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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, 2002

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  (XBOX)   No  (BOX)

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 May 10, 2002: 42,459,746



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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
|                                              | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|PART II. OTHER INFORMATION                   
|                                              | Item 6. Exhibits and Reports on Form 8-K.                                                    
|SIGNATURES                                   
|EXHIBIT INDEX                                
|Credit Agreement - SunTrust Bank             
|Amended Credit Agreement - SunTrust Bank     
|Statement of Computation of Ratio of Earnings



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##### Table of Contents



TEPPCO PARTNERS, L.P.

TABLE OF CONTENTS

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|PART I. FINANCIAL INFORMATION                                                                 |                                                                                                      |  |      |   
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|Item 1. Financial Statements                                                                  |                                                                                                      |  |      |   
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|                                                                                              | Consolidated Balance Sheets as of March 31, 2002 (unaudited) and December 31, 2001                   |  |      | 1  | 
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|                                                                                              | Consolidated Statements of Income for the three months ended March 31, 2002
and 2001 (unaudited)     |  |      | 2  | 
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|                                                                                              | Consolidated Statements of Cash Flows for the three months ended March 31, 2002
and 2001 (unaudited) |  |      | 3  | 
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|                                                                                              | Notes to the Consolidated Financial Statements (unaudited)                                           |  |      | 4  | 
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|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                      |  | 22   |   
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|                                                                                              | Forward-Looking Statements                                                                           |  |      | 32 | 
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|Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                      |  | 32   |   
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|PART II. OTHER INFORMATION                                                                    |                                                                                                      |  |      |   
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|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                      |  | 34   |   

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##### Table of Contents









PART I. FINANCIAL INFORMATION

Item 1. Financial Statements





TEPPCO PARTNERS, L.P.


CONSOLIDATED BALANCE SHEETS
(in thousands)

|                                                                                                                   |                                          |                                         |                         |         |             |         |              |         |           |         | 
|------------------------------------------------------------------------------------------------------------------ | ---------------------------------------- | --------------------------------------- | ----------------------- | ------- | ----------- | ------- | ------------ | ------- | --------- | ------- | 
|                                                                                                                   |                                          |                                         |                         |         | March 31,   |         | December 31,
|                                                                                                                   |                                          |                                         |                         |         | 2002        |         | 2001        
|                                                                                                                   |                                          |                                         |                         |         |             |         |             
|                                                                                                                   |                                          |                                         |                         |         | (Unaudited) |         |              |         |          
|ASSETS                                                                                                             |                                          |                                         |                         |         |             |         |              |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Current assets:                                                                                                    |                                          |                                         |                         |         |             |         |              |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Cash and cash equivalents                |                                         | $                       | 22,917  |             |         | $            | 25,479  |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Accounts receivable, trade               |                                         |                         | 213,371 |             |         |              | 221,541 |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Accounts receivable, related party       |                                         |                         | 4,310   |             |         |              | 4,310   |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Inventories                              |                                         |                         | 21,910  |             |         |              | 17,243  |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Other                                    |                                         |                         | 19,862  |             |         |              | 14,907  |          
|                                                                                                                   |                                          |                                         |                         |         |             |         |              |        
|                                                                                                                   |                                          | Total current assets                    |                         |         | 282,370     |         |              |         | 283,480   |        
|                                                                                                                   |                                          |                                         |                         |         |             |         |              |        
|Property, plant and equipment, at cost (Net of accumulated
depreciation and amortization of $299,046 and $290,248) |                                          |                                         | 1,331,965               |         |             |         | 1,180,461    |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Equity investments                                                                                                 |                                          |                                         | 292,155                 |         |             |         | 292,224      |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Intangible assets                                                                                                  |                                          |                                         | 246,891                 |         |             |         | 251,487      |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Goodwill                                                                                                           |                                          |                                         | 16,939                  |         |             |         | 16,669       |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Other assets                                                                                                       |                                          |                                         | 41,859                  |         |             |         | 41,027       |        
|                                                                                                                   |                                          |                                         |                         |         |             |         |              |        
|                                                                                                                   |                                          | Total assets                            |                         | $       | 2,212,179   |         |              | $       | 2,065,348 |        
|                                                                                                                   |                                          |                                         |                         |         |             |         |              |        
|LIABILITIES AND PARTNERS CAPITAL                                                                                  |                                          |                                         |                         |         |             |         |              |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Current liabilities:                                                                                               |                                          |                                         |                         |         |             |         |              |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Notes payable                            |                                         | $                       |        |             |         | $            | 360,000 |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Accounts payable and accrued liabilities |                                         |                         | 211,278 |             |         |              | 228,075 |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Accounts
payable, related parties        |                                         |                         | 11,300  |             |         |              | 22,680  |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Accrued interest                         |                                         |                         | 13,057  |             |         |              | 15,649  |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Other accrued taxes                      |                                         |                         | 6,820   |             |         |              | 8,888   |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Other                                    |                                         |                         | 31,749  |             |         |              | 33,550  |          
|                                                                                                                   |                                          |                                         |                         |         |             |         |              |        
|                                                                                                                   |                                          | Total current liabilities               |                         |         | 274,204     |         |              |         | 668,842   |        
|                                                                                                                   |                                          |                                         |                         |         |             |         |              |        
|Senior Notes                                                                                                       |                                          |                                         | 887,651                 |         |             |         | 389,814      |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Other long-term debt                                                                                               |                                          |                                         | 332,000                 |         |             |         | 340,658      |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Other liabilities and deferred credits                                                                             |                                          |                                         | 14,946                  |         |             |         | 17,223       |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Redeemable Class B Units held by related party                                                                     |                                          |                                         | 105,171                 |         |             |         | 105,630      |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Commitments and contingencies                                                                                      |                                          |                                         |                         |         |             |         |              |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|Partners capital:                                                                                                 |                                          |                                         |                         |         |             |         |              |        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Accumulated other comprehensive loss     |                                         |                         | (17,024 | )           |         |              | (20,324 | )        
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | General partners interest               |                                         |                         | 12,746  |             |         |              | 13,190  |          
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                  
|                                                                                                                   | Limited partners interests              |                                         |                         | 602,485 |             |         |              | 550,315 |          
|                                                                                                                   |                                          |                                         |                         |         |             |         |              |        
|                                                                                                                   |                                          |                                         | Total partners capital |         |             | 598,207 |              |         |           | 543,181 | 
|                                                                                                                   |                                          |                                         |                         |         |             |         |              |        
|                                                                                                                   |                                          | Total liabilities and partners capital |                         | $       | 2,212,179   |         |              | $       | 2,065,348 |        
|                                                                                                                   |                                          |                                         |                         |         |             |         |              |        

See accompanying Notes to Consolidated Financial Statements.

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TEPPCO PARTNERS, L.P.

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

|                                                                  |                                               |                                 |         |                    |         |      |         |         |         | 
|----------------------------------------------------------------- | --------------------------------------------- | ------------------------------- | ------- | ------------------ | ------- | ---- | ------- | ------- | ------- | 
|                                                                  |                                               |                                 |         | Three Months Ended
|                                                                  |                                               |                                 |         | March 31,         
|                                                                  |                                               |                                 |         |                   
|                                                                  |                                               |                                 |         | 2002               |         | 2001
|                                                                  |                                               |                                 |         |                    |         |     
|Operating revenues:                                               |                                               |                                 |         |                    |         |      |         |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Sales of crude oil and petroleum products     |                                 | $       | 545,208            |         |      | $       | 707,481 |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Transportation  Refined products             |                                 |         | 25,144             |         |      |         | 26,181  |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Transportation  LPGs                         |                                 |         | 23,360             |         |      |         | 24,999  |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Transportation  Crude oil and NGLs           |                                 |         | 12,434             |         |      |         | 10,909  |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Gathering  Natural gas                       |                                 |         | 9,520              |         |      |         |        |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Mont Belvieu operations                       |                                 |         | 4,506              |         |      |         | 2,897   |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Other                                         |                                 |         | 10,965             |         |      |         | 12,768  |        
|                                                                  |                                               |                                 |         |                    |         |      |         |        
|                                                                  |                                               | Total operating revenues        |         |                    | 631,137 |      |         |         | 785,235 | 
|                                                                  |                                               |                                 |         |                    |         |      |         |        
|Costs and expenses:                                               |                                               |                                 |         |                    |         |      |         |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Purchases of crude oil and petroleum products |                                 |         | 533,209            |         |      |         | 698,576 |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Operating, general and administrative         |                                 |         | 31,445             |         |      |         | 27,950  |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Operating fuel and power                      |                                 |         | 8,589              |         |      |         | 8,614   |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Depreciation and amortization                 |                                 |         | 16,041             |         |      |         | 9,907   |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|                                                                  | Taxes  other than income taxes               |                                 |         | 4,505              |         |      |         | 3,882   |        
|                                                                  |                                               |                                 |         |                    |         |      |         |        
|                                                                  |                                               | Total costs and expenses        |         |                    | 593,789 |      |         |         | 748,929 | 
|                                                                  |                                               |                                 |         |                    |         |      |         |        
|                                                                  |                                               | Operating income                |         |                    | 37,348  |      |         |         | 36,306  | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Interest expense                                                  |                                               |                                 | (16,787 | )                  |         |      | (16,294 | )      
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Interest capitalized                                              |                                               |                                 | 2,109   |                    |         |      | 345     |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Equity earnings                                                   |                                               |                                 | 3,572   |                    |         |      | 5,206   |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Other income  net                                                |                                               |                                 | 566     |                    |         |      | 434     |        
|                                                                  |                                               |                                 |         |                    |         |      |         |        
|                                                                  |                                               | Income before minority interest |         |                    | 26,808  |      |         |         | 25,997  | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Minority interest                                                 |                                               |                                 |        |                    |         |      | (262    | )      
|                                                                  |                                               |                                 |         |                    |         |      |         |        
|                                                                  |                                               | Net income                      |         | $                  | 26,808  |      |         | $       | 25,735  | 
|                                                                  |                                               |                                 |         |                    |         |      |         |        
|Net Income Allocation:                                            |                                               |                                 |         |                    |         |      |         |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Limited Partner Unitholders                                       |                                               | $                               | 18,594  |                    |         | $    | 18,611  |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Class B Unitholder                                                |                                               |                                 | 1,793   |                    |         |      | 2,192   |        
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|General Partner                                                   |                                               |                                 | 6,421   |                    |         |      | 4,932   |        
|                                                                  |                                               |                                 |         |                    |         |      |         |        
|                                                                  |                                               | Total net income allocated      |         | $                  | 26,808  |      |         | $       | 25,735  | 
|                                                                  |                                               |                                 |         |                    |         |      |         |        
|Basic and diluted net income per Limited
Partner and Class B Unit |                                               | $                               | 0.46    |                    |         | $    | 0.55    |        
|                                                                  |                                               |                                 |         |                    |         |      |         |        
|Weighted average Limited Partner and Class B
Units outstanding    |                                               |                                 | 44,559  |                    |         |      | 37,889  |        

See accompanying Notes to Consolidated Financial Statements.

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##### Table of Contents






TEPPCO PARTNERS, L.P.

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

|                                                 |                                                                               |                                                               |                                                      |                                                     |          |                    |          |        |         |         |         |  
|------------------------------------------------ | ----------------------------------------------------------------------------- | ------------------------------------------------------------- | ---------------------------------------------------- | --------------------------------------------------- | -------- | ------------------ | -------- | ------ | ------- | ------- | ------- | -
|                                                 |                                                                               |                                                               |                                                      |                                                     |          | Three Months Ended
|                                                 |                                                                               |                                                               |                                                      |                                                     |          | March 31,         
|                                                 |                                                                               |                                                               |                                                      |                                                     |          |                   
|                                                 |                                                                               |                                                               |                                                      |                                                     |          | 2002               |          | 2001  
|                                                 |                                                                               |                                                               |                                                      |                                                     |          |                    |          |       
|Cash flows from operating activities:            |                                                                               |                                                               |                                                      |                                                     |          |                    |          |       
|                                                
|                                                
|                                                
|                                                
|                                                 | Net income                                                                    |                                                               | $                                                    | 26,808                                              |          |                    | $        | 25,735 |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Adjustments to reconcile net income to cash provided by
operating activities: |                                                               |                                                      |                                                     |          |                    |          |        |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               |                                                               | Depreciation and amortization                        |                                                     |          | 16,041             |          |        |         | 9,907   |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               |                                                               | Earnings in equity investments, net of distributions |                                                     |          | 3,402              |          |        |         | 6,300   |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               |                                                               | Non-cash portion of interest expense                 |                                                     |          | 1,587              |          |        |         | 520     |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               |                                                               | Decrease in accounts receivable                      |                                                     |          | 8,170              |          |        |         | 38,550  |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               |                                                               | Increase in inventories                              |                                                     |          | (4,667             | )        |        |         | (2,577  | )      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               |                                                               | Increase in other current assets                     |                                                     |          | (4,955             | )        |        |         | (1,099  | )      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               |                                                               | Decrease in accounts payable and accrued expenses    |                                                     |          | (13,327            | )        |        |         | (51,236 | )      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               |                                                               | Other                                                |                                                     |          | (9,458             | )        |        |         | (3,475  | )      
|                                                 |                                                                               |                                                               |                                                      |                                                     |          |                    |          |       
|                                                 |                                                                               |                                                               |                                                      | Net cash provided by operating activities           |          |                    | 23,601   |        |         |         | 22,625  |  
|                                                 |                                                                               |                                                               |                                                      |                                                     |          |                    |          |       
|Cash flows from investing activities:            |                                                                               |                                                               |                                                      |                                                     |          |                    |          |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               | Proceeds from cash investments                                |                                                      |                                                     |         |                    |          |        | 1,000   |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               | Purchase of crude oil assets                                  |                                                      |                                                     |         |                    |          |        | (20,000 | )      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               | Proceeds from the sale of assets                              |                                                      |                                                     |         |                    |          |        | 1,300   |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               | Purchase of Chaparral NGL system                              |                                                      |                                                     | (132,000 | )                  |          |        |        |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               | Purchase of Jonah Gas Gathering Company                       |                                                      |                                                     | (7,315   | )                  |          |        |        |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               | Investments in Centennial Pipeline, LLC                       |                                                      |                                                     | (3,334   | )                  |          |        | (2,947  | )      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               | Capital expenditures                                          |                                                      |                                                     | (33,001  | )                  |          |        | (10,940 | )      
|                                                 |                                                                               |                                                               |                                                      |                                                     |          |                    |          |       
|                                                 |                                                                               |                                                               |                                                      | Net cash used in investing activities               |          |                    | (175,650 | )      |         |         | (31,587 | )
|                                                 |                                                                               |                                                               |                                                      |                                                     |          |                    |          |       
|Cash flows from financing activities:            |                                                                               |                                                               |                                                      |                                                     |          |                    |          |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               | Proceeds from term and revolving credit facilities            |                                                      |                                                     | 172,000  |                    |          |        | 8,000   |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               | Repayments on term and revolving credit facilities            |                                                      |                                                     | (540,658 | )                  |          |        | (41,000 | )      
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               | Issuance of Senior Notes                                      |                                                      |                                                     | 497,805  |                    |          |        |        |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               | Debt issuance costs                                           |                                                      |                                                     | (4,126   | )                  |          |        |        |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               | Issuance of Limited Partner Units, net                        |                                                      |                                                     | 56,839   |                    |          |        | 54,588  |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               | General Partners contributions                               |                                                      |                                                     | 1,172    |                    |          |        | 1,114   |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               | Distributions                                                 |                                                      |                                                     | (33,545  | )                  |          |        | (24,024 | )      
|                                                 |                                                                               |                                                               |                                                      |                                                     |          |                    |          |       
|                                                 |                                                                               |                                                               |                                                      | Net cash provided by (used in) investing activities |          |                    | 149,487  |        |         |         | (1,322  | )
|                                                 |                                                                               |                                                               |                                                      |                                                     |          |                    |          |       
|Net decrease in cash and cash equivalents        |                                                                               |                                                               | (2,562                                               | )                                                   |          |                    | (10,284  | )     
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at beginning of period |                                                                               |                                                               | 25,479                                               |                                                     |          |                    | 27,096   |       
|                                                 |                                                                               |                                                               |                                                      |                                                     |          |                    |          |       
|Cash and cash equivalents at end of period       |                                                                               | $                                                             | 22,917                                               |                                                     |          | $                  | 16,812   |       
|                                                 |                                                                               |                                                               |                                                      |                                                     |          |                    |          |       
|Supplemental disclosure of cash flows:           |                                                                               |                                                               |                                                      |                                                     |          |                    |          |       
|                                                
|                                                
|                                                
|                                                
|                                                 |                                                                               | Interest paid during the period (net of capitalized interest) |                                                      | $                                                   | 16,799   |                    |          | $      | 26,656  |        
|                                                 |                                                                               |                                                               |                                                      |                                                     |          |                    |          |       

See accompanying Notes to Consolidated Financial Statements.

3



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##### Table of Contents






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

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

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

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

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##### Table of Contents



TEPPCO PARTNERS, L.P.

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

Basic net income per Unit is computed by dividing net income, after
deduction of the general partners interest, by the weighted average number of
Limited Partner and Class B Units outstanding (a total of 44.6 million Units
for the three months ended March 31, 2002, and 37.9 million Units for the three
months ended March 31, 2001). 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 8. Quarterly Distributions of Available Cash). The
general partner was allocated $6.4 million (representing 23.95%) and $4.9
million (representing 19.17%) of net income for the three months ended March
31, 2002, and 2001, respectively.

Diluted net income per Unit is similar to the computation of basic net
income per Unit above, except that the denominator was increased to include the
dilutive effect of outstanding Unit options by application of the treasury
stock method. For the three months ended March 31, 2002 and 2001, the
denominator was increased by 40,620 Units and 26,180 Units, respectively.

NOTE 2.   NEW ACCOUNTING PRONOUNCEMENTS

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

Beginning January 1, 2002, effective with the adoption of SFAS 142, we no
longer record amortization expense related to goodwill or amortization expense
related to the excess investment on our equity investment in Seaway (see Note
6. Equity Investments). The following table presents our quarterly results on
a comparable basis, as if we had not recorded amortization expense of goodwill
or amortization expense of our excess investment for the three months ended
March 31, 2001 (in thousands, except per Unit amounts):

|                                                                   |                                                |  |                              |        |      |  |   |        | 
|------------------------------------------------------------------ | ---------------------------------------------- |  | ---------------------------- | ------ | ---- |  | - | ------ | 
|                                                                   |                                                |  | Three Months Ended March 31,
|                                                                   |                                                |  |                             
|                                                                   |                                                |  | 2002                         |        | 2001
|                                                                   |                                                |  |                              |        |     
|Net income:                                                        |                                                |  |                              |        |      |  |   |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Reported net income                            |  | $                            | 26,808 |      |  | $ | 25,735 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Amortization of goodwill and excess investment |  |                              |       |      |  |   | 394    | 
|                                                                   |                                                |  |                              |        |      |  |   |       
|                                                                   | Adjusted net income                            |  | $                            | 26,808 |      |  | $ | 26,129 | 
|                                                                   |                                                |  |                              |        |      |  |   |       
|Net Income Allocation:                                             |                                                |  |                              |        |      |  |   |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Limited Partner Unitholders                    |  | $                            | 18,594 |      |  | $ | 18,896 | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Class B Unitholder                             |  |                              | 1,793  |      |  |   | 2,226  | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | General Partner                                |  |                              | 6,421  |      |  |   | 5,007  | 
|                                                                   |                                                |  |                              |        |      |  |   |       
|                                                                   | Total net income allocated                     |  | $                            | 26,808 |      |  | $ | 26,129 | 
|                                                                   |                                                |  |                              |        |      |  |   |       
|Basic and diluted net income per Limited Partner and
Class B Unit: |                                                |  |                              |        |      |  |   |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | As reported                                    |  | $                            | 0.46   |      |  | $ | 0.55   | 
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Amortization of goodwill and excess investment |  |                              |       |      |  |   | 0.01   | 
|                                                                   |                                                |  |                              |        |      |  |   |       
|                                                                   | Adjusted per Unit amount                       |  | $                            | 0.46   |      |  | $ | 0.56   | 
|                                                                   |                                                |  |                              |        |      |  |   |       

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TEPPCO PARTNERS, L.P.

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

Upon the adoption of SFAS 142, we are required to reassess the useful
lives and residual values of all intangible assets acquired, and make necessary
amortization period adjustments by the end of the first interim period
after adoption. We have completed this analysis during the three months ended
March 31, 2002, resulting in no change to the amortization period for our
intangible assets.

In connection with the transitional goodwill impairment evaluation
required by SFAS 142, we are required to perform an assessment of whether there
is an indication that goodwill is impaired as of the date of adoption. To
accomplish this, we must identify our reporting units and determine the
carrying value of each reporting unit by assigning the assets and liabilities,
including the existing goodwill and intangible assets, to those reporting units
as of the date of adoption. We will then have up to six months from the date
of adoption to determine the fair value of each reporting unit and compare it
to the carrying value of the reporting unit. To the extent the carrying amount
of a reporting unit exceeds the fair value of the reporting unit, an indication
exists that the reporting unit goodwill may be impaired. We have completed the
process of identifying our reporting units and assigning our assets and
liabilities to those reporting units in conjunction with the adoption of SFAS
142 and are currently in the process of completing our analysis of the fair
value of our reporting units. We currently do not believe any transitional
impairment loss will be identified upon completion of this process.

At March 31, 2002, we had $16.9 million of unamortized goodwill and $55.0
million of excess investment in our equity investments. An impairment analysis
of the excess investment in our equity investments was completed during the
three months ended March 31, 2002, through which no indication of impairment
was noted. The excess investment is included in our equity investments account
at March 31, 2002. The following table presents the carrying amount of
goodwill, excluding the excess investment, at March 31, 2002, by business
segment (in thousands):

|           |  |           |        |          |  |          |  |  |         |  |  |  |  | 
|---------- |  | --------- | ------ | -------- |  | -------- |  |  | ------- |  |  |  |  | 
|Downstream |  | Midstream |        | Upstream |  | Segments
|Segment    |  | Segment   |        | Segment  |  | Total   
|           |  |           |        |          |  |         
|$         |  |           | $2,772 |          |  | $14,167  |  |  | $16,939 | 

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

|                             |                                      |       |   |                |         |                   |   |                |         |              |   |         |         |  |   |        |         |  
|---------------------------- | ------------------------------------ | ----- | - | -------------- | ------- | ----------------- | - | -------------- | ------- | ------------ | - | ------- | ------- |  | - | ------ | ------- | -
|                             |                                      |       |   | March 31, 2002 |         | December 31, 2001
|                             |                                      |       |   |                |         |                  
|                             |                                      |       |   | Gross Carrying |         | Accumulated       |   | Gross Carrying |         | Accumulated 
|                             |                                      |       |   | Amount         |         | Amortization      |   | Amount         |         | Amortization
|                             |                                      |       |   |                |         |                   |   |                |         |             
|Amortized intangible assets: |                                      |       |   |                |         |                   |   |                |         |              |   |         |         |  |   |       
|                            
|                            
|                            
|                            
|                             | Fractionation agreement              |       | $ | 38,000         |         |                   | $ | (7,600         | )       |              | $ | 38,000  |         |  | $ | (7,125 | )      
|                            
|                            
|                            
|                            
|                             | Natural gas transportation contracts |       |   | 222,800        |         |                   |   | (7,334         | )       |              |   | 222,800 |         |  |   | (3,275 | )      
|                            
|                            
|                            
|                            
|                             | Other                                |       |   | 1,458          |         |                   |   | (433           | )       |              |   | 1,458   |         |  |   | (371   | )      
|                             |                                      |       |   |                |         |                   |   |                |         |              |   |         |         |  |   |        |        
|                             |                                      | Total |   | $              | 262,258 |                   |   | $              | (15,367 | )            |   | $       | 262,258 |  |   | $      | (10,771 | )
|                             |                                      |       |   |                |         |                   |   |                |         |              |   |         |         |  |   |        |        

Excluding goodwill, amortization expense on intangible assets was $4.6
million and $0.5 million for the three months ended March 31, 2002 and 2001,
respectively.

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TEPPCO PARTNERS, L.P.

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

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

|     |  |   |        | 
|---- |  | - | ------ | 
|2002 |  | $ | 18,561 | 
|    
|    
|    
|    
|2003 |  |   | 26,026 | 
|    
|    
|    
|    
|2004 |  |   | 27,439 | 
|    
|    
|    
|    
|2005 |  |   | 28,661 | 
|    
|    
|    
|    
|2006 |  |   | 25,756 | 

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

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

NOTE 3.   DERIVATIVE FINANCIAL INSTRUMENTS

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

We have utilized and expect to continue to utilize derivative financial
instruments with respect to a portion of our interest rate and fair value risks
and our crude oil marketing activities, as each is explained below. The
derivative financial instrument related to our interest rate risk is intended
to reduce our exposure to increases in the benchmark interest rates underlying
our variable rate revolving credit facility. The derivative financial
instruments related to our fair value risks are intended to reduce our exposure
to changes in the fair value of the fixed rate Senior Notes resulting from
changes in interest rates. Our Upstream Segment uses derivative financial
instruments to reduce our exposure to fluctuations in the market price of crude
oil. At March 31, 2002, the Upstream Segment had

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TEPPCO PARTNERS, L.P.

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

no open positions on
derivative financial contracts. By using derivative financial instruments to
hedge exposures to changes in interest rates, fair value of fixed rate Senior
Notes and crude oil prices, we are exposed to credit risk and market risk.
Credit risk is the failure of the counterparty to perform under the terms of
the derivative contract. When the fair value of a derivative contract is
positive, the counterparty owes us, which creates credit risk for us. When the
fair value of a derivative contract is negative, we owe the counterparty and,
therefore, we do not possess credit risk.
We minimize the credit risk in derivative instruments by entering into
transactions with major financial institutions or commodities trading
institutions. These derivative financial instruments generally take the form
of swaps and forward contracts. Market risk is the adverse effect on the value
of a financial instrument that results from a change in interest rates or
commodity prices. We manage market risk associated with interest-rate and
commodity-price contracts by establishing and monitoring parameters that limit
the type and degree of market risk that may be undertaken.

On July 31, 2000, we entered into a three-year interest rate swap
agreement to hedge our exposure to increases in the benchmark interest rate
underlying our variable rate revolving credit facilities. We have 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 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, 2002 and 2001, we recognized $3.2 million and $0.8 million,
respectively, in losses, included in interest expense, on the interest rate
swap attributable to interest costs occurring in 2002 and 2001. 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 $17.0 million and
$13.7 million at March 31, 2002 and 2001, respectively. We anticipate that
approximately $10.9 million of the fair value will be transferred into earnings
over the next twelve months.

On October 4, 2001, our subsidiary, TE Products 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 have designated this swap agreement,
which hedges exposure to changes in the fair value of the TE Products Senior
Notes, as a fair value hedge. The swap agreement has a notional amount of $210
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%. Since this swap is designated as a
fair value hedge, the changes in fair value are recognized in current earnings.
During the three months ended March 31, 2002, we recognized a gain of $1.7
million, included as a component of interest expense, on the interest rate
swap. No gain or loss from ineffectiveness was required to be recognized.

On February 20, 2002, we entered into interest rate swap agreements to
hedge our exposure to changes in the fair value of our fixed rate 7.625% Senior
Notes due 2012. We have designated these swap agreements, which hedge exposure
to changes in the fair value of the Senior Notes, as fair value hedges. The
swap agreements have a combined notional amount of $500 million and mature in
2012 to match the principal and maturity of the Senior Notes. Under the swap
agreements, we pay a floating rate based on a six month U.S. Dollar LIBOR rate,
plus a spread, and receive a fixed rate of interest of 7.625%. Since these
swaps are designated as fair value hedges, the changes in fair value are
recognized in current earnings. During the three months ended March 31, 2002,
we recognized a gain of $1.9 million, included as a component of interest
expense, on the interest rate swaps. No gain or loss from ineffectiveness was
required to be recognized.

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TEPPCO PARTNERS, L.P.

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

NOTE 4.   ACQUISITIONS

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

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

|                                                           |                     |   |         |         | 
|---------------------------------------------------------- | ------------------- | - | ------- | ------- | 
|Property, plant and equipment                              |                     | $ | 141,835 |        
|                                                          
|                                                          
|                                                          
|                                                          
|Intangible assets (primarily gas transportation contracts) |                     |   | 222,800 |        
|                                                          
|                                                          
|                                                          
|                                                          
|Goodwill                                                   |                     |   | 2,772   |        
|                                                           |                     |   |         |        
|                                                           | Total assets        |   |         | 367,407 | 
|                                                           |                     |   |         |        
|Total liabilities assumed                                  |                     |   | (489    | )      
|                                                           |                     |   |         |        
|                                                           | Net assets acquired |   | $       | 366,918 | 
|                                                           |                     |   |         |        

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

The following table presents our unaudited pro forma results as though the
acquisition of Jonah occurred at the beginning of 2001 (in thousands, except
per Unit amounts). The pro forma results do not include operating efficiencies
or revenue growth from historical results.

|                                                                  |  |                    |         | 
|----------------------------------------------------------------- |  | ------------------ | ------- | 
|                                                                  |  | Three Months Ended
|                                                                  |  | March 31,         
|                                                                  |  | 2001              
|                                                                  |  |                   
|Revenues                                                          |  | $                  | 793,011 | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Operating income                                                  |  |                    | 36,157  | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Net income                                                        |  |                    | 22,373  | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|Basic and diluted net income per Limited
Partner and Class B Unit |  | $                  | 0.48    | 

On March 1, 2002, we completed the purchase of the Chaparral NGL system
(Chaparral) for $132 million from Diamond-Koch II, L.P. and Diamond-Koch III,
L.P. We funded the purchase by a drawdown of our $475 million revolving credit
facility (see Note 7. 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 contract
arrangement on our behalf, DEFS operates and manages these assets. We
accounted for the acquisition of the assets under the purchase method of
accounting. We allocated the purchase price of $132 million to property, plant
and equipment.

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##### Table of Contents



TEPPCO PARTNERS, L.P.

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

NOTE 5.   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,
|                       |       |   | 2002      |        | 2001        
|                       |       |   |           |        |             
|Crude oil              |       | $ | 6,890     |        |              | $ | 3,783 |       
|                      
|                      
|                      
|                      
|Gasolines              |       |   | 4,245     |        |              |   | 3,670 |       
|                      
|                      
|                      
|                      
|Propane                |       |   |          |        |              |   | 1,096 |       
|                      
|                      
|                      
|                      
|Butanes                |       |   | 866       |        |              |   | 1,431 |       
|                      
|                      
|                      
|                      
|Other products         |       |   | 5,796     |        |              |   | 3,744 |       
|                      
|                      
|                      
|                      
|Materials and supplies |       |   | 4,113     |        |              |   | 3,519 |       
|                       |       |   |           |        |              |   |       |       
|                       | Total |   | $         | 21,910 |              |   | $     | 17,243 | 
|                       |       |   |           |        |              |   |       |       

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

NOTE 6.   EQUITY INVESTMENTS

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

In August 2000, TE Products entered into agreements with CMS Energy
Corporation and Marathon Ashland Petroleum LLC to form Centennial Pipeline, LLC
(Centennial). Centennial owns and operates an interstate refined petroleum
products pipeline extending from the upper Texas Gulf Coast to Illinois. Each
participant owns a one-third interest in Centennial. Through 2001, we
contributed approximately $70.0 million for our investment in Centennial.
During the three months ended March 31, 2002, we contributed approximately $3.3
million for our investment in Centennial. These amounts are included in the
equity investment balance at March 31, 2002.

We use the equity method of accounting to account for our investments in
Seaway and Centennial. Summarized combined financial information for Seaway as
of and for the three months ended March 31, 2002 and 2001, and for Centennial
as of and for the three months ended March 31, 2002, is presented below (in
thousands):
10Table of Contents

TEPPCO PARTNERS, L.P.

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

|                       |  |                              |         |      |  |   |         | 
|---------------------- |  | ---------------------------- | ------- | ---- |  | - | ------- | 
|                       |  | Three Months Ended March 31,
|                       |  |                             
|                       |  | 2002                         |         | 2001
|                       |  |                              |         |     
|Current assets         |  | $                            | 50,960  |      |  | $ | 23,960  | 
|                      
|                      
|                      
|                      
|Noncurrent assets      |  |                              | 534,508 |      |  |   | 286,264 | 
|                      
|                      
|                      
|                      
|Current liabilities    |  |                              | 11,078  |      |  |   | 2,395   | 
|                      
|                      
|                      
|                      
|Long-term debt         |  |                              | 140,000 |      |  |   |        | 
|                      
|                      
|                      
|                      
|Noncurrent liabilities |  |                              | 13,040  |      |  |   |        | 
|                      
|                      
|                      
|                      
|Partners capital      |  |                              | 421,350 |      |  |   | 307,829 | 
|                      
|                      
|                      
|                      
|Revenues               |  |                              | 14,796  |      |  |   | 15,486  | 
|                      
|                      
|                      
|                      
|Net income             |  |                              | 3,455   |      |  |   | 6,978   | 

Our investment in Seaway at March 31, 2002 and 2001, includes an excess
net investment amount of $25.5 million and $26.0 million, respectively. At
March 31, 2002, our investment in Centennial included an excess investment of
$29.5 million. Excess investment is the amount by which our investment balance
exceeds our proportionate share of the net assets of the investment. Prior to
January 1, 2002, and the adoption of SFAS 142, we were amortizing the excess
investment in Seaway using the straight-line method over 20 years.

NOTE 7.   DEBT

Senior Notes

On January 27, 1998, TE Products completed the issuance of $180 million
principal amount of 6.45% Senior Notes due 2008, and $210 million principal
amount of 7.51% Senior Notes due 2028 (collectively the TE Products Senior
Notes). The 6.45% TE Products Senior Notes were issued at a discount and are
being accreted to their face value over the term of the notes. The 6.45% TE
Products Senior Notes due 2008 are not subject to redemption prior to January
15, 2008. The 7.51% TE Products Senior Notes due 2028, issued at par, may be
redeemed at any time after January 15, 2008, at the option of TE Products, in
whole or in part, at a premium.

The TE Products Senior Notes do not have sinking fund requirements.
Interest on the TE Products Senior Notes is payable semiannually in arrears on
January 15 and July 15 of each year. The TE Products Senior Notes are
unsecured obligations of TE Products and rank on a parity with all other
unsecured and unsubordinated indebtedness of TE Products. The indenture
governing the TE Products Senior Notes contains covenants, including, but not
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, 2002, TE Products
was in compliance with the covenants of the TE Products Senior Notes.

On February 20, 2002, we received $494.6 million in net proceeds from the
issuance of $500 million principal amount of 7.625% Senior Notes due 2012. The
7.625% Senior Notes were issued at a discount and are being accreted to their
face value over the term of the notes. We used the proceeds from the offering
to reduce the outstanding balances of the 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 discounted rate equal to the rate of the United States
Treasury securities of comparable remaining maturity plus 35 basis points. As
of March 31, 2002, we were in compliance with the covenants of these Senior
Notes.

We have entered into interest rate swap agreements to hedge our exposure
to changes in the fair value on a portion of the Senior Notes discussed above.
See Note 3. Derivative Financial Instruments.

11



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##### Table of Contents



TEPPCO PARTNERS, L.P.

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

Other Long Term Debt and Credit Facilities

On July 14, 2000, we entered into a $475 million revolving credit facility
(Three Year Facility). We used the funds to finance the acquisition of the
ARCO assets and to refinance existing bank credit facilities. On April 6,
2001, the Three Year Facility was amended to provide for revolving borrowings
of up to $500 million including the issuance of letters of credit of up to $20
million. The term of the revised Three Year Facility was extended to April 6,
2004. The interest rate is based on our option of either the lenders base
rate plus a spread, or LIBOR plus a spread in effect at the time of the
borrowings. The credit agreement for the Three Year Facility contains
restrictive financial covenants that require us to maintain a minimum level of
partners capital as well as maximum debt-to-EBITDA (earnings before interest
expense, income tax expense and depreciation and amortization expense) and
minimum fixed charge coverage ratios. On November 13, 2001, certain lenders
under the agreement elected to withdraw from the facility, and the available
borrowing capacity was reduced to $411 million. On March 27, 2002, the Three
Year Facility was amended to increase the borrowing capacity to $500 million.
At March 31, 2002, $332.0 million was outstanding under the Three Year Facility
at a weighted average interest rate of 2.9%. As of March 31, 2002, we were in
compliance with the covenants contained in this credit agreement.

We have entered into an interest rate swap agreement to hedge our exposure
to increases in interest rates on the Three Year Facility discussed above. See
Note 3. Derivative Financial Instruments.

Short Term Credit Facilities

On April 6, 2001, we entered into a 364-day, $200 million revolving credit
agreement (Short-term Revolver). The interest rate is based on our option of
either the lenders base rate plus a spread, or LIBOR plus a spread in effect
at the time of the borrowings. The credit agreement contains restrictive
financial covenants that require us to maintain a minimum level of partners
capital as well as maximum debt-to-EBITDA and minimum fixed charge coverage
ratios. On March 27, 2002, the Short-term Revolver was extended for an
additional period of 364 days, commencing on the termination date in April
2002. At March 31, 2002, no amounts were outstanding under the Short-term
Revolver.

On September 28, 2001, we entered into a $400 million credit facility with
SunTrust Bank (Bridge Facility). We borrowed $360 million under the Bridge
Facility to acquire the Jonah assets (see Note 4. Acquisitions). The Bridge
Facility was payable in June 2002. During the fourth quarter of 2001, we
repaid $160 million of the outstanding principal from proceeds received from
the issuance of Limited Partner Units in November 2001. On February 5, 2002,
we drew down an additional $15 million under the Bridge Facility. On February
20, 2002, we repaid the outstanding balance of the Bridge Facility of $215
million, with proceeds from the issuance of the 7.625% Senior Notes and
canceled the facility.

The following table summarizes the principal outstanding under our credit
facilities as of March 31, 2002 and December 31, 2001 (in thousands):
12Table of ContentsTEPPCO PARTNERS, L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
(Unaudited)

|                              |                                                  |                                    |   |           |           |              |   |         |         | 
|----------------------------- | ------------------------------------------------ | ---------------------------------- | - | --------- | --------- | ------------ | - | ------- | ------- | 
|                              |                                                  |                                    |   | March 31, |           | December 31,
|                              |                                                  |                                    |   | 2002      |           | 2001        
|                              |                                                  |                                    |   |           |           |             
|Short Term Credit Facilities: |                                                  |                                    |   |           |           |              |   |        
|                             
|                             
|                             
|                             
|                              | Short-term Revolver, due April 2003              |                                    | $ |          |           |              | $ | 160,000 |        
|                             
|                             
|                             
|                             
|                              | Bridge Facility, due June 2002                   |                                    |   |          |           |              |   | 200,000 |        
|                              |                                                  |                                    |   |           |           |              |   |         |        
|                              |                                                  | Total Short Term Credit Facilities |   | $         |          |              |   | $       | 360,000 | 
|                              |                                                  |                                    |   |           |           |              |   |         |        
|Long Term Credit Facilities:  |                                                  |                                    |   |           |           |              |   |        
|                             
|                             
|                             
|                             
|                              | Three Year Facility, due April 2004              |                                    | $ | 332,000   |           |              | $ | 340,658 |        
|                             
|                             
|                             
|                             
|                              | 6.45% TE Products Senior Notes, due January 2008 |                                    |   | 179,822   |           |              |   | 179,814 |        
|                             
|                             
|                             
|                             
|                              | 7.51% TE Products Senior Notes, due January 2028 |                                    |   | 210,000   |           |              |   | 210,000 |        
|                             
|                             
|                             
|                             
|                              | 7.625% Senior Notes, due February 2012           |                                    |   | 497,829   |           |              |   |        |        
|                              |                                                  |                                    |   |           |           |              |   |         |        
|                              |                                                  | Total Long Term Credit Facilities  |   | $         | 1,219,651 |              |   | $       | 730,472 | 
|                              |                                                  |                                    |   |           |           |              |   |         |        

NOTE
8.   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. According to the Partnership Agreement, the Company receives
incremental incentive cash distributions on the portion that cash distributions
on a per Unit basis exceed certain target thresholds as follows:

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

The following table reflects the allocation of total distributions paid
during the three months ended March 31, 2002 and 2001 (in thousands, except per
Unit amounts).

|                                       |                                            |   |                              |        |      |   |        |        | 
|-------------------------------------- | ------------------------------------------ | - | ---------------------------- | ------ | ---- | - | ------ | ------ | 
|                                       |                                            |   | Three Months Ended March 31,
|                                       |                                            |   |                             
|                                       |                                            |   | 2002                         |        | 2001
|                                       |                                            |   |                              |        |     
|Limited Partner Units                  |                                            | $ | 23,259                       |        |      | $ | 17,167 |       
|                                      
|                                      
|                                      
|                                      
|General Partner Ownership Interest     |                                            |   | 521                          |        |      |   | 194    |       
|                                      
|                                      
|                                      
|                                      
|General Partner Incentive              |                                            |   | 7,514                        |        |      |   | 4,364  |       
|                                       |                                            |   |                              |        |      |   |        |       
|                                       | Total Partners Capital Cash Distributions |   |                              | 31,294 |      |   |        | 21,725 | 
|                                      
|                                      
|                                      
|                                      
|Class B Units                          |                                            |   | 2,251                        |        |      |   | 2,056  |       
|                                      
|                                      
|                                      
|                                      
|Minority Interest                      |                                            |   |                             |        |      |   | 243    |       
|                                       |                                            |   |                              |        |      |   |        |       
|                                       | Total Cash Distributions Paid              |   | $                            | 33,545 |      |   | $      | 24,024 | 
|                                       |                                            |   |                              |        |      |   |        |       
|Total Cash Distributions Paid Per Unit |                                            | $ | 0.575                        |        |      | $ | 0.525  |       
|                                       |                                            |   |                              |        |      |   |        |       

On May 8, 2002, we paid a cash distribution of $0.575 per Limited Partner
Unit and Class B Unit for the quarter ended March 31, 2002. The first quarter
2002 cash distribution totaled $35.0 million.

13



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TEPPCO PARTNERS, L.P.

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

NOTE 9.   SEGMENT DATA

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

Effective January 1, 2002, we realigned our three business segments. We
shifted the fractionation of NGLs, which were previously reflected as part of
the Downstream Segment, to the Midstream Segment. The operation of NGL
pipelines, which was previously reflected as part of the Upstream Segment, was
also shifted to the Midstream Segment. The assets we acquired as part of the
Chaparral acquisition are reflected as part of the Midstream Segment. We have
adjusted our quarter-to-quarter comparisons to conform to the current
presentation.

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

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

Our Midstream Segment includes the fractionation of NGLs in Colorado;
operating two trunkline NGL pipelines in South Texas and two NGL pipelines in
East Texas; and the gathering of natural gas in the Green River Basin in
southwestern Wyoming, through Jonah, which was acquired by our subsidiaries on
September 30, 2001, from Alberta Energy Company. This segment also includes
Chaparral, which we acquired on March 1, 2002 (see Note 4. Acquisitions).
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. The results of operations of the Jonah and
Chaparral acquisitions are included in periods subsequent to September 30,
2001, and March 1, 2002, respectively.

14



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##### Table of Contents



TEPPCO PARTNERS, L.P.

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

The table below includes interim financial information by reporting
segment for the interim periods ended March 31, 2002 and 2001 (in thousands):

|                                      |                          |   |                                   |        |           |   |          |       |          |   |             |        |              |   |           |        |  |   |        |   |  |   |           |        | 
|------------------------------------- | ------------------------ | - | --------------------------------- | ------ | --------- | - | -------- | ----- | -------- | - | ----------- | ------ | ------------ | - | --------- | ------ |  | - | ------ | - |  | - | --------- | ------ | 
|                                      |                          |   | Three Months Ended March 31, 2002
|                                      |                          |   |                                  
|                                      |                          |   | Downstream                        |        | Midstream |   | Upstream |       | Segments |   | Partnership |        |              |   |          
|                                      |                          |   | Segment                           |        | Segment   |   | Segment  |       | Total    |   | and Other   |        | Consolidated
|                                      |                          |   |                                   |        |           |   |          |       |          |   |             |        |             
|Revenues                              |                          | $ | 59,586                            |        |           | $ | 18,370   |       |          | $ | 553,888     |        |              | $ | 631,844   |        |  | $ | (707   | ) |  | $ | 631,137   |       
|                                     
|                                     
|                                     
|                                     
|Operating expenses, including
power   |                          |   | 29,107                            |        |           |   | 3,493    |       |          |   | 545,855     |        |              |   | 578,455   |        |  |   | (707   | ) |  |   | 577,748   |       
|                                     
|                                     
|                                     
|                                     
|Depreciation and amortization
expense |                          |   | 6,832                             |        |           |   | 7,145    |       |          |   | 2,064       |        |              |   | 16,041    |        |  |   |       |   |  |   | 16,041    |       
|                                      |                          |   |                                   |        |           |   |          |       |          |   |             |        |              |   |           |        |  |   |        |   |  |   |           |       
|                                      | Operating income         |   |                                   | 23,647 |           |   |          | 7,732 |          |   |             | 5,969  |              |   |           | 37,348 |  |   |        |  |  |   |           | 37,348 | 
|                                     
|                                     
|                                     
|                                     
|Equity earnings                       |                          |   | (796                              | )      |           |   |         |       |          |   | 4,368       |        |              |   | 3,572     |        |  |   |       |   |  |   | 3,572     |       
|                                     
|                                     
|                                     
|                                     
|Other income, net                     |                          |   | 124                               |        |           |   | 19       |       |          |   | 423         |        |              |   | 566       |        |  |   |       |   |  |   | 566       |       
|                                      |                          |   |                                   |        |           |   |          |       |          |   |             |        |              |   |           |        |  |   |        |   |  |   |           |       
|                                      | Earnings before interest |   | $                                 | 22,975 |           |   | $        | 7,751 |          |   | $           | 10,760 |              |   | $         | 41,486 |  |   | $      |  |  |   | $         | 41,486 | 
|                                      |                          |   |                                   |        |           |   |          |       |          |   |             |        |              |   |           |        |  |   |        |   |  |   |           |       
|Total assets                          |                          | $ | 851,088                           |        |           | $ | 677,744  |       |          | $ | 691,015     |        |              | $ | 2,219,847 |        |  | $ | (7,668 | ) |  | $ | 2,212,179 |       

|                                      |                          |   |                                   |        |           |   |          |       |          |   |             |       |              |   |           |        |  |   |      |   |  |   |           |        | 
|------------------------------------- | ------------------------ | - | --------------------------------- | ------ | --------- | - | -------- | ----- | -------- | - | ----------- | ----- | ------------ | - | --------- | ------ |  | - | ---- | - |  | - | --------- | ------ | 
|                                      |                          |   | Three Months Ended March 31, 2001
|                                      |                          |   |                                  
|                                      |                          |   | Downstream                        |        | Midstream |   | Upstream |       | Segments |   | Partnership |       |              |   |          
|                                      |                          |   | Segment                           |        | Segment   |   | Segment  |       | Total    |   | and Other   |       | Consolidated
|                                      |                          |   |                                   |        |           |   |          |       |          |   |             |       |             
|Revenues                              |                          | $ | 62,301                            |        |           | $ | 6,605    |       |          | $ | 716,329     |       |              | $ | 785,235   |        |  | $ |     |   |  | $ | 785,235   |       
|                                     
|                                     
|                                     
|                                     
|Operating expenses, including
power   |                          |   | 27,348                            |        |           |   | 1,055    |       |          |   | 710,619     |       |              |   | 739,022   |        |  |   |     |   |  |   | 739,022   |       
|                                     
|                                     
|                                     
|                                     
|Depreciation and amortization
expense |                          |   | 6,673                             |        |           |   | 1,389    |       |          |   | 1,845       |       |              |   | 9,907     |        |  |   |     |   |  |   | 9,907     |       
|                                      |                          |   |                                   |        |           |   |          |       |          |   |             |       |              |   |           |        |  |   |      |   |  |   |           |       
|                                      | Operating income         |   |                                   | 28,280 |           |   |          | 4,161 |          |   |             | 3,865 |              |   |           | 36,306 |  |   |      |  |  |   |           | 36,306 | 
|                                     
|                                     
|                                     
|                                     
|Equity earnings                       |                          |   |                                  |        |           |   |         |       |          |   | 5,206       |       |              |   | 5,206     |        |  |   |     |   |  |   | 5,206     |       
|                                     
|                                     
|                                     
|                                     
|Other income, net                     |                          |   | 293                               |        |           |   |         |       |          |   | 141         |       |              |   | 434       |        |  |   |     |   |  |   | 434       |       
|                                      |                          |   |                                   |        |           |   |          |       |          |   |             |       |              |   |           |        |  |   |      |   |  |   |           |       
|                                      | Earnings before interest |   | $                                 | 28,573 |           |   | $        | 4,161 |          |   | $           | 9,212 |              |   | $         | 41,946 |  |   | $    |  |  |   | $         | 41,946 | 
|                                      |                          |   |                                   |        |           |   |          |       |          |   |             |       |              |   |           |        |  |   |      |   |  |   |           |       
|Total assets                          |                          | $ | 705,891                           |        |           | $ | 149,079  |       |          | $ | 741,809     |       |              | $ | 1,596,779 |        |  | $ | (242 | ) |  | $ | 1,596,537 |       

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

|                         |            |   |                              |        |      |   |         |        | 
|------------------------ | ---------- | - | ---------------------------- | ------ | ---- | - | ------- | ------ | 
|                         |            |   | Three Months Ended March 31,
|                         |            |   |                             
|                         |            |   | 2002                         |        | 2001
|                         |            |   |                              |        |     
|Earnings before interest |            | $ | 41,486                       |        |      | $ | 41,946  |       
|                        
|                        
|                        
|                        
|Interest expense         |            |   | (16,787                      | )      |      |   | (16,294 | )     
|                        
|                        
|                        
|                        
|Interest capitalized     |            |   | 2,109                        |        |      |   | 345     |       
|                        
|                        
|                        
|                        
|Minority interest        |            |   |                             |        |      |   | (262    | )     
|                         |            |   |                              |        |      |   |         |       
|                         | Net income |   | $                            | 26,808 |      |   | $       | 25,735 | 
|                         |            |   |                              |        |      |   |         |       

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TEPPCO PARTNERS, L.P.

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

NOTE 10.   COMMITMENTS AND CONTINGENCIES

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

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

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

In February 2002, a producer on the Jonah system notified Alberta Energy
Company that it has a right to acquire all or a portion of the assets
comprising the Jonah system. This claim is based upon an alleged right of
first refusal contained in a gas gathering agreement between the producer and
Jonah. Subsidiaries of Alberta Energy have agreed to indemnify us against
losses resulting from the breach of representations concerning the absence of
third party rights in connection with the acquisition of the entity that owns
the Jonah system. We believe that we have adequate legal defenses to the
producers claim and 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 otherwise
relating to environmental protection. 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

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TEPPCO PARTNERS, L.P.

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

in environmental laws and
regulations will not have a material adverse effect on our financial position,
results of operations or cash flows in the near term.

In 1994, we entered into an Agreed Order with the Indiana Department of
Environmental Management (IDEM) that resulted in the implementation of a
remediation program for groundwater contamination attributable to our
operations at the Seymour, Indiana, terminal. In 1999, the IDEM approved a
Feasibility Study, which
includes our proposed remediation program. We expect the IDEM to issue a
Record of Decision formally approving the remediation program. After the
Record of Decision is issued, we will enter into a subsequent Agreed Order for
the continued operation and maintenance of the remediation program. We have an
accrued liability of $0.5 million at March 31, 2002, for future remediation
costs at the Seymour terminal. We do not expect that the completion of the
remediation program will have a future material adverse effect on our financial
position, results of operations or cash flows.

In 1994, the Louisiana Department of Environmental Quality (LDEQ) issued
a compliance order for environmental contamination at our Arcadia, Louisiana,
facility. This contamination may be attributable to our operations, as well as
adjacent petroleum terminals operated by other companies. In 1999, our Arcadia
facility and adjacent terminals were directed by the Remediation Services
Division of the LDEQ to pursue remediation of this containment phase. At March
31, 2002, we have an accrued liability of $0.3 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.

During 2001, we accrued $8.6 million to complete environmental remediation
activities at certain of our Upstream Segment sites. In establishing this
accrual, we expensed $4.4 million for these environmental remediation costs and
recorded a receivable of $4.2 million for the remainder. The receivable is
based on a contractual indemnity obligation for specified environmental
liabilities that DEFS owes to us in connection with our acquisition of the
Upstream Segment from DEFS in November 1998. Under this indemnity obligation,
we are responsible for the first $3.0 million in specified environmental
liabilities, and DEFS is responsible for those environmental liabilities in
excess of $3.0 million, up to a maximum amount of $25.0 million. The majority
of the indemnified costs relate to remediation activities at the Velma crude
oil site in Stephens County, Oklahoma, attributable to operations prior to our
acquisition of the Upstream Segment. Remediation activities at the Velma crude
oil site are being conducted according to a work plan approved by the Oklahoma
Corporation Commission. At March 31, 2002, an accrual of $5.7 million remains
outstanding related to TCTM environmental remediation activities. We do not
expect that the completion of remediation programs associated with this release
will have a future material adverse effect on our financial position, results
of operations or cash flows.

Centennial has entered into credit facilities totaling $150 million. The
proceeds were used to fund construction and conversion costs of its pipeline
system. As of March 31, 2002, Centennial had borrowed $140 million under its
credit facility. TE Products has guaranteed one-third of the debt of
Centennial up to a maximum amount of $50 million.

NOTE 11.   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, 2002 and 2001, the components of comprehensive income were due to the
interest rate swap related to our variable rate revolving credit facility. The
table below reconciles reported net income to total comprehensive income for
the three months ended March 31, 2002 and 2001 (in thousands).

17



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TEPPCO PARTNERS, L.P.

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

|                                                       |                            |   |                              |        |      |   |         |        | 
|------------------------------------------------------ | -------------------------- | - | ---------------------------- | ------ | ---- | - | ------- | ------ | 
|                                                       |                            |   | Three Months Ended March 31,
|                                                       |                            |   |                             
|                                                       |                            |   | 2002                         |        | 2001
|                                                       |                            |   |                              |        |     
|Net income                                             |                            | $ | 26,808                       |        |      | $ | 25,735  |       
|                                                      
|                                                      
|                                                      
|                                                      
|Cumulative effect attributable to adoption of SFAS 133 |                            |   |                             |        |      |   | (10,103 | )     
|                                                      
|                                                      
|                                                      
|                                                      
|Net income (loss) on cash flow hedges                  |                            |   | 3,300                        |        |      |   | (2,261  | )     
|                                                       |                            |   |                              |        |      |   |         |       
|                                                       | Total comprehensive income |   | $                            | 30,108 |      |   | $       | 13,371 | 
|                                                       |                            |   |                              |        |      |   |         |       

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

|                             |                                        |   |         |         |  
|---------------------------- | -------------------------------------- | - | ------- | ------- | -
|Balance at December 31, 2000 |                                        | $ |        |        
|                            
|                            
|                            
|                            
|                             | Cumulative effect of accounting change |   |         | (10,103 | )
|                            
|                            
|                            
|                            
|                             | Net loss on cash flow hedges           |   |         | (10,221 | )
|                             |                                        |   |         |        
|Balance at December 31, 2001 |                                        | $ | (20,324 | )      
|                            
|                            
|                            
|                            
|                             | Net income on cash flow hedges         |   |         | 3,300   |  
|                             |                                        |   |         |        
|Balance at March 31, 2002    |                                        | $ | (17,024 | )      
|                             |                                        |   |         |        

NOTE 12.   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 (the Guarantor Subsidiaries), issued unconditional guarantees of
our debt securities. The guarantees are full, unconditional and joint and
several.

The following supplemental condensed consolidating financial information
reflects the separate accounts of the Partnership, the combined accounts of the
Guarantor Subsidiaries (including Jonah for all periods and dates from and
after September 30, 2001, the date Jonah became our subsidiary), the combined
accounts of our other non-guarantor subsidiaries, the combined consolidating
adjustments and eliminations and the consolidated Partnership accounts for the
dates and periods indicated. For purposes of the following consolidating
information, the Partnerships and Guarantor Subsidiaries investments in their
respective subsidiaries are accounted for by the equity method of accounting.

18



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TEPPCO PARTNERS, L.P.

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

|                                  |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |           |           | 
|--------------------------------- | ------------------------------------------------- | --------------------------------------- | - | -------------- | --------- | ------------ | - | ------------- | --------- | ------------- | - | -------------- | ------- |  | - | -------- | ---------- | - | - | --------- | --------- | 
|                                  |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   | TEPPCO   
|                                  |                                                   |                                         |   | TEPPCO         |           | Guarantor    |   | Non-Guarantor |           | Consolidating |   | Partners, L.P.
|March 31, 2002                    |                                                   | Partners, L.P.                          |   | Subsidiaries   |           | Subsidiaries |   | Adjustments   |           | Consolidated 
|                                  |                                                   |                                         |   |                |           |              |   |               |           |              
|                                  |                                                   |                                         |   | (in thousands)
|Assets                            |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Current assets                                    |                                         | $ | 7,352          |           |              | $ | 60,495        |           |               | $ | 236,183        |         |  | $ | (21,660  | )          |   | $ | 282,370   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Property, plant and equipment  net               |                                         |   |               |           |              |   | 869,454       |           |               |   | 462,511        |         |  |   |         |            |   |   | 1,331,965 |          
|                                 
|                                 
|                                 
|                                 
|                                  | Equity investments                                |                                         |   | 721,103        |           |              |   | 316,757       |           |               |   | 220,208        |         |  |   | (965,913 | )          |   |   | 292,155   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Intercompany notes receivable                     |                                         |   | 828,065        |           |              |   |              |           |               |   |               |         |  |   | (828,065 | )          |   |   |          |          
|                                 
|                                 
|                                 
|                                 
|                                  | Other assets                                      |                                         |   | 6,441          |           |              |   | 233,497       |           |               |   | 65,751         |         |  |   |         |            |   |   | 305,689   |          
|                                  |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |           |          
|                                  |                                                   | Total assets                            |   | $              | 1,562,961 |              |   | $             | 1,480,203 |               |   | $              | 984,653 |  |   | $        | (1,815,638 | ) |   | $         | 2,212,179 | 
|                                  |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |           |          
|Liabilities and partners capital |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Current liabilities                               |                                         | $ | 23,619         |           |              | $ | 58,147        |           |               | $ | 215,126        |         |  | $ | (22,688  | )          |   | $ | 274,204   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Long-term debt                                    |                                         |   | 829,828        |           |              |   | 389,823       |           |               |   |               |         |  |   |         |            |   |   | 1,219,651 |          
|                                 
|                                 
|                                 
|                                 
|                                  | Intercompany notes payable                        |                                         |   |               |           |              |   | 361,572       |           |               |   | 465,465        |         |  |   | (827,037 | )          |   |   |          |          
|                                 
|                                 
|                                 
|                                 
|                                  | Other long term liabilities and
minority interest |                                         |   | 6,142          |           |              |   | 8,573         |           |               |   | 231            |         |  |   |         |            |   |   | 14,946    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Redeemable Class B Units held by
related party    |                                         |   | 105,171        |           |              |   |              |           |               |   |               |         |  |   |         |            |   |   | 105,171   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Total partners capital                           |                                         |   | 598,201        |           |              |   | 662,088       |           |               |   | 303,831        |         |  |   | (965,913 | )          |   |   | 598,207   |          
|                                  |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |           |          
|                                  |                                                   | Total liabilities and partners capital |   | $              | 1,562,961 |              |   | $             | 1,480,203 |               |   | $              | 984,653 |  |   | $        | (1,815,638 | ) |   | $         | 2,212,179 | 
|                                  |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |           |          

|                                  |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |           |           | 
|--------------------------------- | ------------------------------------------------- | --------------------------------------- | - | -------------- | --------- | ------------ | - | ------------- | --------- | ------------- | - | -------------- | ------- |  | - | -------- | ---------- | - | - | --------- | --------- | 
|                                  |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   | TEPPCO   
|                                  |                                                   |                                         |   | TEPPCO         |           | Guarantor    |   | Non-Guarantor |           | Consolidating |   | Partners, L.P.
|December 31, 2001                 |                                                   | Partners, L.P.                          |   | Subsidiaries   |           | Subsidiaries |   | Adjustments   |           | Consolidated 
|                                  |                                                   |                                         |   |                |           |              |   |               |           |              
|                                  |                                                   |                                         |   | (in thousands)
|Assets                            |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Current assets                                    |                                         | $ | 3,100          |           |              | $ | 59,730        |           |               | $ | 223,345        |         |  | $ | (2,695   | )          |   | $ | 283,480   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Property, plant and equipment  net               |                                         |   |               |           |              |   | 849,978       |           |               |   | 330,483        |         |  |   |         |            |   |   | 1,180,461 |          
|                                 
|                                 
|                                 
|                                 
|                                  | Equity investments                                |                                         |   | 669,370        |           |              |   | 309,080       |           |               |   | 222,815        |         |  |   | (909,041 | )          |   |   | 292,224   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Intercompany notes receivable                     |                                         |   | 700,564        |           |              |   | 11,269        |           |               |   | 7,404          |         |  |   | (719,237 | )          |   |   |          |          
|                                 
|                                 
|                                 
|                                 
|                                  | Other assets                                      |                                         |   | 3,853          |           |              |   | 244,448       |           |               |   | 65,386         |         |  |   | (4,504   | )          |   |   | 309,183   |          
|                                  |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |           |          
|                                  |                                                   | Total assets                            |   | $              | 1,376,887 |              |   | $             | 1,474,505 |               |   | $              | 849,433 |  |   | $        | (1,635,477 | ) |   | $         | 2,065,348 | 
|                                  |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |           |          
|Liabilities and partners capital |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Current liabilities                               |                                         | $ | 367,094        |           |              | $ | 361,547       |           |               | $ | 310,476        |         |  | $ | (370,275 | )          |   | $ | 668,842   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Long-term debt                                    |                                         |   | 340,658        |           |              |   | 389,814       |           |               |   |               |         |  |   |         |            |   |   | 730,472   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Intercompany notes payable                        |                                         |   |               |           |              |   | 45,410        |           |               |   | 294,801        |         |  |   | (340,211 | )          |   |   |          |          
|                                 
|                                 
|                                 
|                                 
|                                  | Other long term liabilities and minority interest |                                         |   |               |           |              |   | 8,364         |           |               |   | 231            |         |  |   | 8,628    |            |   |   | 17,223    |          
|                                 
|                                 
|                                 
|                                 
|                                  | Redeemable Class B Units held by related party    |                                         |   | 105,630        |           |              |   |              |           |               |   |               |         |  |   |         |            |   |   | 105,630   |          
|                                 
|                                 
|                                 
|                                 
|                                  | Total partners capital                           |                                         |   | 563,505        |           |              |   | 669,370       |           |               |   | 243,925        |         |  |   | (933,619 | )          |   |   | 543,181   |          
|                                  |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |           |          
|                                  |                                                   | Total liabilities and partners capital |   | $              | 1,376,887 |              |   | $             | 1,474,505 |               |   | $              | 849,433 |  |   | $        | (1,635,477 | ) |   | $         | 2,065,348 | 
|                                  |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |   |           |          

19



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##### Table of Contents



TEPPCO PARTNERS, L.P.

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

|                                  |                  |                |                |              |           |              |               |             |               |              |                |        |  |   |         |         |   |   |         |        | 
|--------------------------------- | ---------------- | -------------- | -------------- | ------------ | --------- | ------------ | ------------- | ----------- | ------------- | ------------ | -------------- | ------ |  | - | ------- | ------- | - | - | ------- | ------ | 
|                                  |                  |                |                |              |           |              |               |             |               |              |                |        |  |   |         |         |   |   | TEPPCO 
|                                  |                  |                | TEPPCO         |              | Guarantor |              | Non-Guarantor |             | Consolidating |              | Partners, L.P.
|Three Months Ended March 31, 2002 |                  | Partners, L.P. |                | Subsidiaries |           | Subsidiaries |               | Adjustments |               | Consolidated
|                                  |                  |                |                |              |           |              |               |             |               |             
|                                  |                  |                | (in thousands)
|Operating revenues                |                  | $              |               |              |           | $            | 69,788        |             |               | $            | 562,056        |        |  | $ | (707    | )       |   | $ | 631,137 |       
|                                 
|                                 
|                                 
|                                 
|Costs and expenses                |                  |                |               |              |           |              | 43,024        |             |               |              | 551,472        |        |  |   | (707    | )       |   |   | 593,789 |       
|                                  |                  |                |                |              |           |              |               |             |               |              |                |        |  |   |         |         |   |   |         |       
|                                  | Operating income |                |                |             |           |              |               | 26,764      |               |              |                | 10,584 |  |   |         |        |   |   |         | 37,348 | 
|                                  |                  |                |                |              |           |              |               |             |               |              |                |        |  |   |         |         |   |   |         |       
|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           |             |               |              | 433            |        |  |   | (11,433 | )       |   |   | 566     |       
|                                  |                  |                |                |              |           |              |               |             |               |              |                |        |  |   |         |         |   |   |         |       
|                                  | Net income       |                | $              | 26,808       |           |              | $             | 27,355      |               |              | $              | 8,357  |  |   | $       | (35,712 | ) |   | $       | 26,808 | 
|                                  |                  |                |                |              |           |              |               |             |               |              |                |        |  |   |         |         |   |   |         |       

|                                  |                                 |                |                |              |           |              |               |             |               |              |                |       |  |   |         |         |   |   |         |        | 
|--------------------------------- | ------------------------------- | -------------- | -------------- | ------------ | --------- | ------------ | ------------- | ----------- | ------------- | ------------ | -------------- | ----- |  | - | ------- | ------- | - | - | ------- | ------ | 
|                                  |                                 |                |                |              |           |              |               |             |               |              |                |       |  |   |         |         |   |   | TEPPCO 
|                                  |                                 |                | TEPPCO         |              | Guarantor |              | Non-Guarantor |             | Consolidating |              | Partners, L.P.
|Three Months Ended March 31, 2001 |                                 | Partners, L.P. |                | Subsidiaries |           | Subsidiaries |               | Adjustments |               | Consolidated
|                                  |                                 |                |                |              |           |              |               |             |               |             
|                                  |                                 |                | (in thousands)
|Operating revenues                |                                 | $              |               |              |           | $            | 62,301        |             |               | $            | 722,934        |       |  | $ |        |         |   | $ | 785,235 |       
|                                 
|                                 
|                                 
|                                 
|Costs and expenses                |                                 |                |               |              |           |              | 34,020        |             |               |              | 714,909        |       |  |   |        |         |   |   | 748,929 |       
|                                  |                                 |                |                |              |           |              |               |             |               |              |                |       |  |   |         |         |   |   |         |       
|                                  | Operating income                |                |                |             |           |              |               | 28,281      |               |              |                | 8,025 |  |   |         |        |   |   |         | 36,306 | 
|                                  |                                 |                |                |              |           |              |               |             |               |              |                |       |  |   |         |         |   |   |         |       
|Interest expense  net            |                                 |                | (9,372         | )            |           |              | (7,624        | )           |               |              | (8,325         | )     |  |   | 9,372   |         |   |   | (15,949 | )     
|                                 
|                                 
|                                 
|                                 
|Equity earnings                   |                                 |                | 25,735         |              |           |              | 5,048         |             |               |              | 5,206          |       |  |   | (30,783 | )       |   |   | 5,206   |       
|                                 
|                                 
|                                 
|                                 
|Other income  net                |                                 |                | 9,372          |              |           |              | 292           |             |               |              | 142            |       |  |   | (9,372  | )       |   |   | 434     |       
|                                  |                                 |                |                |              |           |              |               |             |               |              |                |       |  |   |         |         |   |   |         |       
|                                  | Income before minority interest |                |                | 25,735       |           |              |               | 25,997      |               |              |                | 5,048 |  |   |         | (30,783 | ) |   |         | 25,997 | 
|                                 
|                                 
|                                 
|                                 
|Minority interest                 |                                 |                |               |              |           |              |              |             |               |              |               |       |  |   | (262    | )       |   |   | (262    | )     
|                                  |                                 |                |                |              |           |              |               |             |               |              |                |       |  |   |         |         |   |   |         |       
|                                  | Net income                      |                | $              | 25,735       |           |              | $             | 25,997      |               |              | $              | 5,048 |  |   | $       | (31,045 | ) |   | $       | 25,735 | 
|                                  |                                 |                |                |              |           |              |               |             |               |              |                |       |  |   |         |         |   |   |         |       

20



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##### Table of Contents



TEPPCO PARTNERS, L.P.

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

|                                                     |            |                                                                                             |                                             |              |                |              |           |             |               |              |               |       |                |         |          |         |   |         |          |        |        |         |  
|---------------------------------------------------- | ---------- | ------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------ | -------------- | ------------ | --------- | ----------- | ------------- | ------------ | ------------- | ----- | -------------- | ------- | -------- | ------- | - | ------- | -------- | ------ | ------ | ------- | -
|                                                     |            |                                                                                             |                                             |              |                |              |           |             |               |              |               |       |                |         |          |         |   |         |          |        | TEPPCO
|                                                     |            |                                                                                             |                                             |              | TEPPCO         |              | Guarantor |             | Non-Guarantor |              | Consolidating |       | Partners, L.P.
|Three Months Ended March 31, 2002                    |            | 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   |       
|                                                     |            |                                                                                             |                                             |              |                |              |           |             |               |              |               |       |                |         |          |         |   |         |          |       

|                                                    |            |                                                                                             |                                             |              |                |              |           |             |               |              |               |       |                |         |         |         |   |        |         |        |        |         |  
|--------------------------------------------------- | ---------- | ------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------ | -------------- | ------------ | --------- | ----------- | ------------- | ------------ | ------------- | ----- | -------------- | ------- | ------- | ------- | - | ------ | ------- | ------ | ------ | ------- | -
|                                                    |            |                                                                                             |                                             |              |                |              |           |             |               |              |               |       |                |         |         |         |   |        |         |        | TEPPCO
|                                                    |            |                                                                                             |                                             |              | TEPPCO         |              | Guarantor |             | Non-Guarantor |              | Consolidating |       | Partners, L.P.
|Three Months Ended March 31, 2001                   |            | Partners, L.P.                                                                              |                                             | Subsidiaries |                | Subsidiaries |           | Adjustments |               | Consolidated
|                                                    |            |                                                                                             |                                             |              |                |              |           |             |               |             
|                                                    |            |                                                                                             |                                             |              | (in thousands)
|Cash flows from operating activities                |            |                                                                                             |                                             |              |                |              |           |             |               |              |               |       |                |         |         |         |   |        |         |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Net income |                                                                                             | $                                           | 25,735       |                |              | $         | 25,997      |               |              | $             | 5,048 |                |         | $       | (31,045 | ) |        | $       | 25,735 |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |            | Adjustments to reconcile net income to
net cash provided by (used in)
operating activities: |                                             |              |                |              |           |             |               |              |               |       |                |         |         |         |   |        |         |        |        |        
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |            |                                                                                             | Depreciation and amortization               |              |                |             |           |             |               | 6,673        |               |       |                | 3,234   |         |         |   |       |         |        |        | 9,907   |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |            |                                                                                             | Equity earnings, net of distributions       |              |                | (1,953       | )         |             |               | 4,515        |               |       |                | 6,275   |         |         |   | (2,537 | )       |        |        | 6,300   |  
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |            |                                                                                             | Changes in assets and liabilities
and other |              |                | (1           | )         |             |               | (4,019       | )             |       |                | (16,093 | )       |         |   | 796    |         |        |        | (19,317 | )
|                                                    |            |                                                                                             |                                             |              |                |              |           |             |               |              |               |       |                |         |         |         |   |        |         |       
|Net cash provided by (used in) operating
activities |            |                                                                                             | 23,781                                      |              |                |              | 33,166    |             |               |              | (1,536        | )     |                |         | (32,786 | )       |   |        | 22,625  |       
|                                                    |            |                                                                                             |                                             |              |                |              |           |             |               |              |               |       |                |         |         |         |   |        |         |       
|Cash flows from investing activities                |            |                                                                                             | (22,139                                     | )            |                |              | (10,132   | )           |               |              | (21,455       | )     |                |         | 22,139  |         |   |        | (31,587 | )     
|                                                   
|                                                   
|                                                   
|                                                   
|Cash flows from financing activities                |            |                                                                                             | (1,642                                      | )            |                |              | (32,200   | )           |               |              | 21,873        |       |                |         | 10,647  |         |   |        | (1,322  | )     
|                                                    |            |                                                                                             |                                             |              |                |              |           |             |               |              |               |       |                |         |         |         |   |        |         |       
|Net decrease in cash and cash equivalents           |            |                                                                                             |                                            |              |                |              | (9,166    | )           |               |              | (1,118        | )     |                |         |        |         |   |        | (10,284 | )     
|                                                   
|                                                   
|                                                   
|                                                   
|Cash and cash equivalents at beginning of
period    |            |                                                                                             |                                            |              |                |              | 9,166     |             |               |              | 17,930        |       |                |         |        |         |   |        | 27,096  |       
|                                                    |            |                                                                                             |                                             |              |                |              |           |             |               |              |               |       |                |         |         |         |   |        |         |       
|Cash and cash equivalents at end of period          |            | $                                                                                           |                                            |              |                | $            |          |             |               | $            | 16,812        |       |                | $       |        |         |   | $      | 16,812  |       
|                                                    |            |                                                                                             |                                             |              |                |              |           |             |               |              |               |       |                |         |         |         |   |        |         |       

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##### Table of Contents






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. These
Consolidated Financial Statements should be read in conjunction with the
financial statements and related notes, together with our discussion and
analysis of financial position and results of operations included in our Annual
Report on Form 10-K for the year ended December 31, 2001.

We operate and report in three business segments:



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

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

Effective January 1, 2002, we realigned our three business segments. We
shifted the fractionation of NGLs, which were previously reflected as part of
the Downstream Segment, to the Midstream Segment. The operation of NGL
pipelines, which was previously reflected as part of the Upstream Segment, was
also shifted to the Midstream Segment. The assets we acquired as part of the
Chaparral acquisition are reflected as part of the Midstream Segment. We have
adjusted our quarter-to-quarter comparisons to conform to the current
presentation.

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

The Upstream Segment revenues are earned from gathering, storage,
transportation and marketing 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.

The Midstream Segment revenues are earned from fractionation of NGLs in
Colorado, transportation of NGLs and gathering of natural gas. The Midstream
Segment includes the operations from the acquisition of Jonah on September 30,
2001, from Alberta Energy Company for $359.8 million. We paid an additional
$7.3 million on February 4, 2002, for final purchase adjustments related
primarily to construction projects in progress at the time of closing. The
results of operations of the acquisition are included in our consolidated
financial statements beginning in the fourth quarter of 2001. The Jonah assets
are managed and operated by DEFS under a contract arrangement.

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##### Table of Contents



On March 1, 2002, we acquired the Chaparral NGL system from Diamond-Koch
II, L.P. and Diamond-Koch III, L.P. for approximately $132 million. The
Chaparral system is an 800-mile pipeline that extends from West Texas and New
Mexico to Mont Belvieu. The pipeline delivers NGLs to fractionators and to
existing Partnership storage in Mont Belvieu. The approximately 170-mile
Quanah Pipeline is an NGL gathering system located in West Texas. The Quanah
Pipeline begins in Sutton County, Texas and connects to the Chaparral Pipeline
near Midland. The pipelines are connected to 27 gas plants in West Texas and
have approximately 28,000 horsepower of pumping capacity at 14 stations. These
systems are managed and operated by DEFS under a contract arrangement. These
assets are included in the Midstream Segment.

Results of Operations

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

|                          |                           |                          |                                |         |                              |        |      |         |         |        | 
|------------------------- | ------------------------- | ------------------------ | ------------------------------ | ------- | ---------------------------- | ------ | ---- | ------- | ------- | ------ | 
|                          |                           |                          |                                |         | Three Months Ended March 31,
|                          |                           |                          |                                |         |                             
|                          |                           |                          |                                |         | 2002                         |        | 2001
|                          |                           |                          |                                |         |                              |        |     
|Operating revenues:       |                           |                          |                                |         |                              |        |      |        
|                         
|                         
|                         
|                         
|                          | Downstream Segment        |                          | $                              | 59,586  |                              |        | $    | 62,301  |        
|                         
|                         
|                         
|                         
|                          | Upstream Segment          |                          |                                | 553,888 |                              |        |      | 716,329 |        
|                         
|                         
|                         
|                         
|                          | Midstream Segment         |                          |                                | 18,370  |                              |        |      | 6,605   |        
|                         
|                         
|                         
|                         
|                          | Intercompany eliminations |                          |                                | (707    | )                            |        |      |        |        
|                          |                           |                          |                                |         |                              |        |      |        
|                          |                           | Total operating revenues |                                | $       | 631,137                      |        |      | $       | 785,235 |       
|                          |                           |                          |                                |         |                              |        |      |        
|Operating income:         |                           |                          |                                |         |                              |        |      |        
|                         
|                         
|                         
|                         
|                          | Downstream Segment        |                          | $                              | 23,647  |                              |        | $    | 28,280  |        
|                         
|                         
|                         
|                         
|                          | Upstream Segment          |                          |                                | 5,969   |                              |        |      | 3,865   |        
|                         
|                         
|                         
|                         
|                          | Midstream Segment         |                          |                                | 7,732   |                              |        |      | 4,161   |        
|                          |                           |                          |                                |         |                              |        |      |        
|                          |                           | Total operating income   |                                | $       | 37,348                       |        |      | $       | 36,306  |       
|                          |                           |                          |                                |         |                              |        |      |        
|Earnings before interest: |                           |                          |                                |         |                              |        |      |        
|                         
|                         
|                         
|                         
|                          | Downstream Segment        |                          | $                              | 22,975  |                              |        | $    | 28,573  |        
|                         
|                         
|                         
|                         
|                          | Upstream Segment          |                          |                                | 10,760  |                              |        |      | 9,212   |        
|                         
|                         
|                         
|                         
|                          | Midstream Segment         |                          |                                | 7,751   |                              |        |      | 4,161   |        
|                          |                           |                          |                                |         |                              |        |      |        
|                          |                           |                          | Total earnings before interest |         | $                            | 41,486 |      |         | $       | 41,946 | 
|                          |                           |                          |                                |         |                              |        |      |        

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

23



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##### Table of Contents



Downstream Segment

The following table presents volume and average rate information for the
three months ended March 31, 2002 and 2001:

|                          |                         |                                  |   |                                           |        |            |   |            |        |  |  |     |    |   
|------------------------- | ----------------------- | -------------------------------- | - | ----------------------------------------- | ------ | ---------- | - | ---------- | ------ |  |  | --- | -- | --
|                          |                         |                                  |   | Three Months Ended                        |        |           
|                          |                         |                                  |   | March 31,                                 |        | Percentage
|                          |                         |                                  |   |                                           |        | Increase  
|                          |                         |                                  |   | 2002                                      |        | 2001       |   | (Decrease)
|                          |                         |                                  |   |                                           |        |            |   |           
|                          |                         |                                  |   | (in thousands, except tariff information)
|Volumes Delivered         |                         |                                  |   |                                           |        |            |   |            |        |  |  |    
|                         
|                         
|                         
|                         
|                          | Refined products        |                                  |   | 25,765                                    |        |            |   | 27,188     |        |  |  | (5  | %)
|                         
|                         
|                         
|                         
|                          | LPGs                    |                                  |   | 12,035                                    |        |            |   | 11,651     |        |  |  | 3   | % 
|                         
|                         
|                         
|                         
|                          | Mont Belvieu operations |                                  |   | 9,671                                     |        |            |   | 6,265      |        |  |  | 54  | % 
|                          |                         |                                  |   |                                           |        |            |   |            |        |  |  |    
|                          |                         | Total                            |   |                                           | 47,471 |            |   |            | 45,104 |  |  |     | 5  | % 
|                          |                         |                                  |   |                                           |        |            |   |            |        |  |  |    
|Average Tariff per Barrel |                         |                                  |   |                                           |        |            |   |            |        |  |  |    
|                         
|                         
|                         
|                         
|                          | Refined products        |                                  | $ | 0.98                                      |        |            | $ | 0.96       |        |  |  | 2   | % 
|                         
|                         
|                         
|                         
|                          | LPGs                    |                                  |   | 1.94                                      |        |            |   | 2.15       |        |  |  | (10 | %)
|                         
|                         
|                         
|                         
|                          | Mont Belvieu operations |                                  |   | 0.15                                      |        |            |   | 0.17       |        |  |  | (12 | %)
|                         
|                         
|                         
|                         
|                          |                         | Average system tariff per barrel |   | $                                         | 1.05   |            |   | $          | 1.16   |  |  |     | (9 | %)
|                          |                         |                                  |   |                                           |        |            |   |            |        |  |  |    

Our Downstream Segment reported earnings before interest of $23.0 million
for the three months ended March 31, 2002, compared to earnings before interest
of $28.6 million for the three months ended March 31, 2001. Earnings before
interest decreased $5.6 million primarily due to a decrease of $2.7 million in
operating revenues, an increase of $1.9 million in costs and expenses and
losses of $0.8 million from equity investments. We discuss the factors
influencing these variances below.

Revenues from refined products transportation decreased $1.0 million for
the three months ended March 31, 2002, compared with the three months ended
March 31, 2001, due to a 5% decrease in the refined products volumes delivered.
MTBE deliveries decreased 0.6 million barrels as a result of the expiration of
contract deliveries to our marine terminal near Beaumont, Texas, effective
April 2001. As a result of the contract expiration, we no longer transport
MTBE through our Products pipeline system. Jet fuel volumes decreased 0.8
million barrels, or 11%, due to reduced air travel demand in the Midwest market
areas. The refined products average rate per barrel increased 2% from the
prior-year period primarily due to the decreased short-haul MTBE volumes
delivered and an increase in market-based tariff rates in July 2001.

Revenues from LPGs transportation decreased $1.6 million for the three
months ended March 31, 2002, compared with the three months ended March 31,
2001, primarily due to decreased deliveries of propane in the upper Midwest and
Northeast market areas attributable to warmer than normal weather. These
decreases were partially offset by increased butane deliveries in the Midwest
that resulted from favorable price differentials of Gulf Coast butane compared
with competing Midwest supply sources. The LPGs average rate per barrel
decreased 10% from the prior-year period as a result of a decreased percentage
of long-haul deliveries during the three months ended March 31, 2002.

Revenues generated from Mont Belvieu operations increased $1.6 million
during the three months ended March 31, 2002, compared with the three months
ended March 31, 2001, as a result of increased storage revenue and brine
service revenue. Mont Belvieu shuttle volumes delivered increased 54% during
the three months ended March 31, 2002, compared with the three months ended
March 31, 2001, due to increased petrochemical demand. The Mont Belvieu
average rate per barrel decreased during the three months ended March 31, 2002,
as a result of increased contract shuttle deliveries, which generally carry
lower rates.

Other operating revenues decreased $1.6 million during the three months
ended March 31, 2002, compared with the three months ended March 31, 2001,
primarily due to lower propane deliveries at our Providence, Rhode Island,
import facility, lower refined product rental charges, and increased losses we
incurred as a result of

24



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##### Table of Contents



exchanging products at different geographic points of
delivery to position product in the Midwest market area. These decreases were
partially offset by increased refined products and LPGs loading fees.

Costs and expenses increased $1.9 million for the three months ended March
31, 2002, compared with the three months ended March 31, 2001. The increase
was made up of a $2.5 million increase in operating, general and administrative
expenses, a $0.2 million increase in depreciation and amortization expense, and
a $0.1 million increase in taxes  other than income taxes. These increases
were partially offset by a $0.9 million decrease in operating fuel and power
expense. Operating, general and administrative expenses increased primarily
due to higher environmental remediation expenses, increased consulting and
contract services and increased labor costs. Depreciation expense increased
from the prior-year period because of assets placed in service during 2001.
Operating fuel and power expense decreased as a result of decreased mainline
throughput. Taxes  other than income taxes increased as a result of a higher
property base.

Net loss from equity investments totaled $0.8 million during the three
months ended March 31, 2002, due to pre-operating expenses of Centennial
Pipeline, LLC (Centennial). Centennial commenced full operations in early
April 2002.

Upstream Segment

We calculate the margin of the Upstream Segment as revenues generated from
the sale of crude oil and lubrication oil, and transportation of crude oil,
less the costs of purchases of crude oil and lubrication oil. Margin is a more
meaningful measure of financial performance than operating revenues and
operating expenses due to the significant fluctuations in revenues and expenses
caused by variations in the level of marketing activity and prices for products
marketed. Margin and volume information for the three months ended March 31,
2002 and 2001 is presented below (in thousands, except per barrel and per
gallon amounts):

|                                       |                          |              |       |                    |        |            |       |            |        |  |    |     |    |  
|-------------------------------------- | ------------------------ | ------------ | ----- | ------------------ | ------ | ---------- | ----- | ---------- | ------ |  | -- | --- | -- | -
|                                       |                          |              |       | Three Months Ended |        |           
|                                       |                          |              |       | March 31,          |        | Percentage
|                                       |                          |              |       |                    |        | Increase  
|                                       |                          |              |       | 2002               |        | 2001       |       | (Decrease)
|                                       |                          |              |       |                    |        |            |       |           
|Margins:                               |                          |              |       |                    |        |            |       |            |        |  |    |    
|                                      
|                                      
|                                      
|                                      
|                                       | Crude oil transportation |              | $     | 9,188              |        |            | $     | 8,125      |        |  |    | 13  | % 
|                                      
|                                      
|                                      
|                                      
|                                       | Crude oil marketing      |              |       | 4,764              |        |            |       | 3,551      |        |  |    | 34  | % 
|                                      
|                                      
|                                      
|                                      
|                                       | Crude oil terminaling    |              |       | 2,331              |        |            |       | 2,128      |        |  |    | 10  | % 
|                                      
|                                      
|                                      
|                                      
|                                       | Lubrication oil sales    |              |       | 1,135              |        |            |       | 1,134      |        |  |    |    |   
|                                       |                          |              |       |                    |        |            |       |            |        |  |    |     |   
|                                       |                          | Total margin |       | $                  | 17,418 |            |       | $          | 14,938 |  |    |     | 17 | %
|                                       |                          |              |       |                    |        |            |       |            |        |  |    |     |   
|Total barrels:                         |                          |              |       |                    |        |            |       |            |        |  |    |    
|                                      
|                                      
|                                      
|                                      
|                                       | Crude oil transportation |              |       | 21,116             |        |            |       | 15,745     |        |  |    | 34  | % 
|                                      
|                                      
|                                      
|                                      
|                                       | Crude oil marketing      |              |       | 30,352             |        |            |       | 29,661     |        |  |    | 2   | % 
|                                      
|                                      
|                                      
|                                      
|                                       | Crude oil terminaling    |              |       | 29,275             |        |            |       | 24,662     |        |  |    | 19  | % 
|                                      
|                                      
|                                      
|                                      
|Lubrication oil volume (total gallons) |                          |              | 2,194 |                    |        |            | 2,255 |            |        |  | (3 | %) 
|                                      
|                                      
|                                      
|                                      
|Margin per barrel:                     |                          |              |       |                    |        |            |       |            |        |  |    |    
|                                      
|                                      
|                                      
|                                      
|                                       | Crude oil transportation |              | $     | 0.435              |        |            | $     | 0.516      |        |  |    | (16 | %)
|                                      
|                                      
|                                      
|                                      
|                                       | Crude oil marketing      |              |       | 0.157              |        |            |       | 0.120      |        |  |    | 31  | % 
|                                      
|                                      
|                                      
|                                      
|                                       | Crude oil terminaling    |              |       | 0.080              |        |            |       | 0.086      |        |  |    | (7  | %)
|                                      
|                                      
|                                      
|                                      
|Lubrication oil margin (per gallon)    |                          |              | 0.517 |                    |        |            | 0.503 |            |        |  | 3  | %  

25



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Our Upstream Segment reported earnings before interest of $10.8 million
for the three months ended March 31, 2002, compared with earnings before
interest of $9.2 million for the three months ended March 31, 2001. Earnings
before interest increased $1.6 million primarily due to a $2.5 million increase
in margin and a $0.3 million increase in other income  net. These increases
were partially offset by a $0.8 million decrease in equity earnings of
Seaway and a $0.1 million increase in costs and expenses (excluding purchases
of crude oil and lubrication oil). We discuss factors influencing these
variances below.

Our margin increased $2.5 million during the three months ended March 31,
2002, compared with the three months ended March 31, 2001. Crude oil
transportation margin increased $1.1 million primarily due to volumes
transported on the pipeline assets acquired from Valero Energy Corp. (formerly
Ultramar Diamond Shamrock Corporation) (UDS), in March 2001. Crude oil
marketing margin increased $1.2 million primarily due to favorable market
conditions, renegotiated contracts and lower trucking expenses. Crude oil
terminaling margin increased $0.2 million as a result of higher pumpover
volumes at Midland, Texas, and Cushing, Oklahoma.

Other operating revenue of the Upstream Segment decreased $0.2 million for
the three months ended March 31, 2002, compared with the three months ended
March 31, 2001, due to lower revenue from documentation and other services to
support customers trading activity at Midland, Texas, and Cushing, Oklahoma.

Costs and expenses, excluding expenses associated with purchases of crude
oil and lubrication oil, increased $0.1 million during the three months ended
March 31, 2002, compared with the three months ended March 31, 2001. The
increase was comprised of a $0.3 million increase in operating fuel and power
expense, a $0.2 million increase in depreciation and amortization expense, and
a $0.1 million increase in taxes  other than income taxes, primarily
attributable to assets acquired from UDS. These increases were partially
offset by a $0.5 million decrease in operating, general and administrative
expenses primarily due to decreased labor related costs and decreased general
and administrative supplies and services expense.

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

Midstream Segment

The following table presents volume and average rate information for the
three months ended March 31, 2002 and 2001:

|                         |                         |  |                    |        |            |  |            |       |  |  |  |     |   
|------------------------ | ----------------------- |  | ------------------ | ------ | ---------- |  | ---------- | ----- |  |  |  | --- | --
|                         |                         |  | Three Months Ended |        |           
|                         |                         |  | March 31,          |        | Percentage
|                         |                         |  |                    |        | Increase  
|                         |                         |  | 2002               |        | 2001       |  | (Decrease)
|                         |                         |  |                    |        |            |  |           
|Gathering  Natural Gas: |                         |  |                    |        |            |  |            |       |  |  |  |    
|                        
|                        
|                        
|                        
|                         | MMcf                    |  |                    | 50,171 |            |  |            |      |  |  |  |    |   
|                        
|                        
|                        
|                        
|                         | MMBtu                   |  |                    | 55,728 |            |  |            |      |  |  |  |    |   
|                        
|                        
|                        
|                        
|                         | Average fee per MMBtu   |  | $                  | 0.17   |            |  |            |      |  |  |  |    |   
|                        
|                        
|                        
|                        
|Transportation  NGLs:   |                         |  |                    |        |            |  |            |       |  |  |  |    
|                        
|                        
|                        
|                        
|                         | Thousand barrels        |  |                    | 4,606  |            |  |            | 4,762 |  |  |  | (3  | %)
|                        
|                        
|                        
|                        
|                         | Average rate per barrel |  | $                  | 0.554  |            |  | $          | 1.024 |  |  |  | (46 | %)
|                        
|                        
|                        
|                        
|Sales  Condensate:      |                         |  |                    |        |            |  |            |       |  |  |  |    
|                        
|                        
|                        
|                        
|                         | Barrels                 |  |                    | 32,352 |            |  |            |      |  |  |  |    |   
|                        
|                        
|                        
|                        
|                         | $/barrel                |  | $                  | 25.38  |            |  |            |      |  |  |  |    |   

26



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Our Midstream Segments earnings before interest totaled $7.8 million for
the three months ended March 31, 2002, compared with earnings before interest
of $4.2 million for the three months ended March 31, 2001. The $3.6 million
increase in earnings before interest was due to an $11.8 million increase in
operating revenues, partially offset by an $8.2 million increase in costs and
expenses. We discuss factors influencing these variances below.

Operating revenues increased $11.8 million during the three months ended
March 31, 2002, compared with the three months ended March 31, 2001. Operating
revenues for the three months ended March 31, 2002 for Jonah were $10.2
million. Natural gas gathering revenues totaled $9.5 million from volumes
delivered of 50.2 billion cubic feet. Other revenues increased $0.7 million
due to sales of gas condensate from the Jonah system, which was acquired on
September 30, 2001. NGL transportation revenues increased $1.5 million
primarily due to the acquisition of Chaparral, partially offset by lower
revenues on a take-or-pay contract on the Dean system that was in effect until
the bankruptcy of Enron Corp. in December 2001. The decrease in the NGL
transportation average rate per barrel resulted from the cancellation of the
Enron Corp. take-or-pay contract.

Costs and expenses increased $8.2 million during the three months ended
March 31, 2002, compared with the three months ended March 31, 2001. The
increase was comprised of a $5.8 million increase in depreciation and
amortization expense, a $1.5 million increase in operating, general and
administrative expense, a $0.5 million increase in operating fuel and power
costs and a $0.4 million increase in taxes  other than income. These
increases related primarily to the Jonah and Chaparral assets acquired on
September 30, 2001, and March 1, 2002, respectively.

Interest Expense and Capitalized Interest

Interest expense increased $0.5 million during the three months ended
March 31, 2002, compared with the three months ended March 31, 2001, primarily
due to higher outstanding debt, partially offset by lower LIBOR interest rates.

Capitalized interest increased $1.8 million during the three months ended
March 31, 2002, compared with the three months ended March 31, 2001, due to
increased balances on construction work-in-progress and the additional
investment in Centennial.

Financial Condition and Liquidity

Net cash from operations totaled $23.6 million for the three months ended
March 31, 2002. This cash was made up of $42.8 million of income before
charges for depreciation and amortization, partially offset by $19.2 million of
cash used for working capital changes. This compares with net cash from
operations of $22.6 million for the corresponding period in 2001, comprised of
$35.6 million of income before charges for depreciation and amortization,
partially offset by $13.0 million of cash used for working capital changes. Net cash from operations for the three months ended March 31, 2002 and
2001, included interest payments of $16.8 million and $26.7 million,
respectively.

Cash flows used in investing activities during the three months ended
March 31, 2002, was 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 interest in the Centennial joint
venture, and $132.0 million for the purchase of Chaparral on March 1, 2002.
Cash flows used in investing activities during the three months ended March 31,
2001, was primarily comprised of $20.0 million for the purchase of assets from
UDS on March 1, 2001, $10.9 million of capital expenditures, and $2.9 million
of cash contributions for our interest in the Centennial joint venture. These
uses of cash were partially offset by $1.3 million of cash received from the
sale of vehicles and $1.0 million received on matured cash investments.

27



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Centennial entered into credit facilities totaling $150 million. The
proceeds were used to fund construction and conversion costs of its pipeline
system. As of March 31, 2002, Centennial had borrowed $140 million under its
credit facility. TE Products has guaranteed one-third of the debt of
Centennial up to a maximum amount of $50 million.

Credit Facilities and Interest Rate Swap Agreements

On July 14, 2000, we entered into a $475 million revolving credit facility
(Three Year Facility) to finance the acquisition of the ARCO assets and to
refinance existing bank credit facilities. In April 2001, the Three Year
Facility was amended to provide for revolving borrowings of up to $500 million
including the issuance of letters of credit of up to $20 million. The term of
the revised Three Year Facility was extended to April 6, 2004. The interest
rate is based on our option of either the lenders base rate plus a spread, or
LIBOR plus a spread in effect at the time of the borrowings. The credit
agreement for the Three Year Facility contains restrictive financial covenants
that require us to maintain a minimum level of partners capital as well as
maximum debt-to-EBITDA (earnings before interest expense, income tax expense
and depreciation and amortization expense) and minimum fixed charge coverage
ratios. On November 13, 2001, certain lenders under the agreement elected to
withdraw from the facility, and the available borrowing capacity was reduced to
$411 million. On February 20, 2002, we repaid $115.7 million of the then
outstanding balance of the Three Year Facility with proceeds from the issuance
of our 7.625% Senior Notes. On March 1, 2002, we borrowed $132 million under
the Three Year Facility to finance the acquisition of Chaparral. On March 22,
2002, we repaid a portion of the Three Year Facility with proceeds we received
from the issuance of additional Limited Partner Units. On March 27, 2002, the
Three Year Facility was amended to increase the borrowing capacity to $500
million. At March 31, 2002, $332.0 million was outstanding under the Three
Year Facility at a weighted average interest rate of 2.9%. As of March 31,
2002, we were in compliance with the covenants contained in this credit
agreement.

In April 2001, we entered into a 364-day, $200 million revolving credit
agreement (Short-term Revolver). The interest rate is based on our option of
either the lenders base rate plus a spread, or LIBOR plus a spread in effect
at the time of the borrowings. The credit agreement contains restrictive
financial covenants that require us to maintain a minimum level of partners
capital as well as maximum debt-to-EBITDA and minimum fixed charge coverage
ratios. On March 27, 2002, the Short-term Revolver was extended for an
additional period of 364 days, commencing on the current termination date in
April 2002. At March 31, 2002, no amounts were outstanding under the
Short-term Revolver.

On September 28, 2001, we entered into a $400 million credit facility with
SunTrust Bank (Bridge Facility). We borrowed $360 million under the Bridge
Facility to acquire the Jonah assets (see Note 4. Acquisitions). The Bridge
Facility was payable in June 2002. During the fourth quarter of 2001, we
repaid $160 million of the outstanding principal from proceeds received from
the issuance of Limited Partner Units in November 2001. On February 5, 2002,
we drew down an additional $15 million under the Bridge Facility. On February
20, 2002, we repaid the outstanding balance of the Bridge Facility of $215
million, with proceeds from the issuance of the 7.625% Senior Notes and
canceled the facility.

On February 20, 2002, we received $494.6 million in net proceeds from the
issuance of $500 million principal amount of 7.625% Senior Notes due 2012. We
used the proceeds from the offering to reduce a portion of the outstanding
balances of the credit facilities, described above, including those issued in
connection with the acquisition of Jonah. The Senior Notes may be redeemed at
any time at our option with the payment of accrued interest and a make-whole
premium determined by discounting remaining interest and principal payments
using a discount rate equal to the rate of the United States Treasury
securities of comparable remaining maturity plus 35 basis points. As of March
31, 2002, we were in compliance with the covenants of these Senior Notes.

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

28



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##### Table of Contents



The following table summarizes our credit facilities as of March 31, 2002
(in millions):

|                    |  |                      |       |           |  |           |       |  |  |               |  | 
|------------------- |  | -------------------- | ----- | --------- |  | --------- | ----- |  |  | ------------- |  | 
|                    |  | As of March 31, 2002
|                    |  |                     
|                    |  |                      |       |           |  | Available |       |  |  |              
|                    |  | Outstanding          |       | Borrowing |  | Maturity 
|Description:        |  | Principal            |       | Capacity  |  | Date     
|                    |  |                      |       |           |  |          
|Short-term Revolver |  | $                    |      |           |  | $         | 200.0 |  |  | April 2003   
|                   
|                   
|                   
|                   
|Three Year Facility |  |                      | 332.0 |           |  |           | 168.0 |  |  | April 2004   
|                   
|                   
|                   
|                   
|6.45% Senior Notes  |  |                      | 180.0 |           |  |           |      |  |  | January 2008 
|                   
|                   
|                   
|                   
|7.51% Senior Notes  |  |                      | 210.0 |           |  |           |      |  |  | January 2028 
|                   
|                   
|                   
|                   
|7.625% Senior Notes |  |                      | 500.0 |           |  |           |      |  |  | February 2012

Distributions and Issuance of Additional Limited Partner Units

We paid cash distributions of $33.5 million ($0.575 per Unit) and $24.0
million ($0.525 per Unit) for each of the three months ended March 31, 2002 and
2001, respectively. Additionally, on April 22, 2002, we declared a cash
distribution of $0.575 per Limited Partner Unit and Class B Unit for the
quarter ended March 31, 2002. We paid the distribution of $35.0 million on May
8, 2002, to unitholders of record on April 30, 2002.

On February 6, 2001, we issued by public offering 2.0 million Limited
Partner Units at $25.50 per Unit. The net proceeds from the offering totaled
approximately $48.5 million and were used to reduce borrowings under the Three
Year Facility. On March 6, 2001, 250,000 Units were issued in connection with
the over-allotment provision of the offering on February 6, 2001. Proceeds
from the Units issued from the over-allotment totaled $6.1 million and were
used for general purposes.

On March 22, 2002, we issued by public offering 1.9 million Limited
Partner Units (which included the overallotment provision) at $29.85 per Unit.
The net proceeds from the offering totaled approximately $56.8 million and were
used to repay $50 million of the outstanding balance on the Three Year Facility
with the remaining amount being used for general purposes.

Future Capital Needs and Commitments

We estimate that capital expenditures, excluding acquisitions, for 2002
will be approximately $129 million (which includes $5 million of capitalized
interest). We expect to use approximately $85 million for revenue generating
projects. We also expect to use approximately $29 million for maintenance
capital spending and approximately $10 million for system upgrade projects.
Revenue generating projects will include $61 million for expansion of the
Jonah system and $24 million for other projects to expand our
service capabilities including the completion of facilities to support the
receipt and delivery locations with Centennial. We expect to use approximately $4.9 million of
maintenance capital spending for pipeline rehabilitation projects to comply
with regulations enacted by the United States Department of Transportation
Office of Pipeline Safety. We continually review and evaluate potential
capital improvements and expansions that would be complementary to our present
business segments. These expenditures can vary greatly depending on the
magnitude of our transactions. We may finance capital expenditures through
internally generated funds, debt or the issuance of additional Limited Partner
Units.

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 ($332.0 million at March 31, 2002), (ii) the TE Products Senior
Notes, $180 million principal amount due January 15, 2008, and $210 million
principal amount due January 15, 2028, and (iii) our $500 million 7.625% Senior
Notes due February 15, 2012. We expect to repay the long-term, senior
unsecured obligations and bank debt through the issuance of additional
long-term senior unsecured debt at the time the 2008, 2012 and 2028 debt
matures, issuance of additional equity, proceeds from dispositions of assets,
or any combination of the above items.

29



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##### Table of Contents



TE Products is also contingently liable as guarantor for the lesser of
one-third or $50 million principal amount (plus interest) of the joint venture
borrowings of Centennial. We expect to contribute an additional $4.4 million
to Centennial for the remaining nine months of 2002. 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 guarantee of
Centennial debt and leases covering assets utilized in several areas of our
operations.

The following table summarizes our material contractual obligations as of
March 31, 2002 (in millions).

|                                |       |   |                                            |         |        |   |           |      |           |   |       |       |  |   |      |      |         |   |       |       | 
|------------------------------- | ----- | - | ------------------------------------------ | ------- | ------ | - | --------- | ---- | --------- | - | ----- | ----- |  | - | ---- | ---- | ------- | - | ----- | ----- | 
|                                |       |   | Amount of Commitment Expiration Per Period
|                                |       |   |                                           
|                                |       |   |                                            |         |        |   | Less than |      |           |   |       |       |  |   |      |      | After 5
|                                |       |   | Total                                      |         | 1 Year |   | 2-3 Years |      | 4-5 Years |   | Years
|                                |       |   |                                            |         |        |   |           |      |           |   |      
|Three Year Facility             |       | $ | 332.0                                      |         |        | $ |          |      |           | $ | 332.0 |       |  | $ |     |      |         | $ |      |      
|                               
|                               
|                               
|                               
|6.45% Senior Notes due 2008 (1) |       |   | 180.0                                      |         |        |   |          |      |           |   |      |       |  |   |     |      |         |   | 180.0 |      
|                               
|                               
|                               
|                               
|7.51% Senior Notes due 2028 (1) |       |   | 210.0                                      |         |        |   |          |      |           |   |      |       |  |   |     |      |         |   | 210.0 |      
|                               
|                               
|                               
|                               
|7.625% Senior Notes due 2012    |       |   | 500.0                                      |         |        |   |          |      |           |   |      |       |  |   |     |      |         |   | 500.0 |      
|                               
|                               
|                               
|                               
|Centennial cash contributions   |       |   | 4.4                                        |         |        |   | 4.4       |      |           |   |      |       |  |   |     |      |         |   |      |      
|                               
|                               
|                               
|                               
|Operating leases                |       |   | 34.3                                       |         |        |   | 8.2       |      |           |   | 15.0  |       |  |   | 10.4 |      |         |   | 0.7   |      
|                                |       |   |                                            |         |        |   |           |      |           |   |       |       |  |   |      |      |         |   |       |      
|                                | Total |   | $                                          | 1,260.7 |        |   | $         | 12.6 |           |   | $     | 347.0 |  |   | $    | 10.4 |         |   | $     | 890.7 | 
|                                |       |   |                                            |         |        |   |           |      |           |   |       |       |  |   |      |      |         |   |       |      



---

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

Sources of Future Capital

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

As of March 31, 2002, we had approximately $368.0 million in combined
available borrowing capacity under the Three Year Facility and the Short-term
Revolver.

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

On February 11, 2002, Moodys Investors Service assigned us a senior
unsecured debt rating, including the rating on our 7.625% Senior Notes, of Baa2
and confirmed the Baa2 senior unsecured rating of our subsidiary, TE Products.
These ratings were given with negative outlooks due primarily to Moodys
concerns about current debt levels resulting from financing of our recent
acquisitions. Moodys indicated they may lower our debt ratings if we are not
successful in reducing our debt to target levels where our debt-to-EBITDA ratio
would be below 4 to 1. We are evaluating alternatives to lowering our
debt-to-EBITDA ratio. Reductions in our credit ratings could increase the debt
financing costs or possibly reduce the availability of financing. A rating
reflects only the view of a rating agency and is not a recommendation to buy,
sell or hold any indebtedness. Any rating can be revised upward or downward or
withdrawn at any time by a rating agency if it decides that the circumstances
warrant such a change.

30



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##### Table of Contents



Other Considerations

Our operations are subject to federal, state and local laws and
regulations governing the discharge of materials into the environment otherwise
relating to environmental protection. 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 IDEM that resulted in
the implementation of a remediation program for groundwater contamination
attributable to our operations at the Seymour, Indiana, terminal. In 1999, the
IDEM approved a Feasibility Study, which includes our proposed remediation
program. We expect the IDEM to issue a Record of Decision formally approving
the remediation program. After the Record of Decision is issued, we will enter
into a subsequent Agreed Order for the continued operation and maintenance of
the remediation program. We have an accrued liability of $0.5 million at March
31, 2002, for future remediation costs at the Seymour terminal. We do not
expect that the completion of the remediation program will have a future
material adverse effect on our financial position, results of operations or
cash flows.

In 1994, the 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, 2002, we have an
accrued liability of $0.3 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.

During 2001, we accrued $8.6 million to complete environmental remediation
activities at certain of our Upstream Segment sites. In establishing this
accrual, we expensed $4.4 million for these environmental remediation costs and
recorded a receivable of $4.2 million for the remainder. The receivable is
based on a contractual indemnity obligation for specified environmental
liabilities that DEFS owes to us in connection with our acquisition of the
Upstream Segment from DEFS in November 1998. Under this indemnity obligation,
we are responsible for the first $3.0 million in specified environmental
liabilities, and DEFS is responsible for those environmental liabilities in
excess of $3.0 million, up to a maximum amount of $25.0 million. The majority
of the indemnified costs relate to remediation activities at the Velma crude
oil site in Stephens County, Oklahoma, attributable to operations prior to our
acquisition of the Upstream Segment. Remediation activities at the Velma crude
oil site are being conducted according to a work plan approved by the Oklahoma
Corporation Commission. At March 31, 2002, an accrual of $5.7 million remains
outstanding related to TCTM environmental remediation activities. We do not
expect that the completion of remediation programs associated with this release
will have a future material adverse effect on our financial position, results
of operations or cash flows.

New Accounting Pronouncements

In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS 142 requires that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead tested for impairment at least
annually. SFAS 142 requires that intangible assets with definite useful lives
be amortized over their respective estimated useful lives. Beginning January 1,
2002, effective with the adoption of SFAS 142, we no longer record amortization
expense related to goodwill, or amortization expense on the excess investment
related to our equity investment in Seaway (see Note 6. Equity
Investments). In conjunction with the adoption of SFAS 142, we have
completed the process of identifying our reporting units and
assigning our assets and liabilities to those reporting units and are
currently in the process of completing our analysis of the fair value
of our reporting units. We currently do not believe any transitional
impairment loss will be identified upon completion of this process.

31



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At March 31, 2002, we had $16.9 million of
unamortized goodwill, and $55.0 million of excess investment in our equity
investments.

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

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

Forward-Looking Statements

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

We have utilized and expect to continue to utilize derivative financial
instruments with respect to a portion of our interest rate and fair value risks
and our crude oil marketing activities. These transactions generally are swaps
and forwards, and we enter into them with major financial institutions or
commodities trading institutions. The derivative financial instrument related
to our interest rate risk is intended to reduce our exposure to increases in
the benchmark interest rates underlying our variable rate revolving credit
facility. The derivative financial instruments

32



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##### Table of Contents



related to our fair value risks
are intended to reduce our exposure to changes in the fair value of the fixed
rate Senior Notes resulting from changes in interest rates. Our Upstream
Segment uses derivative financial instruments to reduce our exposure to
fluctuations in the market price of crude oil. Gains and losses from financial
instruments used in our Upstream Segment have been recognized in revenues for
the periods to which the derivative financial instruments relate, and gains and
losses from our interest rate financial instruments have been recognized in
interest expense for the periods to which the derivative financial instrument
relate. As of March 31, 2002, the Upstream Segment had no open positions on
derivative financial contracts.

At March 31, 2002, our subsidiary, TE Products had outstanding $180
million principal amount of 6.45% Senior Notes due 2008, and $210 million
principal amount of 7.51% Senior Notes due 2028 (collectively the TE Products
Senior Notes). At March 31, 2002, the estimated fair value of the TE Products
Senior Notes was approximately $361.6 million. At March 31, 2002, $500 million
principal amount of 7.625% Senior Notes due 2012 was outstanding. At March 31,
2002, the estimated fair value of the $500 million Senior Notes was
approximately $493.3 million.

As of March 31, 2002, TE Products had an interest rate swap agreement in
place to hedge its exposure to changes in the fair value of its fixed rate
7.51% TE Products Senior Notes due 2028. The swap agreement has a notional
amount of $210 million and matures in January 2028 to match the principal and
maturity of the TE Products Senior Notes. Under the swap agreement, we pay a
floating rate based on a three month U.S. Dollar LIBOR rate, plus a spread, and
receive a fixed rate of interest of 7.51%. During the three months ended March
31, 2002, we recognized a gain of $1.7 million, included as a component of
interest expense, on the interest rate swap. No gain or loss from
ineffectiveness was required to be recognized.

As of March 31, 2002, we had an interest rate swap agreement in place to
hedge our exposure to increases in the benchmark interest rate underlying our
variable rate revolving credit facilities. The swap agreement is based on a
notional amount of $250 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. We have designated this interest rate swap as a cash flow
hedge, therefore, 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, 2002, we recognized $3.2 million in losses, included in interest expense,
on the interest rate swap attributable to interest costs occurring in 2002. 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 $17.0
million at March 31, 2002. We anticipate that approximately $10.9 million of
the fair value will be transferred into earnings over the next twelve months.

As of March 31, 2002, we had interest rate swap agreements in place to
hedge our exposure to changes in the fair value of our fixed rate 7.625% Senior
Notes due 2012. We have designated these swap agreements, which hedge exposure
to changes in the fair value of the Senior Notes, as fair value hedges. The
swap agreements have a combined notional amount of $500 million and mature in
2012 to match the principal and maturity of the Senior Notes. Under the swap
agreements, we pay a floating rate based on a six month U.S. Dollar LIBOR rate,
plus a spread, and receive a fixed rate of interest of 7.625%. Since these
swaps are designated as fair value hedges, the changes in fair value are
recognized in current earnings. During the three months ended March 31, 2002,
we recognized a gain of $1.9 million, included as a component of interest
expense, on the interest rate swaps. No gain or loss from ineffectiveness was
required to be recognized.

33



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##### Table of Contents

)




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).
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       
|       
|       
|       
|10.1+   |  | Texas Eastern Products Pipeline Company 1997 Employee
Incentive Compensation Plan executed on July 14, 1997 (Filed as
Exhibit 10 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended September 30, 1997 and
incorporated herein by reference).                                                                                                                                                                                        
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       
|       
|       
|       
|10.2+   |  | Texas Eastern Products Pipeline Company Management Incentive
Compensation Plan executed on January 30, 1992 (Filed as Exhibit 10
to Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403)
for the quarter ended March 31, 1992, and incorporated herein by
reference).                                                                                                                                                                                           
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       
|       
|       
|       
|10.3+   |  | Texas Eastern Products Pipeline Company Long-Term Incentive
Compensation Plan executed on October 31, 1990 (Filed as Exhibit
10.9 to Form 10-K of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the year ended December 31, 1990 and incorporated
herein by reference).                                                                                                                                                                                           
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       
|       
|       
|       
|10.4+   |  | Form of Amendment to Texas Eastern Products Pipeline Company
Long-Term Incentive Compensation Plan (Filed as Exhibit 10.7 to Form
10-K of TEPPCO Partners, L.P.                                                                                                                                                                                                                                                                                                             

34



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|        |  | (Commission File No. 1-10403) for the
year ended December 31, 1995 and incorporated herein by
reference).                                                                                                                                                                                                                                                                                             
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|10.5+   |  | 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).                                                                                                                                                                                 
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|10.6+   |  | 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).                                                                                                                                                                            
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|10.7+   |  | 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).                                                                                                                                                                  
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|10.8+   |  | Employment Agreement with William L. Thacker, Jr. (Filed as
Exhibit 10 to Form 10-Q of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the quarter ended September 30, 1992 and
incorporated herein by reference).                                                                                                                                                                            
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|10.9+   |  | 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).                                                                                                                                
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|10.10+  |  | 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).                                                                                                                 
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|10.11   |  | 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).                                                                                                              
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|10.12   |  | 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).                                                                                                    
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|10.13   |  | 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).                                                                       
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|10.14   |  | Letter Agreement regarding Payment Guarantees of Certain
Obligations of TCTM, L.P. between Duke Capital Corporation and TCTM,
L.P., dated November 30, 1998 (Filed as Exhibit 10.19 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).                                                                   
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|10.15+  |  | Form of Employment Agreement between the Company and Thomas R.
Harper, David L. Langley, 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).
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|10.16   |  | Agreement Between Owner and Contractor between TE Products
Pipeline Company, Limited Partnership and Eagleton Engineering
Company, dated February 4, 1999 (Filed as Exhibit 10.21 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).                                                                     
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                       
|       
|       
|       
|       
|10.17   |  | 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).   

35



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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.18   |  | 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).                                                                                                                                                                             
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.19+  |  | 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).                                                                                                                  
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.20+  |  | 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).                                                                                                    
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.21+  |  | Texas Eastern Products Pipeline Company Non-employee Directors
Unit Accumulation Plan, effective April 1, 1999 (Filed as Exhibit
10.30 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended September 30, 1999 and incorporated
herein by reference).                                                                                                        
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.22+  |  | 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).                                                                                                 
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.23+  |  | 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).                                                                                                                        
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.24   |  | Credit Agreement between TEPPCO Partners, L.P., SunTrust
Bank, and Certain Lenders, dated July 14, 2000 (Filed as Exhibit
10.31 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended June 30, 2000 and incorporated herein
by reference).                                                                                                                    
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.25   |  | 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).                 
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.26+  |  | 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).                                                                                          
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.27+  |  | 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).                                                                                                                                                                 
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.28+  |  | 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).                                                                                                                                                                                  
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.29   |  | 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).
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|10.30   |  | 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).                                         

36



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.31   |  | 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).                                                                                                                         
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.32   |  | 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).                                                                                                             
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.33   |  | 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).                
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.34   |  | Amendment 1, dated as of September 28, 2001, to the Credit
Agreement among TEPPCO Partners, L.P. as Borrower, SunTrust Bank as
Administrative Agent, and Certain Lenders, dated as of April 6, 2001
($200,000,000 Revolving Facility) (Filed as Exhibit 10.34 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended September 30, 2001 and incorporated herein by
reference).                                                         
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.35   |  | 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).                                                 
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.36   |  | 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).
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.37   |  | 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).                                                                                                                                                     
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.38   |  | 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).                                                                                                                                                                                                   
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.39   |  | 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).                                                                  
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.40   |  | 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).                                                                                                                                                                                                                                                    
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.41   |  | 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).                                                                                                                                                                                                 

37



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                            
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                            
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                            
|       
|       
|       
|       
|10.42   |  | 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).
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                            
|       
|       
|       
|       
|10.43   |  | 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).                                                                     
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                            
|       
|       
|       
|       
|10.44*  |  | 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).                                                                                                                                       
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                            
|       
|       
|       
|       
|10.45*  |  | 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).                                                                                                    
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                            
|       
|       
|       
|       
|12.1*   |  | Statement of Computation of Ratio of Earnings to Fixed Charges.                                                                                                                                                                                                                                                                            
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                            
|       
|       
|       
|       
|21      |  | Subsidiaries of the Partnership (Filed as Exhibit 21 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).                                                                                                                                       



---

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



| | (b) |  | Reports on Form 8-K filed during the quarter ended March 31,
2002:                                                                            
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Reports on Form 8-K were filed on January 14, 2002, January
28, 2002, February 8, 2002, February 20, 2002, March 12,
2002, and March 20, 2002.




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                                             
|                   |  |     |  |                                                                      
|Date: May 13, 2002 |  |     |  | Charles H. Leonard,
Senior Vice President and Chief
Financial Officer

38



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##### Table of Contents






EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                        
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                        
|Number  |  | Description                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                        
|10.44*  |  | 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).                                   
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                        
|       
|       
|       
|       
|10.45*  |  | 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).
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                        
|       
|       
|       
|       
|12.1*   |  | Statement of Computation of Ratio of Earnings to Fixed Charges.                                                                                                                                                                        



---

|* |  | Filed herewith.
|- |  | ---------------

39