an alleged right of first refusal in a
gas gathering agreement between the producer and Jonah. Subsidiaries of
Alberta Energy Company have agreed to indemnify us against losses resulting
from any breach of representations concerning the absence of third party rights
in connection with our 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.

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

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TEPPCO PARTNERS, L.P.

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

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. In March
2003, the IDEM issued a Record of Decision formally approving the remediation
program. As the Record of Decision has been issued, we will enter into an
Agreed Order for the continued operation and maintenance of the remediation
program. We have an accrued liability of $0.3 million at March 31, 2003, 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 March
31, 2003, 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.

On March 17, 2003, we experienced a release of 511 barrels of jet fuel
from a tank at our Blue Island terminal located in Cook County, Illinois. As a
result of the release, we have entered into an Agreed Preliminary Injunction
and Order (Agreed Order) with the State of Illinois. The Agreed Order
requires us, in part, to complete a site investigation plan to delineate the
scope of any potential contamination resulting from the release and to
remediate any contamination. The Agreed Order does not contain any provision
for any fines or penalties; however, it does not preclude the State of Illinois
from assessing these at a later date. 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.

At March 31, 2003, we have an accrued liability of $6.6 million related to
various TCTM sites requiring environmental remediation activities. We also
have a receivable at March 31, 2003, of $1.9 million from DEFS which is based
on a contractual indemnity obligation we received in connection with our
acquisition of assets from a DEFS affiliate in November 1998. The indemnity
relates to future environmental remediation activities attributable to
operations of these assets prior to our acquisition. 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.
At December 31, 2002, the receivable balance from DEFS was $4.2 million. The
majority of the receivable from DEFS related to remediation activities at the
Velma crude oil site in Stephens County, Oklahoma. During the first quarter of
2003, we received $2.4 million from DEFS
as partial payment on the receivable balance. The accrued liability
balance at March 31, 2003, also includes an accrual of $2.3 million related to
the Shelby crude oil site in Stephens County, Oklahoma. At March 31, 2003, it
is uncertain if these costs related to Shelby are covered under the indemnity
obligation from DEFS. We are currently in discussions with DEFS regarding
these matters. 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
March 31, 2003, $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, including TE
Products, originally guaranteed one-third of Centennials 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

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TEPPCO PARTNERS, L.P.

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

resulted in PEPL being in default under its portion of the Centennial
guaranty. Effective September 27, 2002, 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 was 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
had provided for PEPL. In connection with the acquisition of the additional
interest in Centennial on February 10, 2003, the guaranty agreement between TE
Products, Marathon, and PEPL was terminated. TE Products guaranty of up to a
maximum of $75.0 million of Centennials debt remains in effect.

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 three months ended March
31, 2003 and 2002, 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
for the three months ended March 31, 2003 and 2002 (in thousands).

|                               |                            |   |                              |        |      |   |        |        | 
|------------------------------ | -------------------------- | - | ---------------------------- | ------ | ---- | - | ------ | ------ | 
|                               |                            |   | Three Months Ended March 31,
|                               |                            |   |                             
|                               |                            |   | 2003                         |        | 2002
|                               |                            |   |                              |        |     
|Net income                     |                            | $ | 33,925                       |        |      | $ | 26,808 |       
|Net income on cash flow hedges |                            |   | 5,469                        |        |      |   | 3,300  |       
|                               |                            |   |                              |        |      |   |        |       
|                               | Total comprehensive income |   | $                            | 39,394 |      |   | $      | 30,108 | 
|                               |                            |   |                              |        |      |   |        |       

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

|                             |                                |   |         |       | 
|---------------------------- | ------------------------------ | - | ------- | ----- | 
|Balance at December 31, 2001 |                                | $ | (20,324 | )    
|                             | Net income on cash flow hedges |   |         | 269   | 
|                             |                                |   |         |      
|Balance at December 31, 2002 |                                | $ | (20,055 | )    
|                             | Net income on cash flow hedges |   |         | 5,469 | 
|                             |                                |   |         |      
|Balance at March 31, 2003    |                                | $ | (14,586 | )    
|                             |                                |   |         |      

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 Guarantor Subsidiaries have also issued guarantees of our 6.125% Senior
Notes issued in January 2003.

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TEPPCO PARTNERS, L.P.

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

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.

|                                  |                                                |  |                                         |           |                |           |              |           |               |           |               |         |                |           |   |            |   |            |   |           |        |           | 
|--------------------------------- | ---------------------------------------------- |  | --------------------------------------- | --------- | -------------- | --------- | ------------ | --------- | ------------- | --------- | ------------- | ------- | -------------- | --------- | - | ---------- | - | ---------- | - | --------- | ------ | --------- | 
|                                  |                                                |  |                                         |           | March 31, 2003
|                                  |                                                |  |                                         |           |               
|                                  |                                                |  |                                         |           |                |           |              |           |               |           |               |         |                |           |   |            |   |            |   |           | TEPPCO
|                                  |                                                |  |                                         |           | TEPPCO         |           | Guarantor    |           | Non-Guarantor |           | Consolidating |         | Partners, L.P.
|                                  |                                                |  |                                         |           | Partners, L.P. |           | Subsidiaries |           | Subsidiaries  |           | Adjustments   |         | Consolidated  
|                                  |                                                |  |                                         |           |                |           |              |           |               |           |               |         |               
|                                  |                                                |  |                                         |           | (in thousands)
|Assets                            |                                                |  |                                         |           |                |           |              |           |               |           |               |         |                |           |   |            |   |            |   |          
|                                  | Current assets                                 |  | $                                       | 12,978    |                |           | $            | 98,008    |               |           | $             | 375,552 |                |           | $ | (56,192    | ) |            | $ | 430,346   |       
|                                  | Property, plant and equipment  net            |  |                                         |          |                |           |              | 1,054,896 |               |           |               | 457,009 |                |           |   |           |   |            |   | 1,511,905 |       
|                                  | Equity investments                             |  |                                         | 1,001,068 |                |           |              | 928,127   |               |           |               | 216,278 |                |           |   | (1,767,664 | ) |            |   | 377,809   |       
|                                  | Intercompany notes receivable                  |  |                                         | 998,031   |                |           |              |          |               |           |               |        |                |           |   | (998,031   | ) |            |   |          |       
|                                  | Intangible assets                              |  |                                         |          |                |           |              | 424,093   |               |           |               | 29,804  |                |           |   |           |   |            |   | 453,897   |       
|                                  | Other assets                                   |  |                                         | 6,553     |                |           |              | 29,494    |               |           |               | 35,441  |                |           |   |           |   |            |   | 71,488    |       
|                                  |                                                |  |                                         |           |                |           |              |           |               |           |               |         |                |           |   |            |   |            |   |           |       
|                                  |                                                |  | Total assets                            |           | $              | 2,018,630 |              |           | $             | 2,534,618 |               |         | $              | 1,114,084 |   |            | $ | (2,821,887 | ) |           | $      | 2,845,445 | 
|                                  |                                                |  |                                         |           |                |           |              |           |               |           |               |         |                |           |   |            |   |            |   |          
|Liabilities and partners capital |                                                |  |                                         |           |                |           |              |           |               |           |               |         |                |           |   |            |   |            |   |          
|                                  | Current liabilities                            |  | $                                       | 25,043    |                |           | $            | 91,296    |               |           | $             | 371,822 |                |           | $ | (53,857    | ) |            | $ | 434,304   |       
|                                  | Long-term debt                                 |  |                                         | 1,005,011 |                |           |              | 402,152   |               |           |               |        |                |           |   |           |   |            |   | 1,407,163 |       
|                                  | Intercompany notes payable                     |  |                                         |          |                |           |              | 568,466   |               |           |               | 431,898 |                |           |   | (1,000,364 | ) |            |   |          |       
|                                  | Other long term liabilities                    |  |                                         | 248       |                |           |              | 15,443    |               |           |               | 209     |                |           |   |           |   |            |   | 15,900    |       
|                                  | Redeemable Class B Units held by
related party |  |                                         | 102,693   |                |           |              |          |               |           |               |        |                |           |   |           |   |            |   | 102,693   |       
|                                  | Total partners capital                        |  |                                         | 885,635   |                |           |              | 1,457,261 |               |           |               | 310,155 |                |           |   | (1,767,666 | ) |            |   | 885,385   |       
|                                  |                                                |  |                                         |           |                |           |              |           |               |           |               |         |                |           |   |            |   |            |   |           |       
|                                  |                                                |  | Total liabilities and partners capital |           | $              | 2,018,630 |              |           | $             | 2,534,618 |               |         | $              | 1,114,084 |   |            | $ | (2,821,887 | ) |           | $      | 2,845,445 | 
|                                  |                                                |  |                                         |           |                |           |              |           |               |           |               |         |                |           |   |            |   |            |   |          

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TEPPCO PARTNERS, L.P.

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

|                                  |                                                |                                         |   |                   |           |              |   |               |           |               |   |                |           |  |   |            |            |   |   |           |           | 
|--------------------------------- | ---------------------------------------------- | --------------------------------------- | - | ----------------- | --------- | ------------ | - | ------------- | --------- | ------------- | - | -------------- | --------- |  | - | ---------- | ---------- | - | - | --------- | --------- | 
|                                  |                                                |                                         |   | December 31, 2002
|                                  |                                                |                                         |   |                  
|                                  |                                                |                                         |   |                   |           |              |   |               |           |               |   |                |           |  |   |            |            |   |   | TEPPCO   
|                                  |                                                |                                         |   | TEPPCO            |           | Guarantor    |   | Non-Guarantor |           | Consolidating |   | Partners, L.P.
|                                  |                                                |                                         |   | Partners, L.P.    |           | Subsidiaries |   | Subsidiaries  |           | Adjustments   |   | Consolidated  
|                                  |                                                |                                         |   |                   |           |              |   |               |           |               |   |               
|                                  |                                                |                                         |   | (in thousands)   
|Assets                            |                                                |                                         |   |                   |           |              |   |               |           |               |   |                |           |  |   |            |            |   |   |          
|                                  | Current assets                                 |                                         | $ | 241               |           |              | $ | 92,798        |           |               | $ | 286,379        |           |  | $ | (18,851    | )          |   | $ | 360,567   |          
|                                  | Property, plant and equipment  net            |                                         |   |                  |           |              |   | 1,128,803     |           |               |   | 459,021        |           |  |   |           |            |   |   | 1,587,824 |          
|                                  | Equity investments                             |                                         |   | 1,011,935         |           |              |   | 846,991       |           |               |   | 211,229        |           |  |   | (1,785,450 | )          |   |   | 284,705   |          
|                                  | Intercompany notes receivable                  |                                         |   | 986,852           |           |              |   |              |           |               |   |               |           |  |   | (986,852   | )          |   |   |          |          
|                                  | Intangible assets                              |                                         |   |                  |           |              |   | 434,941       |           |               |   | 30,433         |           |  |   |           |            |   |   | 465,374   |          
|                                  | Other assets                                   |                                         |   | 6,200             |           |              |   | 31,135        |           |               |   | 34,837         |           |  |   |           |            |   |   | 72,172    |          
|                                  |                                                |                                         |   |                   |           |              |   |               |           |               |   |                |           |  |   |            |            |   |   |           |          
|                                  |                                                | Total assets                            |   | $                 | 2,005,228 |              |   | $             | 2,534,668 |               |   | $              | 1,021,899 |  |   | $          | (2,791,153 | ) |   | $         | 2,770,642 | 
|                                  |                                                |                                         |   |                   |           |              |   |               |           |               |   |                |           |  |   |            |            |   |   |          
|Liabilities and partners capital |                                                |                                         |   |                   |           |              |   |               |           |               |   |                |           |  |   |            |            |   |   |          
|                                  | Current liabilities                            |                                         | $ | 30,715            |           |              | $ | 123,169       |           |               | $ | 272,538        |           |  | $ | (59,639    | )          |   | $ | 366,783   |          
|                                  | Long-term debt                                 |                                         |   | 974,264           |           |              |   | 403,428       |           |               |   |               |           |  |   |           |            |   |   | 1,377,692 |          
|                                  | Intercompany notes payable                     |                                         |   |                  |           |              |   | 508,652       |           |               |   | 437,411        |           |  |   | (946,063   | )          |   |   |          |          
|                                  | Other long term liabilities                    |                                         |   | 6,523             |           |              |   | 24,230        |           |               |   | 209            |           |  |   |           |            |   |   | 30,962    |          
|                                  | Redeemable Class B Units held by related
party |                                         |   | 103,363           |           |              |   |              |           |               |   |               |           |  |   |           |            |   |   | 103,363   |          
|                                  | Total partners capital                        |                                         |   | 890,363           |           |              |   | 1,475,189     |           |               |   | 311,741        |           |  |   | (1,785,451 | )          |   |   | 891,842   |          
|                                  |                                                |                                         |   |                   |           |              |   |               |           |               |   |                |           |  |   |            |            |   |   |           |          
|                                  |                                                | Total liabilities and partners capital |   | $                 | 2,005,228 |              |   | $             | 2,534,668 |               |   | $              | 1,021,899 |  |   | $          | (2,791,153 | ) |   | $         | 2,770,642 | 
|                                  |                                                |                                         |   |                   |           |              |   |               |           |               |   |                |           |  |   |            |            |   |   |          

|                       |                  |   |                                   |        |              |   |               |        |               |   |                |        |  |   |         |         |   |   |           |        | 
|---------------------- | ---------------- | - | --------------------------------- | ------ | ------------ | - | ------------- | ------ | ------------- | - | -------------- | ------ |  | - | ------- | ------- | - | - | --------- | ------ | 
|                       |                  |   | Three Months Ended March 31, 2003
|                       |                  |   |                                  
|                       |                  |   |                                   |        |              |   |               |        |               |   |                |        |  |   |         |         |   |   | TEPPCO   
|                       |                  |   | TEPPCO                            |        | Guarantor    |   | Non-Guarantor |        | Consolidating |   | Partners, L.P.
|                       |                  |   | Partners, L.P.                    |        | Subsidiaries |   | Subsidiaries  |        | Adjustments   |   | Consolidated  
|                       |                  |   |                                   |        |              |   |               |        |               |   |               
|                       |                  |   | (in thousands)                   
|Operating revenues     |                  | $ |                                  |        |              | $ | 102,079       |        |               | $ | 998,170        |        |  | $ | (1,010  | )       |   | $ | 1,099,239 |       
|Costs and expenses     |                  |   |                                  |        |              |   | 60,877        |        |               |   | 988,030        |        |  |   | (1,010  | )       |   |   | 1,047,897 |       
|                       |                  |   |                                   |        |              |   |               |        |               |   |                |        |  |   |         |         |   |   |           |       
|                       | Operating income |   |                                   |       |              |   |               | 41,202 |               |   |                | 10,140 |  |   |         |        |   |   |           | 51,342 | 
|                       |                  |   |                                   |        |              |   |               |        |               |   |                |        |  |   |         |         |   |   |           |       
|Interest expense  net |                  |   | (17,409                           | )      |              |   | (13,519       | )      |               |   | (7,828         | )      |  |   | 17,447  |         |   |   | (21,309   | )     
|Equity earnings        |                  |   | 33,925                            |        |              |   | 8,916         |        |               |   | 4,969          |        |  |   | (44,100 | )       |   |   | 3,710     |       
|Other income  net     |                  |   | 17,409                            |        |              |   | (11           | )      |               |   | 231            |        |  |   | (17,447 | )       |   |   | 182       |       
|                       |                  |   |                                   |        |              |   |               |        |               |   |                |        |  |   |         |         |   |   |           |       
|                       | Net income       |   | $                                 | 33,925 |              |   | $             | 36,588 |               |   | $              | 7,512  |  |   | $       | (44,100 | ) |   | $         | 33,925 | 
|                       |                  |   |                                   |        |              |   |               |        |               |   |                |        |  |   |         |         |   |   |           |       

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TEPPCO PARTNERS, L.P.

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

|                       |                  |   |                                   |        |              |   |               |        |               |   |                |        |  |   |         |         |   |   |         |        | 
|---------------------- | ---------------- | - | --------------------------------- | ------ | ------------ | - | ------------- | ------ | ------------- | - | -------------- | ------ |  | - | ------- | ------- | - | - | ------- | ------ | 
|                       |                  |   | Three Months Ended March 31, 2002
|                       |                  |   |                                  
|                       |                  |   |                                   |        |              |   |               |        |               |   |                |        |  |   |         |         |   |   | TEPPCO 
|                       |                  |   | TEPPCO                            |        | Guarantor    |   | Non-Guarantor |        | Consolidating |   | Partners, L.P.
|                       |                  |   | Partners, L.P.                    |        | Subsidiaries |   | Subsidiaries  |        | Adjustments   |   | Consolidated  
|                       |                  |   |                                   |        |              |   |               |        |               |   |               
|                       |                  |   | (in thousands)                   
|Operating revenues     |                  | $ |                                  |        |              | $ | 69,788        |        |               | $ | 562,056        |        |  | $ | (707    | )       |   | $ | 631,137 |       
|Costs and expenses     |                  |   |                                  |        |              |   | 43,024        |        |               |   | 551,234        |        |  |   | (707    | )       |   |   | 593,551 |       
|                       |                  |   |                                   |        |              |   |               |        |               |   |                |        |  |   |         |         |   |   |         |       
|                       | Operating income |   |                                   |       |              |   |               | 26,764 |               |   |                | 10,822 |  |   |         |        |   |   |         | 37,586 | 
|                       |                  |   |                                   |        |              |   |               |        |               |   |                |        |  |   |         |         |   |   |         |       
|Interest expense  net |                  |   | (11,433                           | )      |              |   | (7,650        | )      |               |   | (7,028         | )      |  |   | 11,433  |         |   |   | (14,678 | )     
|Equity earnings        |                  |   | 26,808                            |        |              |   | 8,108         |        |               |   | 4,368          |        |  |   | (35,712 | )       |   |   | 3,572   |       
|Other income  net     |                  |   | 11,433                            |        |              |   | 133           |        |               |   | 195            |        |  |   | (11,433 | )       |   |   | 328     |       
|                       |                  |   |                                   |        |              |   |               |        |               |   |                |        |  |   |         |         |   |   |         |       
|                       | Net income       |   | $                                 | 26,808 |              |   | $             | 27,355 |               |   | $              | 8,357  |  |   | $       | (35,712 | ) |   | $       | 26,808 | 
|                       |                  |   |                                   |        |              |   |               |        |               |   |                |        |  |   |         |         |   |   |         |       

|                                                 |            |                                                                                   |                                             |        |                                   |         |              |        |               |         |               |       |                |        |         |         |   |         |         |        |        |         |  
|------------------------------------------------ | ---------- | --------------------------------------------------------------------------------- | ------------------------------------------- | ------ | --------------------------------- | ------- | ------------ | ------ | ------------- | ------- | ------------- | ----- | -------------- | ------ | ------- | ------- | - | ------- | ------- | ------ | ------ | ------- | -
|                                                 |            |                                                                                   |                                             |        | Three Months Ended March 31, 2003
|                                                 |            |                                                                                   |                                             |        |                                  
|                                                 |            |                                                                                   |                                             |        |                                   |         |              |        |               |         |               |       |                |        |         |         |   |         |         |        | TEPPCO
|                                                 |            |                                                                                   |                                             |        | TEPPCO                            |         | Guarantor    |        | Non-Guarantor |         | Consolidating |       | Partners, L.P.
|                                                 |            |                                                                                   |                                             |        | Partners, L.P.                    |         | Subsidiaries |        | Subsidiaries  |         | Adjustments   |       | Consolidated  
|                                                 |            |                                                                                   |                                             |        |                                   |         |              |        |               |         |               |       |               
|                                                 |            |                                                                                   |                                             |        | (in thousands)                   
|Cash flows from operating activities             |            |                                                                                   |                                             |        |                                   |         |              |        |               |         |               |       |                |        |         |         |   |         |         |       
|                                                 | Net income |                                                                                   | $                                           | 33,925 |                                   |         | $            | 36,588 |               |         | $             | 7,512 |                |        | $       | (44,100 | ) |         | $       | 33,925 |       
|                                                 |            | Adjustments to reconcile net income to net
cash provided by operating activities: |                                             |        |                                   |         |              |        |               |         |               |       |                |        |         |         |   |         |         |        |        |        
|                                                 |            |                                                                                   | Depreciation and amortization               |        |                                   |        |              |        |               | 21,864  |               |       |                | 5,449  |         |         |   |        |         |        |        | 27,313  |  
|                                                 |            |                                                                                   | Equity earnings, net of distributions       |        |                                   | 12,608  |              |        |               | 12,788  |               |       |                | (5,038 | )       |         |   | (24,137 | )       |        |        | (3,779  | )
|                                                 |            |                                                                                   | Changes in assets and liabilities and other |        |                                   | (30,269 | )            |        |               | (12,829 | )             |       |                | (4,309 | )       |         |   | 25,602  |         |        |        | (21,805 | )
|                                                 |            |                                                                                   |                                             |        |                                   |         |              |        |               |         |               |       |                |        |         |         |   |         |         |       
|Net cash provided by operating activities        |            |                                                                                   | 16,264                                      |        |                                   |         | 58,411       |        |               |         | 3,614         |       |                |        | (42,635 | )       |   |         | 35,654  |       
|                                                 |            |                                                                                   |                                             |        |                                   |         |              |        |               |         |               |       |                |        |         |         |   |         |         |       
|Cash flows from investing activities             |            |                                                                                   | (13                                         | )      |                                   |         | (33,605      | )      |               |         | (2,829        | )     |                |        | 13      |         |   |         | (36,434 | )     
|Cash flows from financing activities             |            |                                                                                   | (16,251                                     | )      |                                   |         | (27,997      | )      |               |         | (14,623       | )     |                |        | 42,622  |         |   |         | (16,249 | )     
|                                                 |            |                                                                                   |                                             |        |                                   |         |              |        |               |         |               |       |                |        |         |         |   |         |         |       
|Net decrease in cash and cash equivalents        |            |                                                                                   |                                            |        |                                   |         | (3,191       | )      |               |         | (13,838       | )     |                |        |        |         |   |         | (17,029 | )     
|Cash and cash equivalents at beginning of period |            |                                                                                   |                                            |        |                                   |         | 8,247        |        |               |         | 22,721        |       |                |        |        |         |   |         | 30,968  |       
|                                                 |            |                                                                                   |                                             |        |                                   |         |              |        |               |         |               |       |                |        |         |         |   |         |         |       
|Cash and cash equivalents at end of period       |            | $                                                                                 |                                            |        |                                   | $       | 5,056        |        |               | $       | 8,883         |       |                | $      |        |         |   | $       | 13,939  |       
|                                                 |            |                                                                                   |                                             |        |                                   |         |              |        |               |         |               |       |                |        |         |         |   |         |         |       

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TEPPCO PARTNERS, L.P.

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

|                                                     |            |                                                                                             |                                             |        |                                   |          |              |        |               |        |               |       |                |         |          |         |   |         |          |        |        |         |  
|---------------------------------------------------- | ---------- | ------------------------------------------------------------------------------------------- | ------------------------------------------- | ------ | --------------------------------- | -------- | ------------ | ------ | ------------- | ------ | ------------- | ----- | -------------- | ------- | -------- | ------- | - | ------- | -------- | ------ | ------ | ------- | -
|                                                     |            |                                                                                             |                                             |        | Three Months Ended March 31, 2002
|                                                     |            |                                                                                             |                                             |        |                                  
|                                                     |            |                                                                                             |                                             |        |                                   |          |              |        |               |        |               |       |                |         |          |         |   |         |          |        | TEPPCO
|                                                     |            |                                                                                             |                                             |        | TEPPCO                            |          | Guarantor    |        | Non-Guarantor |        | Consolidating |       | Partners, L.P.
|                                                     |            |                                                                                             |                                             |        | Partners, L.P.                    |          | Subsidiaries |        | Subsidiaries  |        | Adjustments   |       | Consolidated  
|                                                     |            |                                                                                             |                                             |        |                                   |          |              |        |               |        |               |       |               
|                                                     |            |                                                                                             |                                             |        | (in thousands)                   
|Cash flows from operating activities                 |            |                                                                                             |                                             |        |                                   |          |              |        |               |        |               |       |                |         |          |         |   |         |          |       
|                                                     | Net income |                                                                                             | $                                           | 26,808 |                                   |          | $            | 27,355 |               |        | $             | 8,357 |                |         | $        | (35,712 | ) |         | $        | 26,808 |       
|                                                     |            | Adjustments to reconcile net income to
net cash provided by (used in)
operating activities: |                                             |        |                                   |          |              |        |               |        |               |       |                |         |          |         |   |         |          |        |        |        
|                                                     |            |                                                                                             | Depreciation and amortization               |        |                                   |         |              |        |               | 12,199 |               |       |                | 3,842   |          |         |   |        |          |        |        | 16,041  |  
|                                                     |            |                                                                                             | Equity earnings, net of distributions       |        |                                   | 6,737    |              |        |               | 2,512  |               |       |                | 2,607   |          |         |   | (8,454  | )        |        |        | 3,402   |  
|                                                     |            |                                                                                             | Changes in assets and liabilities
and other |        |                                   | (124,549 | )            |        |               | (4,725 | )             |       |                | (19,847 | )        |         |   | 126,471 |          |        |        | (22,650 | )
|                                                     |            |                                                                                             |                                             |        |                                   |          |              |        |               |        |               |       |                |         |          |         |   |         |          |       
|Net cash provided by (used in) operating
activities  |            |                                                                                             | (91,004                                     | )      |                                   |          | 37,341       |        |               |        | (5,041        | )     |                |         | 82,305   |         |   |         | 23,601   |       
|                                                     |            |                                                                                             |                                             |        |                                   |          |              |        |               |        |               |       |                |         |          |         |   |         |          |       
|Cash flows from investing activities                 |            |                                                                                             | (58,483                                     | )      |                                   |          | (40,052      | )      |               |        | (135,598      | )     |                |         | 58,483   |         |   |         | (175,650 | )     
|Cash flows from financing activities                 |            |                                                                                             | 149,487                                     |        |                                   |          | 6,085        |        |               |        | 134,703       |       |                |         | (140,788 | )       |   |         | 149,487  |       
|                                                     |            |                                                                                             |                                             |        |                                   |          |              |        |               |        |               |       |                |         |          |         |   |         |          |       
|Net increase (decrease) in cash and cash
equivalents |            |                                                                                             |                                            |        |                                   |          | 3,374        |        |               |        | (5,936        | )     |                |         |         |         |   |         | (2,562   | )     
|Cash and cash equivalents at beginning of
period     |            |                                                                                             |                                            |        |                                   |          | 3,655        |        |               |        | 21,824        |       |                |         |         |         |   |         | 25,479   |       
|                                                     |            |                                                                                             |                                             |        |                                   |          |              |        |               |        |               |       |                |         |          |         |   |         |          |        |       
|Cash and cash equivalents at end of period           |            | $                                                                                           |                                            |        |                                   | $        | 7,029        |        |               | $      | 15,888        |       |                | $       |         |         |   | $       | 22,917   |       
|                                                     |            |                                                                                             |                                             |        |                                   |          |              |        |               |        |               |       |                |         |          |         |   |         |          |       

NOTE 15. SUBSEQUENT EVENT

On April 2, 2003, we sold 3,938,750 Units in an underwritten public
offering at $30.35 per Unit. The net proceeds from the offering totaled
approximately $114.5 million, of which approximately $113.8 million was used to
repurchase and retire all of the 3,916,547 outstanding Class B Units held by
Duke Energy Transport and Trading Company, LLC, an affiliate of Duke Energy
Corporation. We received approximately $0.7 million in proceeds from the
offering in excess of the amount needed to repurchase and retire the Class B
Units.

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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 trends, future plans and contingencies that are
reasonably likely to materially affect future liquidity or earnings. The
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 for the year ended December 31, 2002.

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, Inc., our wholly owned subsidiary, acts as managing general partner of our
Operating Partnerships, with a 0.001% general partner interest and manages our
subsidiaries.

Our Downstream Segment revenues are earned from transportation and storage
of refined products and LPGs, 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 the results of operations of the northern portion of the
Dean pipeline. Beginning in January 2003, the northern portion of the Dean
pipeline was converted to transport refinery grade propylene (RGPs) from Mont
Belvieu to Point Comfort, Texas. As a result, the revenues and expenses of the
northern portion of the Dean pipeline are included in the Downstream Segment.
Our Downstream Segment also includes our equity investments in Centennial
Pipeline LLC (Centennial) and Mont Belvieu Storage Partners, L.P. (MB
Storage) (see Note 8. Equity Investments).

Our 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 consists of large diameter pipelines that transport
crude oil from Seaways marine terminals on the U.S. Gulf Coast to Cushing,
Oklahoma, a central crude oil distribution point for the Central United States,
and to refineries in the Texas City and Houston areas.

Our Midstream Segment revenues are earned from the fractionation of NGLs
in Colorado, transportation of NGLs from two trunkline NGL pipelines in South
Texas, two NGL pipelines in East Texas and a pipeline system (Chaparral) from
West Texas and New Mexico to Mont Belvieu; the gathering of natural gas in the
Green River Basin in southwestern Wyoming, through Jonah Gas Gathering Company
(Jonah) and the gathering of CBM from

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the Fruitland Coal Formation of the San
Juan Basin in New Mexico and Colorado, through Val Verde Gas Gathering
Company (Val Verde). Chaparral was acquired on March 1, 2002, for $132.4
million from Diamond-Koch II, L.P. and Diamond-Koch III, L.P., including
acquisition related costs of approximately $0.4 million. The Val Verde assets
were acquired on June 30, 2002, for $444.2 million from a subsidiary of
Burlington Resources Inc., including acquisition related costs of approximately
$1.2 million. The Val Verde, Jonah and Chaparral assets are managed and
operated by DEFS under contractual agreements. The results of operations of
the Chaparral and Val Verde acquisitions are included in periods subsequent to
their respective acquisition dates (see Note 6. Acquisitions).

Results of Operations

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

|                          |                           |                                |         |         |                              |  |         |         |         |  | 
|------------------------- | ------------------------- | ------------------------------ | ------- | ------- | ---------------------------- |  | ------- | ------- | ------- |  | 
|                          |                           |                                |         |         | Three Months Ended March 31,
|                          |                           |                                |         |         |                             
|                          |                           |                                |         |         | 2003                         |  | 2002   
|                          |                           |                                |         |         |                              |  |        
|Operating revenues:       |                           |                                |         |         |                              |  |         |        
|                          | Downstream Segment        |                                | $       | 67,965  |                              |  | $       | 59,586  |        
|                          | Upstream Segment          |                                |         | 985,380 |                              |  |         | 553,888 |        
|                          | Midstream Segment         |                                |         | 46,904  |                              |  |         | 18,370  |        
|                          | Intercompany eliminations |                                |         | (1,010  | )                            |  |         | (707    | )      
|                          |                           |                                |         |         |                              |  |         |        
|                          |                           | Total operating revenues       |         |         | 1,099,239                    |  |         |         | 631,137 | 
|                          |                           |                                |         |         |                              |  |         |        
|Operating income:         |                           |                                |         |         |                              |  |         |        
|                          | Downstream Segment        |                                |         | 29,269  |                              |  |         | 23,647  |        
|                          | Upstream Segment          |                                |         | 3,624   |                              |  |         | 6,207   |        
|                          | Midstream Segment         |                                |         | 18,449  |                              |  |         | 7,732   |        
|                          |                           |                                |         |         |                              |  |         |        
|                          |                           | Total operating income         |         |         | 51,342                       |  |         |         | 37,586  | 
|                          |                           |                                |         |         |                              |  |         |        
|Earnings before interest: |                           |                                |         |         |                              |  |         |        
|                          | Downstream Segment        |                                |         | 28,004  |                              |  |         | 22,975  |        
|                          | Upstream Segment          |                                |         | 8,782   |                              |  |         | 10,760  |        
|                          | Midstream Segment         |                                |         | 18,486  |                              |  |         | 7,751   |        
|                          | Intercompany eliminations |                                |         | (38     | )                            |  |         |        |        
|                          |                           |                                |         |         |                              |  |         |        
|                          |                           | Total earnings before interest |         |         | 55,234                       |  |         |         | 41,486  | 
|                          |                           |                                |         |         |                              |  |         |        
|Interest expense          |                           |                                | (21,905 | )       |                              |  | (16,787 | )      
|Interest capitalized      |                           |                                | 596     |         |                              |  | 2,109   |        
|                          |                           |                                |         |         |                              |  |         |         |        
|                          |                           | Net income                     |         | $       | 33,925                       |  |         | $       | 26,808  | 
|                          |                           |                                |         |         |                              |  |         |        

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

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Downstream Segment

The following table presents volumes delivered in barrels and average
tariff per barrel for the three months ended March 31, 2003 and 2002:

|                          |                  |                                  |   |                                           |        |            |   |            |        |  |  |    |    |  
|------------------------- | ---------------- | -------------------------------- | - | ----------------------------------------- | ------ | ---------- | - | ---------- | ------ |  |  | -- | -- | -
|                          |                  |                                  |   | Three Months Ended                        |        |            |   |           
|                          |                  |                                  |   | March 31,                                 |        | Percentage
|                          |                  |                                  |   |                                           |        | Increase  
|                          |                  |                                  |   | 2003                                      |        | 2002       |   | (Decrease)
|                          |                  |                                  |   |                                           |        |            |   |           
|                          |                  |                                  |   | (in thousands, except tariff information)
|Volumes Delivered         |                  |                                  |   |                                           |        |            |   |            |        |  |  |   
|                          | Refined products |                                  |   | 30,232                                    |        |            |   | 25,765     |        |  |  | 17 | % 
|                          | LPGs             |                                  |   | 13,700                                    |        |            |   | 12,035     |        |  |  | 14 | % 
|                          |                  |                                  |   |                                           |        |            |   |            |        |  |  |    |   
|                          |                  | Total                            |   |                                           | 43,932 |            |   |            | 37,800 |  |  |    | 16 | %
|                          |                  |                                  |   |                                           |        |            |   |            |        |  |  |   
|Average Tariff per Barrel |                  |                                  |   |                                           |        |            |   |            |        |  |  |   
|                          | Refined products |                                  | $ | 0.89                                      |        |            | $ | 0.98       |        |  |  | (9 | %)
|                          | LPGs             |                                  |   | 2.25                                      |        |            |   | 1.94       |        |  |  | 16 | % 
|                          |                  | Average system tariff per barrel |   | $                                         | 1.31   |            |   | $          | 1.28   |  |  |    | 2  | %
|                          |                  |                                  |   |                                           |        |            |   |            |        |  |  |   

Our Downstream Segment reported earnings before interest of $28.0 million
for the three months ended March 31, 2003, compared with earnings before
interest of $23.0 million for the three months ended March 31, 2002. Earnings
before interest increased $5.0 million primarily due to an increase of $8.4
million in operating revenues, partially offset by an increase of $2.8 million
in costs and expenses, increased losses of $0.5 million from equity investments
and a decrease of $0.1 million in other income  net. We discuss the factors
influencing these variances below.

Revenues from refined products transportation increased $1.8 million for
the three months ended March 31, 2003, compared with the three months ended
March 31, 2002, due to an overall increase of 17% in the refined products
volumes delivered. This increase was primarily due to deliveries of product
received into our pipeline from Centennial at Creal Springs, Illinois. Centennial, which
commenced refined products deliveries to us in April 2002, has provided our
system with an additional source of supply for product originating in the U.S. Gulf Coast area. With this incremental supply source, our
previously constrained system has expanded services in markets both south and
north of Creal Springs. The 17% increase in our overall refined product
delivery was composed of a 17% increase in motor fuel delivery, a 26% increase
in distillate volume delivery and a 3% increase in jet fuel delivery from the
prior year period. Volume increases were due to increased demand for product supplied by the U.S. Gulf
Coast into Midwest markets resulting from cold weather during
the first quarter of 2003, which both increased demand and caused higher
natural gas prices. As a result of high natural gas prices, utilities use
distillates as a substitute for natural gas for their facilities. The refined
products average rate per barrel decreased 9% from the prior year period
primarily due to the impact of the Midwest origin point for volumes received
from Centennial, which resulted in an increase in short-haul volumes
transported on our system.

Revenues from LPGs transportation increased $7.5 million for the three
months ended March 31, 2003, compared with the three months ended March 31,
2002, primarily due to increased deliveries of propane in the upper Midwest and
Northeast market areas attributable to colder than normal weather during the
first quarter of 2003. Butane deliveries also increased in the Midwest as a
result of declining future prices for gasoline which resulted in increased
demand for butane used in gasoline blending. The LPGs average rate per barrel
increased 16% from the prior year period as a result of an increased percentage
of long-haul deliveries during the three months ended March 31, 2003.

Effective January 1, 2003, TE Products 50% ownership interest in MB
Storage is accounted for as an equity investment. See discussion regarding
changes in equity earnings/losses below. Revenues generated from Mont Belvieu
operations decreased $4.5 million during the three months ended March 31, 2003,
compared with the three months ended March 31, 2002, as a result of the
formation of MB Storage. The purpose of MB Storage 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.

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Other operating revenues increased $3.6 million during the three months
ended March 31, 2003, compared with the three months ended March 31, 2002,
primarily due to higher margins on product inventory sales, higher propane
deliveries at our Providence, Rhode Island import facility and higher refined
product rental charges. Other operating revenues also increased $1.0 million
due to the addition of the northern Dean pipeline to the Downstream Segment in
January 2003, which began transporting RGPs in January 2003. These increases
were partially offset by lower revenues from product location exchanges which
are used to position product in the Midwest market area.

Costs and expenses increased $2.8 million for the three months ended March
31, 2003, compared with the three months ended March 31, 2002. The increase
was made up of an increase of $1.7 million in operating, general and
administrative expenses, an increase of $1.1 million in operating fuel and
power and an increase of $0.3 million increase in depreciation and amortization
expense. These increases were partially offset by a decrease of $0.3 million
in taxes  other than income taxes. Operating, general and administrative
expenses increased primarily due to higher pipeline maintenance expenses,
increased consulting and contract services, increased labor costs and increased
general and administrative supplies expense and the addition of the northern
Dean pipeline to the Downstream Segment, which increased operating, general and
administrative expense by $0.2 million. Depreciation expense increased from
the prior year period because of assets placed in service during 2002.
Operating fuel and power expense increased as a result of increased mainline
throughput and higher power costs. Taxes  other than income taxes decreased
as a result of actual property taxes being lower than previously estimated.

Net losses from equity investments increased by $0.5 million during the
three months ended March 31, 2003, compared with the three months ended March
31, 2002. Centennial, which commenced operations in April 2002, accounted for
$2.4 million of the equity losses. On February 10, 2003, TE Products acquired
an additional 16.7% interest in Centennial, bringing its ownership interest to
50%. The
losses from Centennial are partially offset by equity earnings of $1.9 million
from our 50% ownership interest in MB Storage, which was formed effective
January 1, 2003. Amounts in the prior year period recorded to revenues and
costs and expenses are now being recorded to equity earnings based upon our
ownership interest in MB Storage, effective with its formation on January 1,
2003.

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Upstream Segment

Information presented in the following table includes the margin of the
Upstream Segment, which may be viewed as a non-GAAP (Generally Accepted
Accounting Principles) financial measure under the rules of the Securities and
Exchange Commission. A reconciliation of margin to operating revenues and
operating expenses is provided in the following table. 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 ended March 31, 2003, and 2002, is
presented below (in thousands, except per barrel and per gallon amounts):

|                                       |                          |              |       |                    |        |            |       |            |        |  |    |     |    |  
|-------------------------------------- | ------------------------ | ------------ | ----- | ------------------ | ------ | ---------- | ----- | ---------- | ------ |  | -- | --- | -- | -
|                                       |                          |              |       | Three Months Ended |        |            |       |           
|                                       |                          |              |       | March 31,          |        | Percentage
|                                       |                          |              |       |                    |        | Increase  
|                                       |                          |              |       | 2003               |        | 2002       |       | (Decrease)
|                                       |                          |              |       |                    |        |            |       |           
|Margins:                               |                          |              |       |                    |        |            |       |            |        |  |    |    
|                                       | Crude oil transportation |              | $     | 10,656             |        |            | $     | 9,071      |        |  |    | 17  | % 
|                                       | Crude oil marketing      |              |       | 4,883              |        |            |       | 5,003      |        |  |    | (2  | %)
|                                       | Crude oil terminaling    |              |       | 2,120              |        |            |       | 2,449      |        |  |    | (13 | %)
|                                       | Lubrication oil sales    |              |       | 1,352              |        |            |       | 1,135      |        |  |    | 19  | % 
|                                       |                          |              |       |                    |        |            |       |            |        |  |    |     |   
|                                       |                          | Total margin |       | $                  | 19,011 |            |       | $          | 17,658 |  |    |     | 8  | %
|                                       |                          |              |       |                    |        |            |       |            |        |  |    |    
|Total barrels:                         |                          |              |       |                    |        |            |       |            |        |  |    |    
|                                       | Crude oil transportation |              |       | 22,625             |        |            |       | 21,116     |        |  |    | 7   | % 
|                                       | Crude oil marketing      |              |       | 37,672             |        |            |       | 30,352     |        |  |    | 24  | % 
|                                       | Crude oil terminaling    |              |       | 27,369             |        |            |       | 29,275     |        |  |    | (7  | %)
|Lubrication oil volume (total gallons) |                          |              | 2,843 |                    |        |            | 2,194 |            |        |  | 30 | %  
|Margin per barrel:                     |                          |              |       |                    |        |            |       |            |        |  |    |    
|                                       | Crude oil transportation |              | $     | 0.471              |        |            | $     | 0.430      |        |  |    | 10  | % 
|                                       | Crude oil marketing      |              |       | 0.130              |        |            |       | 0.165      |        |  |    | (21 | %)
|                                       | Crude oil terminaling    |              |       | 0.077              |        |            |       | 0.084      |        |  |    | (7  | %)
|Lubrication oil margin (per gallon)    |                          |              | 0.476 |                    |        |            | 0.517 |            |        |  | (8 | %) 

The following table reconciles the Upstream Segment margin to the
consolidated statements of income using the information presented in the
consolidated statements of income and the statements of income in Note 11.
Segment Data (in thousands):

|                                      |              |   |                              |        |      |   |          |        | 
|------------------------------------- | ------------ | - | ---------------------------- | ------ | ---- | - | -------- | ------ | 
|                                      |              |   | Three Months Ended March 31,
|                                      |              |   |                             
|                                      |              |   | 2003                         |        | 2002
|                                      |              |   |                              |        |     
|Sales of petroleum products           |              | $ | 975,960                      |        |      | $ | 545,208  |       
|Transportation  Crude oil            |              |   | 6,905                        |        |      |   | 6,128    |       
|Less: Purchases of petroleum products |              |   | (963,854                     | )      |      |   | (533,678 | )     
|                                      |              |   |                              |        |      |   |          |       
|                                      | Total margin |   | $                            | 19,011 |      |   | $        | 17,658 | 
|                                      |              |   |                              |        |      |   |          |       

Our Upstream Segment reported earnings before interest of $8.8 million for
the three months ended March 31, 2003, compared with earnings before interest
of $10.8 million for the three months ended March 31, 2002. Earnings before
interest decreased $2.0 million primarily due to an increase of $4.0 million in
costs and expenses (excluding purchases of crude oil and lubrication oil),
partially offset by an increase of $1.3 million in margin, a decrease of $0.1
million in other operating revenues and an increase of $0.6 million in equity
earnings of Seaway. We discuss factors influencing these variances below.

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Our margin increased $1.3 million during the three months ended March 31,
2003, compared with the three months ended March 31, 2002. Crude oil
transportation margin increased $1.5 million primarily
due to increased revenues on our Red River, Basin, South Texas and West Texas
systems. Lubrication oil sales margin increased $0.2 million due to increased
sales of chemical volumes. Crude oil marketing margin decreased $0.1 million
primarily due to a pricing settlement on a marketing contract, partially offset
by increased volumes marketed, renegotiated supply contracts and lower trucking
expenses. Crude oil terminaling margin decreased $0.3 million as a result of
lower pumpover volumes at Midland, Texas, and Cushing, Oklahoma.

Other operating revenue of the Upstream Segment decreased $0.1 million for
the three months ended March 31, 2003, compared with the three months ended
March 31, 2002, due to lower revenues from documentation and other services to
support customers trading activity at Midland and Cushing.

Costs and expenses, excluding expenses associated with purchases of crude
oil and lubrication oil, increased $4.0 million during the three months ended
March 31, 2003, compared with the three months ended March 31, 2002.
Operating, general and administrative expenses increased $3.3 million from the
prior year period. The increase includes $1.6 million of higher environmental
remediation costs in 2003 and $1.7 million from the net settlement of crude oil
imbalances with customers. Depreciation and amortization expense increased
$1.0 million due to assets placed in service in 2002. These increases were
partially offset by a decrease of $0.2 million in operating fuel and power
attributable to a more efficient use of transportation assets in 2003. Taxes 
other than income taxes decreased $0.1 million due to reductions in property
tax accruals.

Equity earnings in Seaway for the three months ended March 31, 2003,
increased $0.6 million from the three months ended March 31, 2002, due to the
settlement of crude oil imbalances with customers and lower general and
administrative expenses, partially offset by lower long-haul third-party
transportation volumes and by our portion of equity earnings decreasing from 80% to 60% on a pro-rated basis in 2002 (averaging approximately 67% for the year ended December 31, 2002), to 60% in 2003.

Midstream Segment

The following table presents volume and average rate information for the
three months ended March 31, 2003 and 2002:

|                         |                                         |  |                    |         |            |  |            |        |  |  |  |     |   
|------------------------ | --------------------------------------- |  | ------------------ | ------- | ---------- |  | ---------- | ------ |  |  |  | --- | --
|                         |                                         |  | Three Months Ended |         |            |  |           
|                         |                                         |  | March 31,          |         | Percentage
|                         |                                         |  |                    |         | Increase  
|                         |                                         |  | 2003               |         | 2002       |  | (Decrease)
|                         |                                         |  |                    |         |            |  |           
|Gathering  Natural Gas: |                                         |  |                    |         |            |  |            |        |  |  |  |    
|                         | Million cubic feet                      |  |                    | 115,974 |            |  |            | 50,171 |  |  |  | 131 | % 
|                         | Million British thermal units (MMBtu) |  |                    | 117,212 |            |  |            | 55,728 |  |  |  | 110 | % 
|                         | Average fee per MMBtu                   |  | $                  | 0.29    |            |  | $          | 0.17   |  |  |  | 71  | % 
|Transportation  NGLs:   |                                         |  |                    |         |            |  |            |        |  |  |  |    
|                         | Thousand barrels                        |  |                    | 14,191  |            |  |            | 4,606  |  |  |  | 208 | % 
|                         | Average rate per barrel                 |  | $                  | 0.698   |            |  | $          | 0.554  |  |  |  | 26  | % 
|Fractionation  NGLs:    |                                         |  |                    |         |            |  |            |        |  |  |  |    
|                         | Thousand barrels                        |  |                    | 1,071   |            |  |            | 1,012  |  |  |  | 6   | % 
|                         | Average rate per barrel                 |  | $                  | 1.734   |            |  | $          | 1.813  |  |  |  | (5  | %)
|Sales  Condensate:      |                                         |  |                    |         |            |  |            |        |  |  |  |    
|                         | Thousand barrels                        |  |                    | 30,771  |            |  |            | 32,352 |  |  |  | (5  | %)
|                         | Average rate per barrel                 |  | $                  | 32.84   |            |  | $          | 25.38  |  |  |  | 29  | % 

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Our Midstream Segment reported earnings before interest of $18.5 million for
the three months ended March 31, 2003, compared with earnings before interest
of $7.8 million for the three months ended March 31, 2002. Earnings before
interest increased $10.7 million due to an increase of $28.5 million in
operating revenues, partially offset by an increase of $17.8 million in costs
and expenses. We discuss factors influencing these variances below.

Operating revenues increased $28.5 million during the three months ended
March 31, 2003, compared with the three months ended March 31, 2002, due to an
increase of $24.8 million in natural gas gathering revenues, an increase of
$3.6 million in NGL transportation revenues and an increase of $0.1 million in
other revenues. Natural gas gathering revenues from the Jonah system increased
$6.1 million and volumes delivered increased 24.1 billion cubic feet during the
three months ended March 31, 2003, due to the expansion of the Jonah system
during 2002. The expansion of the Jonah system increased its capacity from 450
million cubic feet per day (MMcf/day) to approximately 880 MMcf/day. Natural
gas gathering revenues from the Val Verde system, which was acquired on June
30, 2002, totaled $18.7 million and volumes delivered totaled 41.7 billion
cubic feet during the three months ended March 31, 2003. Other revenues
increased $0.1 million primarily due to sales of gas condensate from the Jonah
system. NGL transportation revenues increased $3.6 million primarily due to
the acquisition of the Chaparral NGL system on March 1, 2002.

Costs and expenses increased $17.8 million during the three months ended
March 31, 2003, compared with the three months ended March 31, 2002, due to an
increase of $10.0 million in depreciation and amortization expense, an increase
of $6.2 million in operating, general and administrative expense, an increase
of $0.9 million in taxes  other than income taxes and an increase of $0.7
million in operating fuel and power. Depreciation and amortization expense
increased $7.4 million due to the acquisition of the Chaparral and Val Verde
assets acquired on March 1, 2002, and June 30, 2002, respectively, and $2.6
million due to assets placed in service in 2002 related to the expansion of the
Jonah system. Operating, general and administrative expense increased $4.7
million from the assets acquired and due to higher general and administrative
labor and supplies expense. Operating fuel and power costs increased $0.7
million due to the assets acquired. Taxes  other than income taxes increased
$0.7 million due to the assets acquired and $0.2 million due to a higher
property tax base on Jonah as a result of the expansion.

Interest Expense and Capitalized Interest

Interest expense increased $5.1 million during the three months ended
March 31, 2003, compared with the three months ended March 31, 2002, primarily
due to higher outstanding debt balances used for capital expenditures and to
finance the acquisition of assets acquired through the Midstream Segment,
partially offset by lower LIBOR interest rates in effect during the three
months ended March 31, 2003.

Capitalized interest decreased $1.5 million during the three months ended
March 31, 2003, compared with the three months ended March 31, 2002, due to
interest capitalized on expenditures during the construction of the Jonah
expansion in 2002 and decreased balances during 2003 on construction
work-in-progress.

Financial Condition and Liquidity

Net cash from operating activities totaled $35.7 million for the three
months ended March 31, 2003. This cash was made up of $61.2 million of income
before charges for depreciation and amortization, partially offset by $25.5
million of cash used for working capital. This compares with net cash from
operating activities of $23.6 million for the corresponding period in 2002,
comprised of $42.8 million of income before charges for depreciation and
amortization, partially offset by $19.2 million of cash used for working
capital. Net cash from operations for the three months ended March 31, 2003
and 2002, included interest payments of $32.5 million and $16.8 million,
respectively.

Cash flows used in investing activities totaled $36.4 million during the
three months ended March 31, 2003, and were comprised of $15.4 million of
capital expenditures, $20.0 million for TE Products acquisition of an

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additional ownership interest in Centennial and $1.0 million of cash
contributions for our ownership interest in Centennial. Cash flows used in
investing activities totaled $175.6 million during the three months ended March
31, 2002, and were primarily comprised of $7.3 million for the final purchase
price adjustments on the acquisition of Jonah, $33.0 million of capital
expenditures, $3.3 million of cash contributions for our ownership interest in
Centennial and $132.0 million for the purchase of Chaparral on March 1, 2002.

Cash flows used in financing activities totaled $16.2 million during the
three months ended March 31, 2003, and were comprised of $40.0 million in
proceeds from term and revolving credit facilities; and $198.6 million from the
issuance in January 2003 of our 6.125% Senior Notes due 2013, partially offset
by debt issuance costs of $1.3 million. These sources of cash during the three
months ended March 31, 2003, were partially offset by $207.0 million of
repayments on our term and revolving credit facilities and $46.5 million of
distributions to unitholders. Cash flows provided by financing activities
totaled $149.5 million during the three months ended March 31, 2002, and were
comprised of $172.0 million of proceeds from term and revolving credit
facilities; $497.8 million from the issuance in February 2002 of our 7.625%
Senior Notes due 2012, partially offset by debt issuance costs of $4.1 million;
and $56.8 million from the issuance of 1.92 million Units and $1.2 million of
related General Partner contributions. These sources of cash during the three
months ended March 31, 2002, were partially offset by $540.7 million of
repayments on our term and revolving credit facilities and $33.5 million of
distributions to unitholders.

In August 2000, TE Products entered into agreements with Panhandle Eastern
Pipeline Company (PEPL) and Marathon Ashland Petroleum LLC (Marathon) to
form Centennial. Centennial owns an interstate refined petroleum products
pipeline extending from the upper Texas Gulf Coast to Illinois. Through
February 9, 2003, each original participant owned a one-third interest in
Centennial. On February 10, 2003, TE Products and Marathon each acquired an
additional 16.7% interest in Centennial, bringing their ownership interest to
50% each. Excluding TE Products purchase of its additional ownership interest
of 16.7% on February 10, 2003, we expect to contribute an additional $10.0
million to Centennial in 2003.

Centennial entered into credit facilities totaling $150.0 million, and as
of March 31, 2003, $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, including TE
Products, originally guaranteed one-third of Centennials 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, 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 was 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 had provided for PEPL. In connection with the acquisition
of the additional interest in Centennial on February 10, 2003, the guaranty
agreement between TE Products, Marathon and PEPL was terminated. TE Products
guaranty of up to a maximum of $75.0 million of Centennials debt remains in
effect.

Credit Facilities and Interest Rate Swap Agreements

On April 6, 2001, we entered into a $500.0 million revolving credit
facility including the issuance of letters of credit of up to $20.0 million
(Three Year Facility). 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 certain restrictive financial covenant ratios. During 2002,
borrowings under the Three Year Facility were used to finance the acquisitions
of the Chaparral NGL system on March 1, 2002, and Val Verde on June 30, 2002.
During 2002, repayments were
made on the Three Year Facility with proceeds from the issuance of our 7.625%
Senior Notes, proceeds from the issuance of additional Units and proceeds from
the termination of interest rate swaps (see Note 5. Derivative Financial
Instruments). During the first quarter of 2003, we repaid $182.0 million of
the outstanding balance of the Three Year Facility with proceeds from the
issuance of our 6.125% Senior Notes on January 30, 2003. At March 31, 2003,
$265.0 million was outstanding under the Three

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Year Facility at a weighted average interest rate of 2.3%. As of March 31,
2003, 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 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 certain
restrictive financial covenant ratios. On March 28, 2002, the Short-term
Revolver was extended for an additional period of 364 days, ending in March
2003. During 2002, borrowings under the Short-term Revolver were used to
finance the acquisition of the Val Verde assets and for other purposes. During
2002, we repaid the existing amounts outstanding under the Short-term Revolver
with proceeds we received from the issuance of Units in 2002. The Short-term
Revolver expired on March 27, 2003.

On February 20, 2002, we completed 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 of $2.2 million 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 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 March 31, 2003, 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 6. 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
certain restrictive financial covenant ratios. On July 11, 2002, we repaid
$90.0 million of the outstanding principal from proceeds primarily received
from the issuance of 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 Units in September 2002, and canceled the facility.

On January 30, 2003, we completed the issuance of $200.0 million principal
amount of 6.125% Senior Notes due 2013. The 6.125% Senior Notes were issued at
a discount of $1.4 million and are being accreted to their face value over the
term of the notes. We used $182.0 million of the proceeds from the offering to
reduce the outstanding principal on the Three Year Facility to $250.0 million.
The balance of the net proceeds received was used for general purposes. 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 6.125% 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
March 31, 2003, we were in compliance with the covenants of these Senior Notes.

We have 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.

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The following table summarizes our credit facilities as of March 31, 2003
(in millions):

|                        |  |                      |         |           |  |           |       |  |  |               |  | 
|----------------------- |  | -------------------- | ------- | --------- |  | --------- | ----- |  |  | ------------- |  | 
|                        |  | As of March 31, 2003
|                        |  |                     
|                        |  |                      |         |           |  | Available |       |  |  |              
|                        |  | Outstanding          |         | Borrowing |  | Maturity 
|Description:            |  | Principal            |         | Capacity  |  | Date     
|                        |  |                      |         |           |  |          
|Three Year Facility     |  | $                    | 265.0   |           |  | $         | 235.0 |  |  | April 2004   
|6.45% Senior Notes (1)  |  |                      | 180.0   |           |  |           |      |  |  | January 2008 
|7.51% Senior Notes (1)  |  |                      | 210.0   |           |  |           |      |  |  | January 2028 
|7.625% Senior Notes (1) |  |                      | 500.0   |           |  |           |      |  |  | February 2012
|6.125% Senior Notes (1) |  |                      | 200.0   |           |  |           |      |  |  | February 2013
|                        |  |                      |         |           |  |           |       |  |  |               |  | 
|Total                   |  | $                    | 1,355.0 |           |  | $         | 235.0 |  |  |               |  | 
|                        |  |                      |         |           |  |           |       |  |  |               |  | 



---



|(1) |  | Our TE Products subsidiary entered into an interest rate swap
agreement to hedge its exposure to changes in the fair value of its
7.51% Senior Notes due 2028. At March 31, 2003, the 7.51% Senior Notes
include an adjustment to increase the fair value of the debt by $12.3
million related to this interest rate swap agreement. We also entered
into interest rate swap agreements to hedge our exposure to changes in
the fair value of our 7.625% Senior Notes due 2012. At March 31, 2003,
the 7.625% Senior Notes include a deferred gain, net of amortization,
from previous interest rate swap terminations of $43.4 million. At
March 31, 2003, our 6.45% Senior Notes, our 7.625% Senior Notes and our
6.125% Senior Notes include $3.5 million of unamortized debt discounts.
The fair value adjustments, the deferred gain adjustment and the
uanmortized debt discounts are excluded from this table.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Distributions and Issuance of Additional Limited Partner Units

We paid cash distributions of $46.5 million ($0.60 per Unit) and $33.5
million ($0.575 per Unit) for each of the three months ended March 31, 2003 and
2002, respectively. Additionally, we declared a cash distribution of $0.625
per Unit for the quarter ended March 31, 2003. We will pay the distribution of
$49.4 million on May 9, 2003, to unitholders of record on April 30, 2003.

On March 22, 2002, we sold in an underwritten public offering 1.92 million
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
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 5, 2002, we sold in an underwritten public offering 3.8
million 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 5, 2002. Proceeds
from that sale totaled $16.2 million and were used to reduce borrowings under
our Short-term Revolver.

On November 7, 2002, we sold in an underwritten public offering 3.3
million Units at $26.83 per Unit. The proceeds from the offering, net of
underwriting discount, totaled approximately $84.8 million and were used to
reduce borrowings under our Short-term Revolver and Three Year Facility. On
December 4, 2002, 495,000 Units were sold upon exercise of the underwriters
over-allotment option granted in connection with the offering on

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November 7, 2002. Proceeds from that sale totaled $12.7 million and were used
to reduce borrowings under our Short-term Revolver and Three Year Facility.

Future Capital Needs and Commitments

We estimate that capital expenditures, excluding acquisitions, for 2003
will be approximately $64.1 million (which includes $3.6 million of capitalized
interest). We expect to use approximately $22.2 million for revenue generating
projects. Capital spending on revenue generating projects will include
approximately $7.5 million for the expansion of our pumping capacity of LPGs
into the Northeast markets, approximately $2.3 million for expansion of our
Downstream Segments deliverability capacity, $5.0 million to expand Upstream
Segment facilities and approximately $7.4 million for the expansion of
Midstream assets. We expect to spend approximately $31.8 million to sustain
existing operations, of which approximately $25.9 million will be for
Downstream Segment pipeline projects, including the replacement of storage
tanks and pipeline rehabilitation projects to comply with regulations enacted
by the United States Department of Transportation Office of Pipeline Safety,
$4.8 million for upgrades of our Upstream Segment and $1.1 million of capital
expenditures to sustain existing operations on the Midstream Segment. An
additional $10.1 million will be expended on system upgrade projects among all
of our business segments including the replacement of a portion of
our 20 inch pipeline crossing the Mississippi River for
approximately $4.0 million. 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 March 31, 2003, we had a working capital deficit of $4.0 million.
In the event of any working capital shortfalls, we have approximately $235.0
million in available borrowing capacity under our Three Year Facility to cover
these items.

Our debt repayment obligations consist of payments for principal and
interest on (i) outstanding principal amounts under the Three Year Facility due
in April 2004 ($265.0 million outstanding at March 31, 2003), (ii) the TE
Products $180.0 million 6.45% Senior Notes due January 15, 2008, (iii) the TE
Products $210.0 million 7.51% Senior Notes due January 15, 2028, (iv) our
$500.0 million 7.625% Senior Notes due February 15, 2012, and (v) our $200.0
million 6.125% Senior Notes due February 1, 2013.

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 $10.0 million to Centennial
in 2003 to provide for its working capital needs. In January 2003, TE Products
entered into a pipeline capacity lease agreement with Centennial for a period
of five years. On February 10, 2003, TE Products acquired an additional 16.7%
ownership interest in Centennial, bringing its ownership percentage to 50%.

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.

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##### Table of Contents



The following table summarizes our debt repayment obligations and material
contractual commitments as of March 31, 2003 (in millions):

|                                    |                                  |   |                                            |         |                  |   |           |      |           |   |               |       |  |   |       |       |  |   |       |       | 
|----------------------------------- | -------------------------------- | - | ------------------------------------------ | ------- | ---------------- | - | --------- | ---- | --------- | - | ------------- | ----- |  | - | ----- | ----- |  | - | ----- | ----- | 
|                                    |                                  |   | Amount of Commitment Expiration Per Period
|                                    |                                  |   |                                           
|                                    |                                  |   | Total                                      |         | Less than 1 Year |   | 1-3 Years |      | 4-5 Years |   | After 5 Years
|                                    |                                  |   |                                            |         |                  |   |           |      |           |   |              
|Three Year Facility                 |                                  | $ | 265.0                                      |         |                  | $ |          |      |           | $ | 265.0         |       |  | $ |      |       |  | $ |      |      
|6.45% Senior Notes due 2008 (1) (2) |                                  |   | 180.0                                      |         |                  |   |          |      |           |   |              |       |  |   | 180.0 |       |  |   |      |      
|7.51% Senior Notes due 2028 (1) (2) |                                  |   | 210.0                                      |         |                  |   |          |      |           |   |              |       |  |   |      |       |  |   | 210.0 |      
|7.625% Senior Notes due 2012 (2)    |                                  |   | 500.0                                      |         |                  |   |          |      |           |   |              |       |  |   |      |       |  |   | 500.0 |      
|6.125% Senior Notes due 2013 (2)    |                                  |   | 200.0                                      |         |                  |   |          |      |           |   |              |       |  |   |      |       |  |   | 200.0 |      
|                                    |                                  |   |                                            |         |                  |   |           |      |           |   |               |       |  |   |       |       |  |   |       |      
|                                    | Debt subtotal                    |   |                                            | 1,355.0 |                  |   |           |     |           |   |               | 265.0 |  |   |       | 180.0 |  |   |       | 910.0 | 
|Centennial cash contributions       |                                  |   | 10.0                                       |         |                  |   | 10.0      |      |           |   |              |       |  |   |      |       |  |   |      |      
|Operating leases                    |                                  |   | 33.1                                       |         |                  |   | 9.4       |      |           |   | 16.6          |       |  |   | 6.3   |       |  |   | 0.8   |      
|                                    |                                  |   |                                            |         |                  |   |           |      |           |   |               |       |  |   |       |       |  |   |       |      
|                                    | Contractual commitments subtotal |   |                                            | 43.1    |                  |   |           | 19.4 |           |   |               | 16.6  |  |   |       | 6.3   |  |   |       | 0.8   | 
|                                    |                                  |   |                                            |         |                  |   |           |      |           |   |               |       |  |   |       |       |  |   |       |      
|                                    | Total                            |   | $                                          | 1,398.1 |                  |   | $         | 19.4 |           |   | $             | 281.6 |  |   | $     | 186.3 |  |   | $     | 910.8 | 
|                                    |                                  |   |                                            |         |                  |   |           |      |           |   |               |       |  |   |       |       |  |   |       |      



---



|(1) |  | Obligations of TE Products.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Our TE Products subsidiary entered into an interest rate swap agreement
to hedge its exposure to changes in the fair value of its 7.51% Senior
Notes due 2028. At March 31, 2003, the 7.51% Senior Notes include an
adjustment to increase the fair value of the debt by $12.3 million related
to this interest rate swap agreement. We also entered into interest rate
swap agreements to hedge our exposure to changes in the fair value of our
7.625% Senior Notes due 2012. At March 31, 2003, the 7.625% Senior Notes
include a deferred gain, net of amortization, from previous interest rate
swap terminations of $43.4 million. At March 31, 2003, our 6.45% Senior
Notes, our 7.625% Senior Notes and our 6.125% Senior Notes include $3.5
million of unamortized debt discounts. The fair value adjustments, the
deferred gain adjustments and the unamortized debt discounts are excluded
from this table.

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, 2013 and 2028 debt matures, issuance of additional equity,
proceeds from dispositions of assets, cash flow from operations 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 Units. We expect future capital needs would be
similarly funded to the extent not otherwise available from cash flow from
operations.

As of March 31, 2003, we had approximately $235.0 million in available
borrowing capacity under the Three Year Facility.

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

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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. 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 determines that the
circumstances warrant such a change. In February 2003, Moodys reaffirmed the
Baa3 ratings for 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. In March
2003, the IDEM issued a Record of Decision formally approving the remediation
program. As the Record of Decision has been issued, we will enter into an
Agreed Order for the continued operation and maintenance of the remediation
program. We have an accrued liability of $0.3 million at March 31, 2003, 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 March
31, 2003, 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.

On March 17, 2003, we experienced a release of 511 barrels of jet fuel
from a tank at our Blue Island terminal located in Cook County, Illinois. As a
result of the release, we have entered into an Agreed Preliminary Injunction
and Order (Agreed Order) with the State of Illinois. The Agreed Order
requires us, in part, to complete a site investigation plan to delineate the
scope of any potential contamination resulting from the release and to
remediate any contamination. The Agreed Order does not contain any provision
for any fines or penalties; however, it does not preclude the State of Illinois
from assessing these at a later date. 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.

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At March 31, 2003, we have an accrued liability of $6.6 million related to
various TCTM sites requiring environmental remediation activities. We also
have a receivable at March 31, 2003, of $1.9 million from DEFS which is based
on a contractual indemnity obligation we received in connection with our
acquisition of assets from a DEFS affiliate in November 1998. The indemnity relates to future
environmental remediation activities attributable to operations of these assets
prior to our acquisition. 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. At December 31, 2002, the receivable
balance from DEFS was $4.2 million. The majority of the receivable from DEFS
related to remediation activities at the Velma crude oil site in Stephens
County, Oklahoma. During the first quarter of 2003, we received $2.4 million
from DEFS as partial payment on the receivable balance. The accrued liability
balance at March 31, 2003, also includes an accrual of $2.3 million related to
the Shelby crude oil site in Stephens County, Oklahoma. At March 31, 2003, it
is uncertain if these costs related to Shelby are covered under the indemnity
obligation from DEFS. We are currently in discussions with DEFS regarding
these matters. 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 December 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure. SFAS 148 amends SFAS No.
123, Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS 148 amends the
disclosure requirements of SFAS 123 to require prominent disclosure in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on the
reported results. The provisions of SFAS 148 are effective for financial
statements for fiscal years ending after December 15, 2002. The adoption of
SFAS 148 did not affect our financial position, results of operations or cash
flows.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation
of Variable Interest Entities, an interpretation of ARB No. 51(FIN 46). FIN
46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. We are required
to apply FIN 46 to all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, we are required to apply FIN 46 on July 1, 2003. In
connection with the adoption of FIN 46, we evaluated our investments in
Centennial, Seaway and MB Storage and determined that these entities are not
variable interest entities as defined by FIN 46, and thus we have accounted for
them as equity method investments (see Note 8. Equity Investments). The
adoption of FIN 46 did not have an effect on our financial position, results of
operations or cash flows.




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 made by us in
light of 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

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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 Annual Report on Form 10-K, for the year ended December
31, 2002, 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 March 31, 2003, we had $265.0 million outstanding under our variable
interest rate revolving credit agreement. 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 March 31, 2003, including the effects of hedging activities
discussed below, and assuming market interest rates increase 100 basis points,
the potential annual increase in interest expense is $0.2 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 March 31, 2003, 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
March 31, 2003, the estimated fair value of the TE Products Senior Notes was
approximately $403.9 million. At March 31, 2003, we had outstanding $500.0
million principal amount of 7.625% Senior Notes due 2012 and $200.0 million
principal amount of 6.125% Senior Notes due 2013. At March 31, 2003, the
estimated fair value of the $500.0 million 7.625% Senior Notes and the $200.0
million 6.125% Senior Notes was approximately $566.9 million and $203.4
million, respectively.

As of March 31, 2003, 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 three months ended March 31,
2003, and 2002, we recognized reductions in interest expense of $2.4 million
and $1.7 million, respectively, related to the difference between the fixed
rate and the floating rate of interest on the interest rate swap. During the
three months ended March 31, 2003, 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 $12.3 million and $13.6 million at March 31, 2003,
and December 31, 2002, respectively. Utilizing the balance of the 7.51% TE
Products Senior Notes outstanding at March 31, 2003, and including the effects
of hedging activities, assuming market interest rates increase 100 basis
points, the potential annual increase in interest expense is $2.1 million.

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As of March 31, 2003, 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 three months ended March 31, 2003, and 2002, we
recognized increases in interest expense of $3.4 million and $3.2 million,
respectively, related to the difference between the fixed rate and the floating
rate of interest on the interest rate swap. During the three months ended
March 31, 2003, 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 $14.6 million and $20.1 million at March 31, 2003, and December
31, 2002, respectively. We anticipate that approximately $14.3 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,
designated as fair value hedges, to hedge our exposure to changes in the fair
value of our fixed rate 7.625% Senior Notes due 2012. 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 U.S. Dollar LIBOR rate, plus a spread, and received
a fixed rate of interest of 7.625%. On July 16, 2002, the swap agreements were
terminated resulting in a gain of approximately $18.0 million. Concurrent with
the swap terminations, we entered into new interest rate swap agreements, with
identical terms as the previous swap agreements; however, the floating rate was
based upon a spread of an additional 50 basis points. In December 2002, the
swap agreements entered into on July 16, 2002, were terminated, resulting in a
gain of approximately $26.9 million. The gains realized from the July 2002 and
December 2002 swap terminations have been deferred as adjustments to the
carrying value of the Senior Notes and are being amortized using the effective
interest method as reductions 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 gains would be recognized in the consolidated
statement of income at the time of extinguishment.




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, after evaluating the effectiveness of our disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14(c) and Rule 15d-14(c))
as of a date within 90 days before the filing date of this Report, have
concluded that, as of such date, our disclosure controls and procedures are
adequate and effective to ensure that material information relating to us and
our consolidated subsidiaries would be made known to them by others within
those entities.

There have been no changes in our internal controls or in other factors
known to us that could significantly affect those internal controls subsequent
to the date of the evaluation, nor were there any significant deficiencies or
material weaknesses in our internal controls. As a result, no corrective
actions were required or undertaken.

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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).                                                                                                                                                 
| |  |         |     |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |         | 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 |             |  | Second 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).
| |  |         |     |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |         | 4.7 |             |  | Third Supplemental Indenture among TEPPCO Partners, L.P. as
issuer, 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. as Subsidiary Guarantors,
and Wachovia Bank, National Association, as trustee, dated as of
January 30, 2003 (Filed as Exhibit 4.7 to Form 10-K of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the year ended
December 31, 2002 and incorporated herein by reference).                                                                                       

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| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |  | ------ |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 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).
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |  | 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,                                                                                                                                                                                                                            

41



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##### Table of Contents



| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |  | ------ |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |        |  |  | 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).                                                                                                         
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  |  | 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,                                                                                                                                                                                                                                                                                 

42



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##### Table of Contents



| |  |       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |       |  | 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. (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).                                                       

43



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##### Table of Contents



| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |  | ------ |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 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 10.43 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).                                                                                                                                          
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |  | 10.44+ |  |  | Amended and Restated TEPPCO Supplemental Benefit Plan, effective
November 1, 2002 (Filed as Exhibit 10.44 to Form 10-K of TEPPCO
Partners, L.P. (Commission File No. 1-10403) for the year ended
December 31, 2002 and incorporated herein by reference).                                                                                                                                                             
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |  | 10.45+ |  |  | Texas Eastern Products Pipeline Company, LLC 2000 Long Term
Incentive Plan, Second Amendment and Restatement, effective January
1, 2003 (Filed as Exhibit 10.45 to Form 10-K of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the year ended December 31,
2002 and incorporated herein by reference).                                                                                                       
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |  | 10.46+ |  |  | Amended and Restated Texas Eastern Products Pipeline Company, LLC
Management Incentive Compensation Plan, effective January 1, 2003
(Filed as Exhibit 10.46 to Form 10-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended December 31, 2002
and incorporated herein by reference).                                                                                                           
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |  | 10.47+ |  |  | Amended and Restated TEPPCO Retirement Cash Balance Plan,
effective January 1, 2002 (Filed as Exhibit 10.47 to Form 10-K of
TEPPCO Partners, L.P. (Commission File No. 1-10403) for the year
ended December 31, 2002 and incorporated herein by reference).                                                                                                                                                           
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |  | 10.48  |  |  | Formation Agreement between Panhandle Eastern Pipe Line
Company and Marathon Ashland Petroleum LLC and TE Products Pipeline
Company, Limited Partnership, dated as of August 10, 2000 (Filed as
Exhibit 10.48 to Form 10-K of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the year ended December 31, 2002 and incorporated
herein by reference).                                                         
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |  | 10.49  |  |  | Amended and Restated Limited Liability Company Agreement of
Centennial Pipeline LLC dated as of August 10, 2000 (Filed as
Exhibit 10.49 to Form 10-K of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the year ended December 31, 2002 and incorporated
herein by reference).                                                                                                                               
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |  | 10.50  |  |  | Guaranty Agreement, dated as of September 27, 2002, between
TE Products Pipeline Company, Limited Partnership and Marathon
Ashland Petroleum LLC for Note                                                                                                                                                                                                                                                             

44



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##### Table of Contents



| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |  | ------ |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  |        |  |  | Agreements of Centennial Pipeline LLC
(Filed as Exhibit 10.50 to Form 10-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended December 31, 2002
and incorporated herein by reference).                                                                                                                                                                                                  
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |  | 10.51  |  |  | LLC Membership Interest Purchase Agreement By and Between
CMS Panhandle Holdings, LLC, As Seller and Marathon Ashland
Petroleum LLC and TE Products Pipeline Company, Limited Partnership,
Severally as Buyers, dated February 10, 2003
(Filed as Exhibit 10.51 to Form 10-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) for the year ended December 31,
2002 and incorporated herein by reference).
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |  | 10.52* |  |  | Joint Development
Agreement between TE Products Pipeline Company, Limited Partnership
and Louis Dreyfus Plastics Corporation dated February 10, 2000.                                                                                                                                                                                                                                                          
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |  | 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).                                                                                                                                                                                                            
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |  | 99.1*  |  |  | Certification of Chief Executive Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                            
| |  |  |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |  | 99.2*  |  |  | Certification of Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                            



---



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

(b)     Reports on Form 8-K filed during the quarter ended March 31,
2003:



| |  |  | Reports on Form 8-K were filed with the Securities and
Exchange Commission on January 21, 2003, January 30, 2003,
February 6, 2003 and March 4, 2003.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

45



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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. PEARL                   
| |                                  |                                      
| |                                  | Barry R. Pearl,                      
| |                                  | President and Chief Executive Officer
| |                                  |                                      
| | By:                              | /s/ CHARLES H. LEONARD               
| |                                  |                                      
| |                                  | Charles H. Leonard,                  
| |                                  | Senior Vice President and Chief      
| |                                  | Financial Officer                    

Date: May 1, 2003

46



---



##### 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
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 officer 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 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.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

May 1, 2003
Date



/s/ BARRY R. PEARL

Barry R. Pearl
President and Chief Executive Officer
Texas Eastern Products Pipeline Company, LLC, General Partner

47



---



##### 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
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 officer 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 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.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

May 1, 2003

Date



/s/ CHARLES H. LEONARD

Charles H. Leonard
Senior Vice President and Chief Financial Officer
Texas Eastern Products Pipeline Company, LLC, General Partner

48



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##### Table of Contents



Exhibit Index

|            |  |                                                                                                                                                      
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                          
|            |  |                                                                                                                                                      
|10.52       |  | Joint Development
Agreement between TE Products Pipeline Company, Limited Partnership
and Louis Dreyfus Plastics Corporation dated February 10, 2000.
|            |  |                                                                                                                                                      
|12.1        |  | Statement of Computation of Ratio of Earnings to Fixed Charges                                                                                       
|            |  |                                                                                                                                                      
|99.1        |  | Certification of Chief Executive Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.                                                  
|            |  |                                                                                                                                                      
|99.2        |  | Certification of Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.