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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 June 30, 2002

Commission File No. 1-10403

TEPPCO Partners,
L.P.(Exact name of Registrant as specified in its charter)

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

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

(713) 759-3636
(Registrants telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

|        |  |         
|------- |  | --------
|Yes [X] |  | No [   ]

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

Limited Partner Units outstanding as of August 13, 2002: 45,462,597



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TEPPCO PARTNERS, L.P.

TABLE OF CONTENTS

|                                                                                                               |                                                                                                                |  |      |    | 
|-------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                               |                                                                                                                |  | Page
|                                                                                                               |                                                                                                                |  |     
|PART I. FINANCIAL INFORMATION                                                                                  |                                                                                                                |  |      |   
|                                                                                                               |                                                                                                                |  |      |   
|Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2002 (unaudited) and December 31, 2001 |                                                                                                                |  | 1    |   
|                                                                                                               |                                                                                                                |  |      |   
|                                                                                                               | Consolidated Statements of Income for the three months and six months ended June 30, 2002
and 2001 (unaudited) |  |      | 2  | 
|                                                                                                               |                                                                                                                |  |      |   
|                                                                                                               | Consolidated Statements of Cash Flows for the six months ended June 30, 2002
and 2001 (unaudited)              |  |      | 3  | 
|                                                                                                               |                                                                                                                |  |      |   
|                                                                                                               | Notes to the Consolidated Financial Statements (unaudited)                                                     |  |      | 4  | 
|                                                                                                               |                                                                                                                |  |      |   
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations                  |                                                                                                                |  | 26   |   
|                                                                                                               |                                                                                                                |  |      |   
|                                                                                                               | Forward-Looking Statements                                                                                     |  |      | 40 | 
|                                                                                                               |                                                                                                                |  |      |   
|Item 3. Quantitative and Qualitative Disclosures About Market Risk                                             |                                                                                                                |  | 41   |   
|                                                                                                               |                                                                                                                |  |      |   
|PART II. OTHER INFORMATION                                                                                     |                                                                                                                |  |      |   
|                                                                                                               |                                                                                                                |  |      |   
|Item 6. Exhibits and Reports on Form 8-K                                                                       |                                                                                                                |  | 42   |   

iTABLE OF CONTENTS

|                                                  |                                                                                               |                                            |  |  |  |  |  | 
|------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                    
|                                                  | Item 1. Financial Statements                                                                 
|                                                  |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                                                  |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME         
|                                                  |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                                  |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                                  | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                  | Forward-Looking Statements                                                                   
|                                                  | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|PART II. OTHER INFORMATION                       
|                                                  | Item 6. Exhibits and Reports on Form 8-K.                                                    
|SIGNATURES                                       
|Supplemental Indenture                           
|Agreement of Limited Partnership of Val Verde Gas
|Texas Eastern Products Pipeline 2002 Phantom Unit
|Computation of Ratio of Earnings to Fixed Charges
|Subsidiaries of the Partnership                  
|Certification of CEO Pursuant to Section 906     
|Certification of CFO Pursuant to Section 906     



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PART I. FINANCIAL INFORMATION




Item 1. Financial Statements




TEPPCO PARTNERS, L.P.

CONSOLIDATED BALANCE SHEETS
(in thousands)

|                                                                                                                   |                                          |                                         |                         |         |           |             |           |              |           |         |  | 
|------------------------------------------------------------------------------------------------------------------ | ---------------------------------------- | --------------------------------------- | ----------------------- | ------- | --------- | ----------- | --------- | ------------ | --------- | ------- |  | 
|                                                                                                                   |                                          |                                         |                         |         |           | June 30,    |           | December 31,
|                                                                                                                   |                                          |                                         |                         |         |           | 2002        |           | 2001        
|                                                                                                                   |                                          |                                         |                         |         |           |             |           |             
|                                                                                                                   |                                          |                                         |                         |         |           | (Unaudited) |           |              |           |        
|ASSETS                                                                                                            
|Current assets:                                                                                                    |                                          |                                         |                         |         |           |             |           |             
|                                                                                                                   | Cash and cash equivalents                |                                         | $                       | 25,404  |           |             | $         | 25,479       |          
|                                                                                                                   | Accounts receivable, trade               |                                         |                         | 277,811 |           |             |           | 221,541      |          
|                                                                                                                   | Accounts receivable, related party       |                                         |                         | 6,554   |           |             |           | 4,310        |          
|                                                                                                                   | Inventories                              |                                         |                         | 13,675  |           |             |           | 17,243       |          
|                                                                                                                   | Other                                    |                                         |                         | 26,464  |           |             |           | 14,907       |          
|                                                                                                                   |                                          |                                         |                         |         |           |             |           |              |          
|                                                                                                                   |                                          | Total current assets                    |                         |         | 349,908   |             |           |              | 283,480   |        
|                                                                                                                   |                                          |                                         |                         |         |           |             |           |              |          
|Property, plant and equipment, at cost (Net of accumulated
depreciation and amortization of $312,943 and $290,248) |                                          |                                         | 1,531,349               |         |           |             | 1,180,461 |             
|Equity investments                                                                                                 |                                          |                                         | 292,506                 |         |           |             | 292,224   |             
|Intangible assets                                                                                                  |                                          |                                         | 502,033                 |         |           |             | 251,487   |             
|Goodwill                                                                                                           |                                          |                                         | 16,939                  |         |           |             | 16,669    |             
|Other assets                                                                                                       |                                          |                                         | 45,911                  |         |           |             | 41,027    |             
|                                                                                                                   |                                          |                                         |                         |         |           |             |           |              |          
|                                                                                                                   |                                          | Total assets                            |                         | $       | 2,738,646 |             |           | $            | 2,065,348 |        
|                                                                                                                   |                                          |                                         |                         |         |           |             |           |              |          
|LIABILITIES AND PARTNERS CAPITAL                                                                                 
|Current liabilities:                                                                                               |                                          |                                         |                         |         |           |             |           |             
|                                                                                                                   | Notes payable                            |                                         | $                       | 185,394 |           |             | $         | 360,000      |          
|                                                                                                                   | Accounts payable and accrued liabilities |                                         |                         | 273,711 |           |             |           | 228,075      |          
|                                                                                                                   | Accounts payable, related parties        |                                         |                         | 7,857   |           |             |           | 22,680       |          
|                                                                                                                   | Accrued interest                         |                                         |                         | 32,131  |           |             |           | 15,649       |          
|                                                                                                                   | Other accrued taxes                      |                                         |                         | 9,031   |           |             |           | 8,888        |          
|                                                                                                                   | Other                                    |                                         |                         | 34,659  |           |             |           | 33,550       |          
|                                                                                                                   |                                          |                                         |                         |         |           |             |           |              |          
|                                                                                                                   |                                          | Total current liabilities               |                         |         | 542,783   |             |           |              | 668,842   |        
|                                                                                                                   |                                          |                                         |                         |         |           |             |           |              |          
|Senior Notes                                                                                                       |                                          |                                         | 887,714                 |         |           |             | 389,814   |             
|Other long-term debt                                                                                               |                                          |                                         | 586,606                 |         |           |             | 340,658   |             
|Other liabilities and deferred credits                                                                             |                                          |                                         | 29,336                  |         |           |             | 17,223    |             
|Redeemable Class B Units held by related party                                                                     |                                          |                                         | 104,360                 |         |           |             | 105,630   |             
|Commitments and contingencies                                                                                      |                                          |                                         |                         |         |           |             |           |             
|Partners capital:                                                                                                 |                                          |                                         |                         |         |           |             |           |             
|                                                                                                                   | Accumulated other comprehensive loss     |                                         |                         | (19,976 | )         |             |           | (20,324      | )        
|                                                                                                                   | General partners interest               |                                         |                         | 10,870  |           |             |           | 13,190       |          
|                                                                                                                   | Limited partners interests              |                                         |                         | 596,953 |           |             |           | 550,315      |          
|                                                                                                                   |                                          |                                         |                         |         |           |             |           |              |          
|                                                                                                                   |                                          |                                         | Total partners capital |         |           | 587,847     |           |              |           | 543,181 | 
|                                                                                                                   |                                          |                                         |                         |         |           |             |           |              |          
|                                                                                                                   |                                          | Total liabilities and partners capital |                         | $       | 2,738,646 |             |           | $            | 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 |         | Six Months Ended
|                                                               |                                               |                                 |         | June 30,           |         | June 30,        
|                                                               |                                               |                                 |         |                    |         |                 
|                                                               |                                               |                                 |         | 2002               |         | 2001             |         | 2002    |           | 2001
|                                                               |                                               |                                 |         |                    |         |                  |         |         |           |     
|Operating revenues:                                            |                                               |                                 |         |                    |         |                  |         |         |           |      |         |           |           |   |         |          
|                                                               | Sales of crude oil and petroleum products     |                                 | $       | 800,107            |         |                  | $       | 978,803 |           |      | $       | 1,345,315 |           |   | $       | 1,686,284 |          
|                                                               | Transportation  Refined products             |                                 |         | 31,803             |         |                  |         | 51,406  |           |      |         | 56,947    |           |   |         | 77,587    |          
|                                                               | Transportation  LPGs                         |                                 |         | 10,813             |         |                  |         | 13,506  |           |      |         | 34,173    |           |   |         | 38,505    |          
|                                                               | Transportation  Crude oil                    |                                 |         | 7,095              |         |                  |         | 5,959   |           |      |         | 13,223    |           |   |         | 12,067    |          
|                                                               | Transportation   NGLs                        |                                 |         | 10,544             |         |                  |         | 5,449   |           |      |         | 16,850    |           |   |         | 10,250    |          
|                                                               | Gathering  Natural gas                       |                                 |         | 11,454             |         |                  |         |        |           |      |         | 20,974    |           |   |         |          |          
|                                                               | Mont Belvieu operations                       |                                 |         | 2,889              |         |                  |         | 2,997   |           |      |         | 7,395     |           |   |         | 5,894     |          
|                                                               | Other                                         |                                 |         | 13,624             |         |                  |         | 15,562  |           |      |         | 24,589    |           |   |         | 28,330    |          
|                                                               |                                               |                                 |         |                    |         |                  |         |         |           |      |         |           |           |   |         |           |          
|                                                               |                                               | Total operating revenues        |         |                    | 888,329 |                  |         |         | 1,073,682 |      |         |           | 1,519,466 |   |         |           | 1,858,917 | 
|                                                               |                                               |                                 |         |                    |         |                  |         |         |           |      |         |           |           |   |         |           |          
|Costs and expenses:                                            |                                               |                                 |         |                    |         |                  |         |         |           |      |         |           |           |   |         |          
|                                                               | Purchases of crude oil and petroleum
products |                                 |         | 787,933            |         |                  |         | 965,919 |           |      |         | 1,321,142 |           |   |         | 1,664,495 |          
|                                                               | Operating, general and administrative         |                                 |         | 35,083             |         |                  |         | 29,955  |           |      |         | 66,528    |           |   |         | 57,905    |          
|                                                               | Operating fuel and power                      |                                 |         | 7,243              |         |                  |         | 10,207  |           |      |         | 15,832    |           |   |         | 18,821    |          
|                                                               | Depreciation and amortization                 |                                 |         | 17,599             |         |                  |         | 10,857  |           |      |         | 33,640    |           |   |         | 20,764    |          
|                                                               | Taxes  other than income taxes               |                                 |         | 3,474              |         |                  |         | 3,675   |           |      |         | 7,979     |           |   |         | 7,557     |          
|                                                               |                                               |                                 |         |                    |         |                  |         |         |           |      |         |           |           |   |         |           |          
|                                                               |                                               | Total costs and expenses        |         |                    | 851,332 |                  |         |         | 1,020,613 |      |         |           | 1,445,121 |   |         |           | 1,769,542 | 
|                                                               |                                               |                                 |         |                    |         |                  |         |         |           |      |         |           |           |   |         |           |          
|                                                               |                                               | Operating income                |         |                    | 36,997  |                  |         |         | 53,069    |      |         |           | 74,345    |   |         |           | 89,375    | 
|Interest expense                                               |                                               |                                 | (16,829 | )                  |         |                  | (15,392 | )       |           |      | (33,616 | )         |           |   | (31,686 | )        
|Interest capitalized                                           |                                               |                                 | 1,029   |                    |         |                  | 590     |         |           |      | 3,138   |           |           |   | 935     |          
|Equity earnings                                                |                                               |                                 | 2,414   |                    |         |                  | 4,419   |         |           |      | 5,986   |           |           |   | 9,625   |          
|Other income  net                                             |                                               |                                 | 766     |                    |         |                  | 793     |         |           |      | 1,332   |           |           |   | 1,227   |          
|                                                               |                                               |                                 |         |                    |         |                  |         |         |           |      |         |           |           |   |         |           |          
|                                                               |                                               | Income before minority interest |         |                    | 24,377  |                  |         |         | 43,479    |      |         |           | 51,185    |   |         |           | 69,476    | 
|Minority interest                                              |                                               |                                 |        |                    |         |                  | (441    | )       |           |      |        |           |           |   | (703    | )        
|                                                               |                                               |                                 |         |                    |         |                  |         |         |           |      |         |           |           |   |         |           |          
|                                                               |                                               | Net income                      |         | $                  | 24,377  |                  |         | $       | 43,038    |      |         | $         | 51,185    |   |         | $         | 68,773    | 
|                                                               |                                               |                                 |         |                    |         |                  |         |         |           |      |         |           |           |   |         |           |          
|Net Income Allocation:                                         |                                               |                                 |         |                    |         |                  |         |         |           |      |         |           |           |   |         |          
|Limited Partner Unitholders                                    |                                               | $                               | 16,467  |                    |         | $                | 31,311  |         |           | $    | 35,061  |           |           | $ | 49,922  |          
|Class B Unitholder                                             |                                               |                                 | 1,441   |                    |         |                  | 3,478   |         |           |      | 3,234   |           |           |   | 5,670   |          
|General Partner                                                |                                               |                                 | 6,469   |                    |         |                  | 8,249   |         |           |      | 12,890  |           |           |   | 13,181  |          
|                                                               |                                               |                                 |         |                    |         |                  |         |         |           |      |         |           |           |   |         |           |          
|                                                               |                                               | Total net income allocated      |         | $                  | 24,377  |                  |         | $       | 43,038    |      |         | $         | 51,185    |   |         | $         | 68,773    | 
|                                                               |                                               |                                 |         |                    |         |                  |         |         |           |      |         |           |           |   |         |           |          
|Basic net income per Limited
Partner and Class B Unit          |                                               | $                               | 0.39    |                    |         | $                | 0.90    |         |           | $    | 0.84    |           |           | $ | 1.45    |          
|                                                               |                                               |                                 |         |                    |         |                  |         |         |           |      |         |           |           |   |         |           |          
|Diluted net income per Limited
Partner and Class B Unit        |                                               | $                               | 0.39    |                    |         | $                | 0.89    |         |           | $    | 0.84    |           |           | $ | 1.45    |          
|                                                               |                                               |                                 |         |                    |         |                  |         |         |           |      |         |           |           |   |         |           |          
|Weighted average Limited Partner and Class B
Units outstanding |                                               |                                 | 46,346  |                    |         |                  | 38,867  |         |           |      | 45,457  |           |           |   | 38,380  |          

See accompanying Notes to Consolidated Financial Statements.

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TEPPCO PARTNERS, L.P.

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

|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                  |          |        |         |         |         |  
|------------------------------------------------ | ----------------------------------------------------------------------------- | ------------------------------------------------------------- | ------------------------------------------------------------ | --------------------------------------------------- | -------- | ---------------- | -------- | ------ | ------- | ------- | ------- | -
|                                                 |                                                                               |                                                               |                                                              |                                                     |          | Six Months Ended
|                                                 |                                                                               |                                                               |                                                              |                                                     |          | June 30,        
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                 
|                                                 |                                                                               |                                                               |                                                              |                                                     |          | 2002             |          | 2001  
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                  |          |       
|Cash flows from operating activities:            |                                                                               |                                                               |                                                              |                                                     |          |                  |          |       
|                                                 | Net income                                                                    |                                                               | $                                                            | 51,185                                              |          |                  | $        | 68,773 |        
|                                                 | Adjustments to reconcile net income to cash provided by
operating activities: |                                                               |                                                              |                                                     |          |                  |          |        |        
|                                                 |                                                                               |                                                               | Depreciation and amortization                                |                                                     |          | 33,640           |          |        |         | 20,764  |        
|                                                 |                                                                               |                                                               | Earnings in equity investments, net of distributions         |                                                     |          | 7,444            |          |        |         | 4,457   |        
|                                                 |                                                                               |                                                               | Non-cash portion of interest expense                         |                                                     |          | 2,284            |          |        |         | 1,356   |        
|                                                 |                                                                               |                                                               | Increase in accounts receivable                              |                                                     |          | (56,270          | )        |        |         | (3,843  | )      
|                                                 |                                                                               |                                                               | (Increase) decrease in inventories                           |                                                     |          | 3,568            |          |        |         | (13,158 | )      
|                                                 |                                                                               |                                                               | Increase in other current assets                             |                                                     |          | (11,557          | )        |        |         | (843    | )      
|                                                 |                                                                               |                                                               | Increase (decrease) in accounts payable and accrued expenses |                                                     |          | 74,716           |          |        |         | (13,515 | )      
|                                                 |                                                                               |                                                               | Other                                                        |                                                     |          | (7,552           | )        |        |         | (2,459  | )      
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                  |          |        |        
|                                                 |                                                                               |                                                               |                                                              | Net cash provided by operating activities           |          |                  | 97,458   |        |         |         | 61,532  |  
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                  |          |        |        
|Cash flows from investing activities:            |                                                                               |                                                               |                                                              |                                                     |          |                  |          |       
|                                                 |                                                                               | Proceeds from cash investments                                |                                                              |                                                     |         |                  |          |        | 3,236   |        
|                                                 |                                                                               | Purchase of crude oil assets                                  |                                                              |                                                     |         |                  |          |        | (20,000 | )      
|                                                 |                                                                               | Proceeds from the sale of assets                              |                                                              |                                                     | 3,380    |                  |          |        | 1,300   |        
|                                                 |                                                                               | Purchase of Val Verde Gathering system                        |                                                              |                                                     | (444,150 | )                |          |        |        |        
|                                                 |                                                                               | Purchase of Chaparral NGL system                              |                                                              |                                                     | (132,140 | )                |          |        |        |        
|                                                 |                                                                               | Purchase of Jonah Gas Gathering Company                       |                                                              |                                                     | (7,315   | )                |          |        |        |        
|                                                 |                                                                               | Investments in Centennial Pipeline, LLC                       |                                                              |                                                     | (7,726   | )                |          |        | (25,142 | )      
|                                                 |                                                                               | Capital expenditures                                          |                                                              |                                                     | (63,560  | )                |          |        | (33,398 | )      
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                  |          |        |        
|                                                 |                                                                               |                                                               |                                                              | Net cash used in investing activities               |          |                  | (651,511 | )      |         |         | (74,004 | )
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                  |          |        |        
|Cash flows from financing activities:            |                                                                               |                                                               |                                                              |                                                     |          |                  |          |       
|                                                 |                                                                               | Proceeds from term and revolving credit facilities            |                                                              |                                                     | 642,000  |                  |          |        | 33,000  |        
|                                                 |                                                                               | Repayments on term and revolving credit facilities            |                                                              |                                                     | (570,660 | )                |          |        | (41,000 | )      
|                                                 |                                                                               | Issuance of Senior Notes                                      |                                                              |                                                     | 497,805  |                  |          |        |        |        
|                                                 |                                                                               | Debt issuance costs                                           |                                                              |                                                     | (7,043   | )                |          |        |        |        
|                                                 |                                                                               | Issuance of Limited Partner Units, net                        |                                                              |                                                     | 59,234   |                  |          |        | 54,588  |        
|                                                 |                                                                               | General Partners contributions                               |                                                              |                                                     | 1,217    |                  |          |        | 1,114   |        
|                                                 |                                                                               | Distributions                                                 |                                                              |                                                     | (68,575  | )                |          |        | (49,524 | )      
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                  |          |        |        
|                                                 |                                                                               |                                                               |                                                              | Net cash provided by (used in) investing activities |          |                  | 553,978  |        |         |         | (1,822  | )
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                  |          |        |        
|Net decrease in cash and cash equivalents        |                                                                               |                                                               | (75                                                          | )                                                   |          |                  | (14,294  | )     
|Cash and cash equivalents at beginning of period |                                                                               |                                                               | 25,479                                                       |                                                     |          |                  | 27,095   |       
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                  |          |        |        
|Cash and cash equivalents at end of period       |                                                                               | $                                                             | 25,404                                                       |                                                     |          | $                | 12,801   |       
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                  |          |        |        
|Supplemental disclosure of cash flows:           |                                                                               |                                                               |                                                              |                                                     |          |                  |          |       
|                                                 |                                                                               | Interest paid during the period (net of capitalized interest) |                                                              | $                                                   | 19,499   |                  |          | $      | 32,230  |        
|                                                 |                                                                               |                                                               |                                                              |                                                     |          |                  |          |        |        

See accompanying Notes to Consolidated Financial Statements.

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TEPPCO PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

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

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

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

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

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

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

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 45.5 million

4



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TEPPCO PARTNERS, L.P.

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

and 38.4 million Units for the six months ended June 30, 2002, and 2001,
respectively, and 46.3 million and 38.9 million Units for the three months
ended June 30, 2002, and 2001, respectively). The general partners percentage
interest in net income is based on its percentage of cash distributions from
Available Cash for each period (see Note 9. Quarterly Distributions of
Available Cash). The general partner was allocated $12.9 million (representing
25.18%) and $13.2 million (representing 19.17%) of net income for the six
months ended June 30, 2002, and 2001, respectively. The General Partners
percentage interest in our net income increased for the six months ended June
30, 2002, compared to the corresponding period in 2001, as a result of the
increase in the quarterly distribution to $0.60 per Unit with respect to the
second quarter of 2002 from $0.525 per Unit with respect to the second quarter
of 2001.

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 June 30, 2002, and 2001, the
denominator was increased by 39,958 Units and 44,559 Units, respectively. For
the six months ended June 30, 2002, and 2001, the denominator was increased by
45,036 Units and 36,021 Units, respectively.

NOTE 2. NEW ACCOUNTING PRONOUNCEMENTS

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

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

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

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). SFAS 146 requires recognition of a
liability for a cost associated with an exit or disposal activity when the
liability is incurred, as opposed to when the entity commits to an exit plan
under EITF No. 94-3. SFAS 146 is to be applied prospectively to

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TEPPCO PARTNERS, L.P.

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

exit or disposal activities initiated after December 31, 2002. We do not
believe that the adoption of SFAS 146 will have a material effect on our
financial position, results of operations or cash flows.

NOTE 3. GOODWILL AND OTHER INTANGIBLE ASSETS

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

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

|                                                         |                                                |  |                             |        |                           |  |      |        |      |  |   |        |  |  |   |        | 
|-------------------------------------------------------- | ---------------------------------------------- |  | --------------------------- | ------ | ------------------------- |  | ---- | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                                                         |                                                |  | Three Months Ended June 30, |        | Six Months Ended June 30,
|                                                         |                                                |  |                             |        |                          
|                                                         |                                                |  | 2002                        |        | 2001                      |  | 2002 |        | 2001
|                                                         |                                                |  |                             |        |                           |  |      |        |     
|Net income:                                              |                                                |  |                             |        |                           |  |      |        |      |  |   |        |  |  |   |       
|                                                         | Reported net income                            |  | $                           | 24,377 |                           |  | $    | 43,038 |      |  | $ | 51,185 |  |  | $ | 68,773 | 
|                                                         | Amortization of goodwill and
excess investment |  |                             |       |                           |  |      | 873    |      |  |   |       |  |  |   | 1,263  | 
|                                                         |                                                |  |                             |        |                           |  |      |        |      |  |   |        |  |  |   |        | 
|                                                         | Adjusted net income                            |  | $                           | 24,377 |                           |  | $    | 43,911 |      |  | $ | 51,185 |  |  | $ | 70,036 | 
|                                                         |                                                |  |                             |        |                           |  |      |        |      |  |   |        |  |  |   |        | 
|Net Income Allocation:                                   |                                                |  |                             |        |                           |  |      |        |      |  |   |        |  |  |   |       
|                                                         | Limited Partner Unitholders                    |  | $                           | 16,467 |                           |  | $    | 31,946 |      |  | $ | 35,061 |  |  | $ | 50,839 | 
|                                                         | Class B Unitholder                             |  |                             | 1,441  |                           |  |      | 3,549  |      |  |   | 3,234  |  |  |   | 5,774  | 
|                                                         | General Partner                                |  |                             | 6,469  |                           |  |      | 8,416  |      |  |   | 12,890 |  |  |   | 13,423 | 
|                                                         |                                                |  |                             |        |                           |  |      |        |      |  |   |        |  |  |   |        | 
|                                                         | Total net income allocated                     |  | $                           | 24,377 |                           |  | $    | 43,911 |      |  | $ | 51,185 |  |  | $ | 70,036 | 
|                                                         |                                                |  |                             |        |                           |  |      |        |      |  |   |        |  |  |   |        | 
|Basic net income per Limited
Partner and Class B Unit:   |                                                |  |                             |        |                           |  |      |        |      |  |   |        |  |  |   |       
|                                                         | As reported                                    |  | $                           | 0.39   |                           |  | $    | 0.90   |      |  | $ | 0.84   |  |  | $ | 1.45   | 
|                                                         | Amortization of goodwill and
excess investment |  |                             |       |                           |  |      | 0.01   |      |  |   |       |  |  |   | 0.03   | 
|                                                         |                                                |  |                             |        |                           |  |      |        |      |  |   |        |  |  |   |        | 
|                                                         | Adjusted net income per Unit                   |  | $                           | 0.39   |                           |  | $    | 0.91   |      |  | $ | 0.84   |  |  | $ | 1.48   | 
|                                                         |                                                |  |                             |        |                           |  |      |        |      |  |   |        |  |  |   |        | 
|Diluted net income per Limited
Partner and Class B Unit: |                                                |  |                             |        |                           |  |      |        |      |  |   |        |  |  |   |       
|                                                         | As reported                                    |  | $                           | 0.39   |                           |  | $    | 0.89   |      |  | $ | 0.84   |  |  | $ | 1.45   | 
|                                                         | Amortization of goodwill and
excess investment |  |                             |       |                           |  |      | 0.02   |      |  |   |       |  |  |   | 0.02   | 
|                                                         |                                                |  |                             |        |                           |  |      |        |      |  |   |        |  |  |   |        | 
|                                                         | Adjusted net income per Unit                   |  | $                           | 0.39   |                           |  | $    | 0.91   |      |  | $ | 0.84   |  |  | $ | 1.47   | 
|                                                         |                                                |  |                             |        |                           |  |      |        |      |  |   |        |  |  |   |        | 

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

6Table of Contents

TEPPCO PARTNERS, L.P.

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

amortization period for our intangible assets. We will continue to reassess
the useful lives and residual values of all intangible assets on an annual
basis.

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

At June 30, 2002, we had $16.9 million of unamortized goodwill and $58.2
million of excess investment in our equity investments (equity method
goodwill). We completed an impairment analysis of the excess investment in our
equity investments during the six months ended June 30, 2002, and we noted no
indication of impairment. The excess investment is included in our equity
investments account at June 30, 2002. The following table presents the
carrying amount of goodwill and excess investments, at June 30, 2002, by
business segment (in thousands):

|                       |  |            |        |           |  |          |       |          |  |   |        |  |  |   |        | 
|---------------------- |  | ---------- | ------ | --------- |  | -------- | ----- | -------- |  | - | ------ |  |  | - | ------ | 
|                       |  | Downstream |        | Midstream |  | Upstream |       | Segments
|                       |  | Segment    |        | Segment   |  | Segment  |       | Total   
|                       |  |            |        |           |  |          |       |         
|Goodwill               |  | $          |       |           |  | $        | 2,772 |          |  | $ | 14,167 |  |  | $ | 16,939 | 
|Equity method goodwill |  | $          | 32,683 |           |  | $        |      |          |  | $ | 25,502 |  |  | $ | 58,185 | 

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

|                             |                                      |       |   |                |         |                   |   |                |         |              |   |         |         |  |   |        |         |  
|---------------------------- | ------------------------------------ | ----- | - | -------------- | ------- | ----------------- | - | -------------- | ------- | ------------ | - | ------- | ------- |  | - | ------ | ------- | -
|                             |                                      |       |   | June 30, 2002  |         | December 31, 2001
|                             |                                      |       |   |                |         |                  
|                             |                                      |       |   | Gross Carrying |         | Accumulated       |   | Gross Carrying |         | Accumulated 
|                             |                                      |       |   | Amount         |         | Amortization      |   | Amount         |         | Amortization
|                             |                                      |       |   |                |         |                   |   |                |         |             
|Amortized intangible assets: |                                      |       |   |                |         |                   |   |                |         |              |   |         |         |  |   |       
|                             | Fractionation agreement              |       | $ | 38,000         |         |                   | $ | (8,075         | )       |              | $ | 38,000  |         |  | $ | (7,125 | )      
|                             | Natural gas transportation contracts |       |   | 482,595        |         |                   |   | (11,451        | )       |              |   | 222,800 |         |  |   | (3,275 | )      
|                             | Other                                |       |   | 1,460          |         |                   |   | (496           | )       |              |   | 1,458   |         |  |   | (371   | )      
|                             |                                      |       |   |                |         |                   |   |                |         |              |   |         |         |  |   |        |        
|                             |                                      | Total |   | $              | 522,055 |                   |   | $              | (20,022 | )            |   | $       | 262,258 |  |   | $      | (10,771 | )
|                             |                                      |       |   |                |         |                   |   |                |         |              |   |         |         |  |   |        |        

Excluding goodwill, amortization expense on intangible assets was $4.7
million and $0.5 million for the three months ended June 30, 2002 and 2001,
respectively, and $9.3 million and $1.1 million for the six months ended June
30, 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 |  | $ | 37,619 | 
|2003 |  |   | 60,192 | 
|2004 |  |   | 62,794 | 
|2005 |  |   | 63,663 | 
|2006 |  |   | 57,259 | 

NOTE 4. DERIVATIVE FINANCIAL INSTRUMENTS

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

We have utilized and expect to continue to utilize 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 June 30, 2002, the Upstream Segment had 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. The term of the
interest rate swap was extended to April 6, 2004, to match the maturity of the
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 six months ended June 30, 2002, and 2001, we recognized
$6.3 million and $2.2 million,

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TEPPCO PARTNERS, L.P.

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

respectively, in losses, included in interest expense, on the interest
rate swap attributable to interest costs occurring in 2002 and 2001. During
the quarter ended June 30, 2002, we measured the hedge effectiveness of this
interest rate swap and noted that no gain or loss from ineffectiveness was
required to be recognized. The fair value of the interest rate swap agreement
was a loss of approximately $20 million and $20.3 million at June 30, 2002, and
December 31, 2001, respectively. We anticipate that approximately $10.6 million
of the fair value will be transferred into earnings over the next twelve
months.

On October 4, 2001, our TE Products subsidiary entered into an interest
rate swap agreement to hedge its exposure to changes in the fair value of its
fixed rate 7.51% Senior Notes due 2028. We 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%. During the six months ended June
30, 2002, we recognized a gain of $3.6 million, recorded as a reduction of
interest expense, on the interest rate swap. During the quarter ended June 30,
2002, we measured the hedge effectiveness of this interest rate swap and noted
that no gain or loss from ineffectiveness was required to be recognized.

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%. During the six
months ended June 30, 2002, we recognized a gain of $6.9 million, recorded as a
reduction of interest expense, on the interest rate swaps. During the quarter
ended June 30, 2002, we measured the hedge effectiveness of these interest rate
swaps and noted that no gain or loss from ineffectiveness was required to be
recognized.

NOTE 5. ACQUISITIONS

On September 30, 2001, our subsidiaries completed the purchase of Jonah
Gas Gathering Company (Jonah) from Alberta Energy Company for $359.8 million.
The acquisition served as our entry into the natural gas gathering industry. We
recognized goodwill 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. Under a contract
arrangement on our behalf, DEFS operates and manages Jonah.

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

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

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TEPPCO PARTNERS, L.P.

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

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

On March 1, 2002, we completed the purchase of the Chaparral NGL system
(Chaparral) for $132 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 8. Debt). Chaparral is an NGL pipeline system that extends
from West Texas and New Mexico to Mont Belvieu, Texas. The pipeline delivers
NGLs to fractionators and to our existing storage in Mont Belvieu. Under a
contractual arrangement, DEFS operates and manages these assets on our behalf.
We accounted for the acquisition of the assets under the purchase method of
accounting. We allocated the purchase price of $132 million to property, plant
and equipment.

On June 30, 2002, we completed the purchase of the Val Verde Gathering
System (Val Verde) from Burlington Resources Gathering Inc., a subsidiary of
Burlington Resources Inc., for $444.2 million, including acquisition costs of
approximately $1.2 million. The Val Verde system gathers coal seam gas from
the Fruitland Coal Formation of the San Juan Basin in New Mexico. The system
is one of the largest coal seam gas gathering and treating facilities in the
United States. Under a contractual arrangement, DEFS will operate and manage
these assets on our behalf. We accounted for the acquisition under the
purchase method of accounting. Accordingly, the results of the acquisition
will be included in the consolidated financial statements from June 30, 2002.

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

|                                                           |                     |   |         |         | 
|---------------------------------------------------------- | ------------------- | - | ------- | ------- | 
|Property, plant and equipment                              |                     | $ | 185,000 |        
|Intangible assets (primarily gas transportation contracts) |                     |   | 259,795 |        
|                                                           |                     |   |         |        
|                                                           | Total assets        |   |         | 444,795 | 
|                                                           |                     |   |         |        
|Total liabilities assumed                                  |                     |   | (645    | )      
|                                                           |                     |   |         |        
|                                                           | Net assets acquired |   | $       | 444,150 | 
|                                                           |                     |   |         |        

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

The value assigned to intangible assets relates to fixed-term contracts
with customers. We are amortizing the value assigned to intangible assets over
the lives of the contracts (averaging approximately 10 years) in proportion to
the expected contractual volumes.

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

10



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TEPPCO PARTNERS, L.P.

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

|                                                                  |  |                    |         |                  |  |      |           |      |  |   |           |  |  |   |           | 
|----------------------------------------------------------------- |  | ------------------ | ------- | ---------------- |  | ---- | --------- | ---- |  | - | --------- |  |  | - | --------- | 
|                                                                  |  | Three Months Ended |         | Six Months Ended
|                                                                  |  | June 30,           |         | June 30,        
|                                                                  |  |                    |         |                 
|                                                                  |  | 2002               |         | 2001             |  | 2002 |           | 2001
|                                                                  |  |                    |         |                  |  |      |           |     
|Revenues                                                          |  | $                  | 908,010 |                  |  | $    | 1,102,204 |      |  | $ | 1,557,251 |  |  | $ | 1,916,672 | 
|Operating income                                                  |  |                    | 39,766  |                  |  |      | 57,018    |      |  |   | 78,248    |  |  |   | 99,193    | 
|Net income                                                        |  |                    | 23,190  |                  |  |      | 39,495    |      |  |   | 47,177    |  |  |   | 63,556    | 
|Basic and diluted net income per
Limited Partner and Class B Unit |  | $                  | 0.37    |                  |  | $    | 0.82      |      |  | $ | 0.78      |  |  | $ | 1.34      | 

NOTE 6. INVENTORIES

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

|                       |       |   |          |        |              |   |       |        | 
|---------------------- | ----- | - | -------- | ------ | ------------ | - | ----- | ------ | 
|                       |       |   | June 30, |        | December 31,
|                       |       |   | 2002     |        | 2001        
|                       |       |   |          |        |             
|Crude oil              |       | $ | 1,558    |        |              | $ | 3,783 |       
|Gasolines              |       |   | 1,145    |        |              |   | 3,670 |       
|Propane                |       |   |         |        |              |   | 1,096 |       
|Butanes                |       |   | 2,280    |        |              |   | 1,431 |       
|Other products         |       |   | 4,300    |        |              |   | 3,744 |       
|Materials and supplies |       |   | 4,392    |        |              |   | 3,519 |       
|                       |       |   |          |        |              |   |       |       
|                       | Total |   | $        | 13,675 |              |   | $     | 17,243 | 
|                       |       |   |          |        |              |   |       |       

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

NOTE 7. EQUITY INVESTMENTS

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

In August 2000, TE Products entered into agreements with 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. CMS Energy
Corporation has announced that it is exploring the sale of certain of
its assets, including its investment in Centennial. Through December 31,
2001, we contributed approximately $70 million for our investment in
Centennial. During the six months ended June 30, 2002, we contributed
approximately $7.7 million for our investment in Centennial. These amounts are
included in the equity investment balance at June 30, 2002.

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

11



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TEPPCO PARTNERS, L.P.

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

|           |  |                           |        |      |  |   |        | 
|---------- |  | ------------------------- | ------ | ---- |  | - | ------ | 
|           |  | Six Months Ended June 30,
|           |  |                          
|           |  | 2002                      |        | 2001
|           |  |                           |        |     
|Revenues   |  | $                         | 35,847 |      |  | $ | 35,315 | 
|Net income |  |                           | 5,256  |      |  |   | 16,069 | 

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

|                       |  |          |         |              |  |   |         | 
|---------------------- |  | -------- | ------- | ------------ |  | - | ------- | 
|                       |  | June 30, |         | December 31,
|                       |  | 2002     |         | 2001        
|                       |  |          |         |             
|Current assets         |  | $        | 43,420  |              |  | $ | 57,368  | 
|Noncurrent assets      |  |          | 546,808 |              |  |   | 528,835 | 
|Current liabilities    |  |          | 18,512  |              |  |   | 31,308  | 
|Long-term debt         |  |          | 140,000 |              |  |   | 128,000 | 
|Noncurrent liabilities |  |          | 14,553  |              |  |   |        | 
|Partners capital      |  |          | 417,163 |              |  |   | 426,895 | 

Our investment in Seaway at June 30, 2002, and December 31, 2001, includes
an excess net investment amount of $25.5 million. At June 30, 2002, our
investment in Centennial includes an excess investment of $32.7 million.
Excess investment is the amount by which our investment balance exceeds our
proportionate share of the net assets of the investment. Prior to January 1,
2002, and the adoption of SFAS 142, we were amortizing the excess investment in
Seaway using the straight-line method over 20 years.

NOTE 8. DEBT

Senior Notes

On January 27, 1998, TE Products completed the issuance of $180 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 June 30, 2002, TE Products was
in compliance with the covenants of the TE Products Senior Notes.

On February 20, 2002, we received $494.6 million in net proceeds from the
issuance of $500 million principal amount of 7.625% Senior Notes due 2012. The
7.625% Senior Notes were issued at a discount and are being accreted to their
face value over the term of the notes. We used the proceeds from the offering
to reduce a portion of the outstanding balances of our credit facilities,
including those issued in connection with the acquisition of Jonah. The Senior
Notes may be redeemed at any time at our option with the payment of accrued
interest and a

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TEPPCO PARTNERS, L.P.

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

make-whole premium determined by discounting remaining interest and principal
payments using a discount rate equal to the rate of the United States Treasury
securities of comparable remaining maturity plus 35 basis points. The
indenture governing our 7.625% Senior Notes contains covenants, including, but
not limited to, covenants limiting the creation of liens securing indebtedness
and sale and leaseback transactions. However, the indenture does not limit our
ability to incur additional indebtedness. As of June 30, 2002, we were in
compliance with the covenants of these Senior Notes.

We have entered into interest rate swap agreements to hedge our exposure
to changes in the fair value on a portion of the Senior Notes discussed above.
See Note 4. Derivative Financial Instruments.

Other Long Term Debt and Credit Facilities

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. 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, at our option, on either the lenders base rate plus a spread,
or LIBOR plus a spread in effect at the time of the borrowings. The credit
agreement for the Three Year Facility contains restrictive financial covenants
that require us to maintain a minimum level of partners capital as well as
maximum debt-to-EBITDA (earnings before interest expense, income tax expense
and depreciation and amortization expense) and minimum fixed charge coverage
ratios. On 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. To facilitate our financing of a portion of the purchase price of the
Val Verde assets, on June 27, 2002, the Three Year Facility was amended to
increase the maximum debt-to-EBITDA ratio covenant to allow us to incur
additional indebtedness. We then drew down the existing capacity of the Three
Year Facility. At June 30, 2002, $500 million was outstanding under the Three
Year Facility at a weighted average interest rate of 3.5%. As of June 30,
2002, we were in compliance with the covenants contained in this credit
agreement.

We have entered into an interest rate swap agreement to hedge our exposure
to increases in interest rates on the Three Year Facility discussed above. See
Note 4. Derivative Financial Instruments.

Short Term Credit Facilities

On April 6, 2001, we entered into a 364-day, $200 million revolving credit
agreement (Short-term Revolver). The interest rate is based, at our option,
on either the lenders base rate plus a spread, or LIBOR plus a spread in
effect at the time of the borrowings. The credit agreement contains
restrictive financial covenants that require us to maintain a minimum level of
partners capital as well as maximum debt-to-EBITDA and minimum fixed charge
coverage ratios. On March 27, 2002, the Short-term Revolver was extended for an
additional period of 364 days, ending in April 2003. To facilitate our
financing of a portion of the purchase price of the Val Verde assets, on June
27, 2002, the Short-term Revolver was amended to increase the maximum
debt-to-EBITDA ratio covenant to allow us to incur additional indebtedness. We
then drew down $72 million under the Short-term Revolver. At June 30, 2002,
$72 million was outstanding under the Short-term Revolver at an interest rate
of 3.5%. As of June 30, 2002, we were in compliance with the covenants
contained in this credit agreement.

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TEPPCO PARTNERS, L.P.

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

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 5. 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 June 27, 2002, we entered into a $200 million six-month term loan with
SunTrust Bank (Six-Month Term Loan). We borrowed $200 million under the
Six-Month Term Loan to acquire the Val Verde assets (see Note 5.
Acquisitions). The Six-Month Term Loan is payable in December 2002. The
interest rate is based, at our option, on either the lenders base rate plus a
spread, or LIBOR plus a spread in effect at the time of the borrowings. The
credit agreement contains restrictive financial covenants that require us to
maintain a minimum level of partners capital as well as maximum debt-to-EBITDA
and minimum fixed charge coverage ratios. At June 30, 2002, $200 million was
outstanding under the Six-Month Term Loan at an interest rate of 3.3%. As of
June 30, 2002, we were in compliance with the covenants contained in this
credit agreement.

On July 11, 2002, we issued 3 million Limited Partner Units at $30.15 per
Unit in an underwritten public offering. The net proceeds from the offering
totaled $86.6 million and were used to reduce borrowings under our Six-Month
Term Loan. In accordance with SFAS No. 6, Classification of Short-term
Obligations Expected to be Refinanced,the amount repaid on July 11, 2002,
$86.6 million, is classified as long-term debt at June 30, 2002.

The following table summarizes the principal outstanding under our credit
facilities as of June 30, 2002, and December 31, 2001 (in thousands):

|                              |                                                  |                                    |   |         |           |          |   |              |         |  |  | 
|----------------------------- | ------------------------------------------------ | ---------------------------------- | - | ------- | --------- | -------- | - | ------------ | ------- |  |  | 
|                              |                                                  |                                    |   |         |           | June 30, |   | December 31,
|                              |                                                  |                                    |   |         |           | 2002     |   | 2001        
|                              |                                                  |                                    |   |         |           |          |   |             
|Short Term Credit Facilities: |                                                  |                                    |   |         |           |          |   |             
|                              | Short-term Revolver, due April 2003              |                                    | $ | 72,000  |           |          | $ | 160,000      |        
|                              | Six-Month Term Loan, due December 2002           |                                    |   | 200,000 |           |          |   |             |        
|                              | Bridge Facility, due June 2002                   |                                    |   |        |           |          |   | 200,000      |        
|                              | Reclassification to Long Term Debt               |                                    |   | (86,606 | )         |          |   |             |        
|                              |                                                  |                                    |   |         |           |          |   |              |         | 
|                              |                                                  | Total Short Term Credit Facilities |   | $       | 185,394   |          |   | $            | 360,000 | 
|                              |                                                  |                                    |   |         |           |          |   |              |         | 
|Long Term Credit Facilities:  |                                                  |                                    |   |         |           |          |   |             
|                              | Reclassification from Short Term Debt            |                                    | $ | 86,606  |           |          | $ |             |        
|                              | Three Year Facility, due April 2004              |                                    |   | 500,000 |           |          |   | 340,658      |        
|                              | 6.45% TE Products Senior Notes, due January 2008 |                                    |   | 179,830 |           |          |   | 179,814      |        
|                              | 7.51% TE Products Senior Notes, due January 2028 |                                    |   | 210,000 |           |          |   | 210,000      |        
|                              | 7.625% Senior Notes, due February 2012           |                                    |   | 497,884 |           |          |   |             |        
|                              |                                                  |                                    |   |         |           |          |   |              |         | 
|                              |                                                  | Total Long Term Credit Facilities  |   | $       | 1,474,320 |          |   | $            | 730,472 | 
|                              |                                                  |                                    |   |         |           |          |   |              |         | 

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TEPPCO PARTNERS, L.P.

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

NOTE 9. 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 when cash distributions exceed certain
target thresholds as follows:

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

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

|                                       |                                            |   |                           |        |      |   |        |        | 
|-------------------------------------- | ------------------------------------------ | - | ------------------------- | ------ | ---- | - | ------ | ------ | 
|                                       |                                            |   | Six Months Ended June 30,
|                                       |                                            |   |                          
|                                       |                                            |   | 2002                      |        | 2001
|                                       |                                            |   |                           |        |     
|Limited Partner Units                  |                                            | $ | 47,646                    |        |      | $ | 35,516 |       
|General Partner Ownership Interest     |                                            |   | 1,064                     |        |      |   | 400    |       
|General Partner Incentive              |                                            |   | 15,361                    |        |      |   | 8,996  |       
|                                       |                                            |   |                           |        |      |   |        |       
|                                       | Total Partners Capital Cash Distributions |   |                           | 64,071 |      |   |        | 44,912 | 
|Class B Units                          |                                            |   | 4,504                     |        |      |   | 4,112  |       
|Minority Interest                      |                                            |   |                          |        |      |   | 500    |       
|                                       |                                            |   |                           |        |      |   |        |       
|                                       | Total Cash Distributions Paid              |   | $                         | 68,575 |      |   | $      | 49,524 | 
|                                       |                                            |   |                           |        |      |   |        |       
|Total Cash Distributions Paid Per Unit |                                            | $ | 1.150                     |        |      | $ | 1.050  |       
|                                       |                                            |   |                           |        |      |   |        |       

On August 8, 2002, we paid a cash distribution of $0.60 per Limited
Partner Unit and Class B Unit for the quarter ended June 30, 2002. The second
quarter 2002 cash distribution totaled $39.8 million.

NOTE 10. SEGMENT DATA

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

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

15



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TEPPCO PARTNERS, L.P.

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

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

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

Our Midstream Segment includes the fractionation of NGLs in Colorado; the
ownership and operation of two trunkline NGL pipelines in South Texas and two
NGL pipelines in East Texas; and the gathering of natural gas in the Green
River Basin in southwestern Wyoming, through Jonah, which was acquired by our
subsidiaries on September 30, 2001, from Alberta Energy Company. This segment
also includes Chaparral, which we acquired on March 1, 2002 (see Note 5.
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. On June 30,
2002, we acquired the Val Verde assets, which will be included in the Midstream
Segment in periods subsequent to June 30, 2002. The Val Verde system gathers
coal seam gas from the Fruitland Coal Formation of the San Juan Basin in New
Mexico and is one of the largest coal seam gas gathering and treating
facilities in the United States (see Note 5. Acquisitions).

The table below includes interim financial information by reporting
segment for the interim periods ended June 30, 2002, and 2001 (in thousands):

|                                      |                          |   |                                  |        |           |   |          |        |          |   |             |        |              |   |         |        |  |   |      |   |  |   |         |        | 
|------------------------------------- | ------------------------ | - | -------------------------------- | ------ | --------- | - | -------- | ------ | -------- | - | ----------- | ------ | ------------ | - | ------- | ------ |  | - | ---- | - |  | - | ------- | ------ | 
|                                      |                          |   | Three Months Ended June 30, 2002
|                                      |                          |   |                                 
|                                      |                          |   | Downstream                       |        | Midstream |   | Upstream |        | Segments |   | Partnership |        |              |   |        
|                                      |                          |   | Segment                          |        | Segment   |   | Segment  |        | Total    |   | and Other   |        | Consolidated
|                                      |                          |   |                                  |        |           |   |          |        |          |   |             |        |             
|Revenues                              |                          | $ | 54,656                           |        |           | $ | 24,366   |        |          | $ | 809,779     |        |              | $ | 888,801 |        |  | $ | (472 | ) |  | $ | 888,329 |       
|Operating expenses, including
power   |                          |   | 28,715                           |        |           |   | 4,503    |        |          |   | 800,987     |        |              |   | 834,205 |        |  |   | (472 | ) |  |   | 833,733 |       
|Depreciation and amortization
expense |                          |   | 7,364                            |        |           |   | 8,146    |        |          |   | 2,089       |        |              |   | 17,599  |        |  |   |     |   |  |   | 17,599  |       
|                                      |                          |   |                                  |        |           |   |          |        |          |   |             |        |              |   |         |        |  |   |      |   |  |   |         |       
|                                      | Operating income         |   |                                  | 18,577 |           |   |          | 11,717 |          |   |             | 6,703  |              |   |         | 36,997 |  |   |      |  |  |   |         | 36,997 | 
|Equity earnings                       |                          |   | (2,190                           | )      |           |   |         |        |          |   | 4,604       |        |              |   | 2,414   |        |  |   |     |   |  |   | 2,414   |       
|Other income, net                     |                          |   | 70                               |        |           |   | 162      |        |          |   | 534         |        |              |   | 766     |        |  |   |     |   |  |   | 766     |       
|                                      |                          |   |                                  |        |           |   |          |        |          |   |             |        |              |   |         |        |  |   |      |   |  |   |         |       
|                                      | Earnings before interest |   | $                                | 16,457 |           |   | $        | 11,879 |          |   | $           | 11,841 |              |   | $       | 40,177 |  |   | $    |  |  |   | $       | 40,177 | 
|                                      |                          |   |                                  |        |           |   |          |        |          |   |             |        |              |   |         |        |  |   |      |   |  |   |         |       

|                                      |                          |   |                                  |        |           |   |          |       |          |   |             |        |              |   |           |        |  |   |   |   |  |   |           |        | 
|------------------------------------- | ------------------------ | - | -------------------------------- | ------ | --------- | - | -------- | ----- | -------- | - | ----------- | ------ | ------------ | - | --------- | ------ |  | - | - | - |  | - | --------- | ------ | 
|                                      |                          |   | Three Months Ended June 30, 2001
|                                      |                          |   |                                 
|                                      |                          |   | Downstream                       |        | Midstream |   | Upstream |       | Segments |   | Partnership |        |              |   |          
|                                      |                          |   | Segment                          |        | Segment   |   | Segment  |       | Total    |   | and Other   |        | Consolidated
|                                      |                          |   |                                  |        |           |   |          |       |          |   |             |        |             
|Revenues                              |                          | $ | 78,546                           |        |           | $ | 7,361    |       |          | $ | 987,775     |        |              | $ | 1,073,682 |        |  | $ |  |   |  | $ | 1,073,682 |       
|Operating expenses, including
power   |                          |   | 30,529                           |        |           |   | 1,356    |       |          |   | 977,871     |        |              |   | 1,009,756 |        |  |   |  |   |  |   | 1,009,756 |       
|Depreciation and amortization
expense |                          |   | 6,703                            |        |           |   | 1,413    |       |          |   | 2,741       |        |              |   | 10,857    |        |  |   |  |   |  |   | 10,857    |       
|                                      |                          |   |                                  |        |           |   |          |       |          |   |             |        |              |   |           |        |  |   |   |   |  |   |           |       
|                                      | Operating income         |   |                                  | 41,314 |           |   |          | 4,592 |          |   |             | 7,163  |              |   |           | 53,069 |  |   |   |  |  |   |           | 53,069 | 
|Equity earnings                       |                          |   | (339                             | )      |           |   |         |       |          |   | 4,758       |        |              |   | 4,419     |        |  |   |  |   |  |   | 4,419     |       
|Other income, net                     |                          |   | 388                              |        |           |   | (9       | )     |          |   | 414         |        |              |   | 793       |        |  |   |  |   |  |   | 793       |       
|                                      |                          |   |                                  |        |           |   |          |       |          |   |             |        |              |   |           |        |  |   |   |   |  |   |           |       
|                                      | Earnings before interest |   | $                                | 41,363 |           |   | $        | 4,583 |          |   | $           | 12,335 |              |   | $         | 58,281 |  |   | $ |  |  |   | $         | 58,281 | 
|                                      |                          |   |                                  |        |           |   |          |       |          |   |             |        |              |   |           |        |  |   |   |   |  |   |           |       

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TEPPCO PARTNERS, L.P.

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

|                                      |                          |   |                                |        |           |   |          |        |          |   |             |        |              |   |           |        |  |   |        |   |  |   |           |        | 
|------------------------------------- | ------------------------ | - | ------------------------------ | ------ | --------- | - | -------- | ------ | -------- | - | ----------- | ------ | ------------ | - | --------- | ------ |  | - | ------ | - |  | - | --------- | ------ | 
|                                      |                          |   | Six Months Ended June 30, 2002
|                                      |                          |   |                               
|                                      |                          |   | Downstream                     |        | Midstream |   | Upstream |        | Segments |   | Partnership |        |              |   |          
|                                      |                          |   | Segment                        |        | Segment   |   | Segment  |        | Total    |   | and Other   |        | Consolidated
|                                      |                          |   |                                |        |           |   |          |        |          |   |             |        |             
|Revenues                              |                          | $ | 114,242                        |        |           | $ | 42,736   |        |          | $ | 1,363,667   |        |              | $ | 1,520,645 |        |  | $ | (1,179 | ) |  | $ | 1,519,466 |       
|Operating expenses, including
power   |                          |   | 57,822                         |        |           |   | 7,996    |        |          |   | 1,346,842   |        |              |   | 1,412,660 |        |  |   | (1,179 | ) |  |   | 1,411,481 |       
|Depreciation and amortization
expense |                          |   | 14,196                         |        |           |   | 15,291   |        |          |   | 4,153       |        |              |   | 33,640    |        |  |   |       |   |  |   | 33,640    |       
|                                      |                          |   |                                |        |           |   |          |        |          |   |             |        |              |   |           |        |  |   |        |   |  |   |           |       
|                                      | Operating income         |   |                                | 42,224 |           |   |          | 19,449 |          |   |             | 12,672 |              |   |           | 74,345 |  |   |        |  |  |   |           | 74,345 | 
|Equity earnings                       |                          |   | (2,986                         | )      |           |   |         |        |          |   | 8,972       |        |              |   | 5,986     |        |  |   |       |   |  |   | 5,986     |       
|Other income, net                     |                          |   | 194                            |        |           |   | 181      |        |          |   | 957         |        |              |   | 1,332     |        |  |   |       |   |  |   | 1,332     |       
|                                      |                          |   |                                |        |           |   |          |        |          |   |             |        |              |   |           |        |  |   |        |   |  |   |           |       
|                                      | Earnings before interest |   | $                              | 39,432 |           |   | $        | 19,630 |          |   | $           | 22,601 |              |   | $         | 81,663 |  |   | $      |  |  |   | $         | 81,663 | 
|                                      |                          |   |                                |        |           |   |          |        |          |   |             |        |              |   |           |        |  |   |        |   |  |   |           |       

|                                      |                          |   |                                |        |           |   |          |       |          |   |             |        |              |   |           |         |  |   |   |   |  |   |           |         | 
|------------------------------------- | ------------------------ | - | ------------------------------ | ------ | --------- | - | -------- | ----- | -------- | - | ----------- | ------ | ------------ | - | --------- | ------- |  | - | - | - |  | - | --------- | ------- | 
|                                      |                          |   | Six Months Ended June 30, 2001
|                                      |                          |   |                               
|                                      |                          |   | Downstream                     |        | Midstream |   | Upstream |       | Segments |   | Partnership |        |              |   |          
|                                      |                          |   | Segment                        |        | Segment   |   | Segment  |       | Total    |   | and Other   |        | Consolidated
|                                      |                          |   |                                |        |           |   |          |       |          |   |             |        |             
|Revenues                              |                          | $ | 140,847                        |        |           | $ | 13,966   |       |          | $ | 1,704,104   |        |              | $ | 1,858,917 |         |  | $ |  |   |  | $ | 1,858,917 |        
|Operating expenses, including
power   |                          |   | 57,877                         |        |           |   | 2,411    |       |          |   | 1,688,490   |        |              |   | 1,748,778 |         |  |   |  |   |  |   | 1,748,778 |        
|Depreciation and amortization
expense |                          |   | 13,376                         |        |           |   | 2,802    |       |          |   | 4,586       |        |              |   | 20,764    |         |  |   |  |   |  |   | 20,764    |        
|                                      |                          |   |                                |        |           |   |          |       |          |   |             |        |              |   |           |         |  |   |   |   |  |   |           |        
|                                      | Operating income         |   |                                | 69,594 |           |   |          | 8,753 |          |   |             | 11,028 |              |   |           | 89,375  |  |   |   |  |  |   |           | 89,375  | 
|Equity earnings                       |                          |   | (339                           | )      |           |   |         |       |          |   | 9,964       |        |              |   | 9,625     |         |  |   |  |   |  |   | 9,625     |        
|Other income, net                     |                          |   | 681                            |        |           |   | (9       | )     |          |   | 555         |        |              |   | 1,227     |         |  |   |  |   |  |   | 1,227     |        
|                                      |                          |   |                                |        |           |   |          |       |          |   |             |        |              |   |           |         |  |   |   |   |  |   |           |        
|                                      | Earnings before interest |   | $                              | 69,936 |           |   | $        | 8,744 |          |   | $           | 21,547 |              |   | $         | 100,227 |  |   | $ |  |  |   | $         | 100,227 | 
|                                      |                          |   |                                |        |           |   |          |       |          |   |             |        |              |   |           |         |  |   |   |   |  |   |           |        

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

|     |  |            |         |           |  |          |           |          |  |             |         |              |  |   |           |  |  |   |          |   |  |   |           | 
|---- |  | ---------- | ------- | --------- |  | -------- | --------- | -------- |  | ----------- | ------- | ------------ |  | - | --------- |  |  | - | -------- | - |  | - | --------- | 
|     |  | Downstream |         | Midstream |  | Upstream |           | Segments |  | Partnership |         |              |  |  
|     |  | Segment    |         | Segment   |  | Segment  |           | Total    |  | and Other   |         | Consolidated
|     |  |            |         |           |  |          |           |          |  |             |         |             
|2002 |  | $          | 865,729 |           |  | $        | 1,129,066 |          |  | $           | 862,247 |              |  | $ | 2,857,042 |  |  | $ | (118,396 | ) |  | $ | 2,738,646 | 
|2001 |  | $          | 844,036 |           |  | $        | 541,195   |          |  | $           | 694,934 |              |  | $ | 2,080,165 |  |  | $ | (14,817  | ) |  | $ | 2,065,348 | 

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TEPPCO PARTNERS, L.P.

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

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

|                         |            |   |                             |        |                           |   |         |        |      |   |         |        |  |   |         |        | 
|------------------------ | ---------- | - | --------------------------- | ------ | ------------------------- | - | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ | 
|                         |            |   | Three Months Ended June 30, |        | Six Months Ended June 30,
|                         |            |   |                             |        |                          
|                         |            |   | 2002                        |        | 2001                      |   | 2002    |        | 2001
|                         |            |   |                             |        |                           |   |         |        |      |   |         |        |  |   |         |       
|Earnings before interest |            | $ | 40,177                      |        |                           | $ | 58,281  |        |      | $ | 81,663  |        |  | $ | 100,227 |       
|Interest expense         |            |   | (16,829                     | )      |                           |   | (15,392 | )      |      |   | (33,616 | )      |  |   | (31,686 | )     
|Interest capitalized     |            |   | 1,029                       |        |                           |   | 590     |        |      |   | 3,138   |        |  |   | 935     |       
|Minority interest        |            |   |                            |        |                           |   | (441    | )      |      |   |        |        |  |   | (703    | )     
|                         |            |   |                             |        |                           |   |         |        |      |   |         |        |  |   |         |       
|                         | Net income |   | $                           | 24,377 |                           |   | $       | 43,038 |      |   | $       | 51,185 |  |   | $       | 68,773 | 
|                         |            |   |                             |        |                           |   |         |        |      |   |         |        |  |   |         |       

NOTE 11. 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 our pipeline, which crosses the plaintiffs
property, leaked toxic products onto the plaintiffs property. The plaintiffs
further contend that this leak caused damages to the plaintiffs. We have filed
an answer to the plaintiffs petition denying the allegations. The plaintiffs
have not stipulated the amount of damages they are seeking in the suit. We are
defending ourself vigorously against the lawsuit. We cannot estimate the
damages, if any, associated with this pending lawsuit, however; this case is
covered by insurance.

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

In addition to the litigation discussed above, we have been, in the
ordinary course of business, a defendant in various lawsuits and a party to
various other legal proceedings, some of which are covered in whole or in part
by

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TEPPCO PARTNERS, L.P.

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

insurance. We believe that the outcome of these lawsuits and other
proceedings will not individually or in the aggregate have a material adverse
effect on our consolidated financial position, results of operations or cash
flows.

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

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

In 1994, we entered into an Agreed Order with the Indiana Department of
Environmental Management (IDEM) that resulted in the implementation of a
remediation program for groundwater contamination attributable to our
operations at the Seymour, Indiana, terminal. In 1999, the IDEM approved a
Feasibility Study, which includes our proposed remediation program. We expect
the IDEM to issue a Record of Decision formally approving the remediation
program. After the Record of Decision is issued, we will enter into a
subsequent Agreed Order for the continued operation and maintenance of the
remediation program. We have an accrued liability of $0.5 million at June 30,
2002, for future remediation costs at the Seymour terminal. We do not expect
that the completion of the remediation program will have a future material
adverse effect on our financial position, results of operations or cash flows.

In 1994, the Louisiana Department of Environmental Quality (LDEQ) issued
a compliance order for environmental contamination at our Arcadia, Louisiana,
facility. This contamination may be attributable to our operations, as well as
adjacent petroleum terminals operated by other companies. In 1999, our Arcadia
facility and adjacent terminals were directed by the Remediation Services
Division of the LDEQ to pursue remediation of this containment phase. At June
30, 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 million in specified environmental
liabilities, and DEFS is responsible for those environmental liabilities in
excess of $3 million, up to a maximum amount of $25 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

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TEPPCO PARTNERS, L.P.

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

according to a work plan approved by the Oklahoma Corporation Commission.
At June 30, 2002, an accrual of $5.3 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 June 30, 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 12. 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 six months ended June 30,
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 and six months ended June 30, 2002, and 2001 (in thousands).

|                                                       |                            |   |                             |        |                           |   |        |        |      |   |        |        |  |   |         |        | 
|------------------------------------------------------ | -------------------------- | - | --------------------------- | ------ | ------------------------- | - | ------ | ------ | ---- | - | ------ | ------ |  | - | ------- | ------ | 
|                                                       |                            |   | Three Months Ended June 30, |        | Six Months Ended June 30,
|                                                       |                            |   |                             |        |                          
|                                                       |                            |   | 2002                        |        | 2001                      |   | 2002   |        | 2001
|                                                       |                            |   |                             |        |                           |   |        |        |     
|Net income                                             |                            | $ | 24,377                      |        |                           | $ | 43,038 |        |      | $ | 51,185 |        |  | $ | 68,773  |       
|Cumulative effect attributable to
adoption of SFAS 133 |                            |   |                            |        |                           |   |       |        |      |   |       |        |  |   | (10,103 | )     
|Net income (loss) on cash flow hedges                  |                            |   | (2,952                      | )      |                           |   | 7,646  |        |      |   | 348    |        |  |   | 5,385   |       
|                                                       |                            |   |                             |        |                           |   |        |        |      |   |        |        |  |   |         |       
|                                                       | Total comprehensive income |   | $                           | 21,425 |                           |   | $      | 50,684 |      |   | $      | 51,533 |  |   | $       | 64,055 | 
|                                                       |                            |   |                             |        |                           |   |        |        |      |   |        |        |  |   |         |       

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         |   |         | 348     |  
|                             |                                        |   |         |        
|Balance at June 30, 2002     |                                        | $ | (19,976 | )      
|                             |                                        |   |         |        

NOTE 13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

In connection with our issuance of Senior Notes on February 20, 2002, TE
Products Pipeline Company, Limited Partnership, TCTM, L.P., TEPPCO Midstream
Companies, L.P. and Jonah Gas Gathering Company, our significant operating
subsidiaries, issued unconditional guarantees of our debt securities.
Effective with the

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TEPPCO PARTNERS, L.P.

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

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

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

|                                  |                                                   |                                         |   |                |           |              |   |               |           |                   |   |           |           |  |   |            |            |   |   |           |           | 
|--------------------------------- | ------------------------------------------------- | --------------------------------------- | - | -------------- | --------- | ------------ | - | ------------- | --------- | ----------------- | - | --------- | --------- |  | - | ---------- | ---------- | - | - | --------- | --------- | 
|                                  |                                                   |                                         |   |                |           |              |   |               |           |                   |   |           |           |  |   |            |            |   |   | TEPPCO   
|                                  |                                                   |                                         |   | TEPPCO         |           | Guarantor    |   | Non-Guarantor |           | Consolidating     |   | Partners,
|June 30, 2002                     |                                                   | Partners,L.P.                           |   | Subsidiaries   |           | Subsidiaries |   | Adjustments   |           | L.P. Consolidated
|                                  |                                                   |                                         |   |                |           |              |   |               |           |                  
|                                  |                                                   |                                         |   | (in thousands)
|Assets                            |                                                   |                                         |   |                |           |              |   |               |           |                   |   |           |           |  |   |            |            |   |   |          
|                                  | Current assets                                    |                                         | $ | 19,388         |           |              | $ | 68,596        |           |                   | $ | 408,352   |           |  | $ | (146,428   | )          |   | $ | 349,908   |          
|                                  | Property, plant and equipment  net               |                                         |   |               |           |              |   | 1,068,595     |           |                   |   | 462,754   |           |  |   |           |            |   |   | 1,531,349 |          
|                                  | Equity investments                                |                                         |   | 710,335        |           |              |   | 1,080,511     |           |                   |   | 218,357   |           |  |   | (1,716,697 | )          |   |   | 292,506   |          
|                                  | Intercompany notes receivable                     |                                         |   | 1,269,004      |           |              |   |              |           |                   |   |          |           |  |   | (1,269,004 | )          |   |   |          |          
|                                  | Other assets                                      |                                         |   | 8,725          |           |              |   | 490,337       |           |                   |   | 65,821    |           |  |   |           |            |   |   | 564,883   |          
|                                  |                                                   |                                         |   |                |           |              |   |               |           |                   |   |           |           |  |   |            |            |   |   |           |          
|                                  |                                                   | Total assets                            |   | $              | 2,007,452 |              |   | $             | 2,708,039 |                   |   | $         | 1,155,284 |  |   | $          | (3,132,129 | ) |   | $         | 2,738,646 | 
|                                  |                                                   |                                         |   |                |           |              |   |               |           |                   |   |           |           |  |   |            |            |   |   |           |          
|Liabilities
and partners capital |                                                   |                                         |   |                |           |              |   |               |           |                   |   |           |           |  |   |            |           
|                                  | Current liabilities                               |                                         | $ | 221,407        |           |              | $ | 81,602        |           |                   | $ | 387,609   |           |  | $ | (147,835   | )          |   | $ | 542,783   |          
|                                  | Long-term debt                                    |                                         |   | 1,084,490      |           |              |   | 389,830       |           |                   |   |          |           |  |   |           |            |   |   | 1,474,320 |          
|                                  | Intercompany notes payable                        |                                         |   |               |           |              |   | 800,317       |           |                   |   | 467,280   |           |  |   | (1,267,597 | )          |   |   |          |          
|                                  | Other long term liabilities and
minority interest |                                         |   | 9,349          |           |              |   | 19,756        |           |                   |   | 231       |           |  |   |           |            |   |   | 29,336    |          
|                                  | Redeemable Class B Units held by
related party    |                                         |   | 104,360        |           |              |   |              |           |                   |   |          |           |  |   |           |            |   |   | 104,360   |          
|                                  | Total partners capital                           |                                         |   | 587,846        |           |              |   | 1,416,534     |           |                   |   | 300,164   |           |  |   | (1,716,697 | )          |   |   | 587,847   |          
|                                  |                                                   |                                         |   |                |           |              |   |               |           |                   |   |           |           |  |   |            |            |   |   |           |          
|                                  |                                                   | Total liabilities and partners capital |   | $              | 2,007,452 |              |   | $             | 2,708,039 |                   |   | $         | 1,155,284 |  |   | $          | (3,132,129 | ) |   | $         | 2,738,646 | 
|                                  |                                                   |                                         |   |                |           |              |   |               |           |                   |   |           |           |  |   |            |            |   |   |           |          

21



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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.
|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 | 
|                                  |                                                   |                                         |   |                |           |              |   |               |           |               |   |                |         |  |   |          |            |   |        |           |          

|                                 |                  |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   |         |        | 
|-------------------------------- | ---------------- | -------------- | -------------- | ------------ | --------- | ------------ | ------------- | ----------- | ------------- | ----------------- | --------- | ------ |  | - | ------- | ------- | - | - | ------- | ------ | 
|                                 |                  |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   | TEPPCO 
|                                 |                  |                | TEPPCO         |              | Guarantor |              | Non-Guarantor |             | Consolidating |                   | Partners,
|Three Months Ended June 30, 2002 |                  | Partners, L.P. |                | Subsidiaries |           | Subsidiaries |               | Adjustments |               | L.P. Consolidated
|                                 |                  |                |                |              |           |              |               |             |               |                  
|                                 |                  |                | (in thousands)
|Operating revenues               |                  | $              |               |              |           | $            | 66,574        |             |               | $                 | 822,227   |        |  | $ | (472    | )       |   | $ | 888,329 |       
|Costs and expenses               |                  |                |               |              |           |              | 43,612        |             |               |                   | 808,192   |        |  |   | (472    | )       |   |   | 851,332 |       
|                                 |                  |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   |         |       
|                                 | Operating income |                |                |             |           |              |               | 22,962      |               |                   |           | 14,035 |  |   |         |        |   |   |         | 36,997 | 
|                                 |                  |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   |         |       
|Interest expense  net           |                  |                | (11,706        | )            |           |              | (8,888        | )           |               |                   | (6,912    | )      |  |   | 11,706  |         |   |   | (15,800 | )     
|Equity earnings                  |                  |                | 24,377         |              |           |              | 12,442        |             |               |                   | 4,604     |        |  |   | (39,009 | )       |   |   | 2,414   |       
|Other income  net               |                  |                | 11,706         |              |           |              | 220           |             |               |                   | 546       |        |  |   | (11,706 | )       |   |   | 766     |       
|                                 |                  |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   |         |       
|                                 | Net income       |                | $              | 24,377       |           |              | $             | 26,736      |               |                   | $         | 12,273 |  |   | $       | (39,009 | ) |   | $       | 24,377 | 
|                                 |                  |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   |         |       

22



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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 June 30, 2001 |                                 | Partners, L.P. |                | Subsidiaries |           | Subsidiaries |               | Adjustments |               | Consolidated
|                                 |                                 |                |                |              |           |              |               |             |               |             
|                                 |                                 |                | (in thousands)
|Operating revenues               |                                 | $              |               |              |           | $            | 78,546        |             |               | $            | 995,136        |        |  | $ |        |         |   | $ | 1,073,682 |       
|Costs and expenses               |                                 |                |               |              |           |              | 37,233        |             |               |              | 983,380        |        |  |   |        |         |   |   | 1,020,613 |       
|                                 |                                 |                |                |              |           |              |               |             |               |              |                |        |  |   |         |         |   |   |           |       
|                                 | Operating income                |                |                |             |           |              |               | 41,313      |               |              |                | 11,756 |  |   |         |        |   |   |           | 53,069 | 
|                                 |                                 |                |                |              |           |              |               |             |               |              |                |        |  |   |         |         |   |   |           |       
|Interest expense  net           |                                 |                | (8,431         | )            |           |              | (7,355        | )           |               |              | (7,447         | )      |  |   | 8,431   |         |   |   | (14,802   | )     
|Equity earnings                  |                                 |                | 43,038         |              |           |              | 9,132         |             |               |              | 4,758          |        |  |   | (52,509 | )       |   |   | 4,419     |       
|Other income  net               |                                 |                | 8,431          |              |           |              | 389           |             |               |              | 404            |        |  |   | (8,431  | )       |   |   | 793       |       
|                                 |                                 |                |                |              |           |              |               |             |               |              |                |        |  |   |         |         |   |   |           |       
|                                 | Income before minority interest |                |                | 43,038       |           |              |               | 43,479      |               |              |                | 9,471  |  |   |         | (52,509 | ) |   |           | 43,479 | 
|Minority interest                |                                 |                |               |              |           |              |              |             |               |              |               |        |  |   | (441    | )       |   |   | (441      | )     
|                                 |                                 |                |                |              |           |              |               |             |               |              |                |        |  |   |         |         |   |   |           |       
|                                 | Net income                      |                | $              | 43,038       |           |              | $             | 43,479      |               |              | $              | 9,471  |  |   | $       | (52,950 | ) |   | $         | 43,038 | 
|                                 |                                 |                |                |              |           |              |               |             |               |              |                |        |  |   |         |         |   |   |           |       

|                               |                  |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   |           |        | 
|------------------------------ | ---------------- | -------------- | -------------- | ------------ | --------- | ------------ | ------------- | ----------- | ------------- | ----------------- | --------- | ------ |  | - | ------- | ------- | - | - | --------- | ------ | 
|                               |                  |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   | TEPPCO   
|                               |                  |                | TEPPCO         |              | Guarantor |              | Non-Guarantor |             | Consolidating |                   | Partners,
|Six Months Ended June 30, 2002 |                  | Partners, L.P. |                | Subsidiaries |           | Subsidiaries |               | Adjustments |               | L.P. Consolidated
|                               |                  |                |                |              |           |              |               |             |               |                  
|                               |                  |                | (in thousands)
|Operating revenues             |                  | $              |               |              |           | $            | 136,362       |             |               | $                 | 1,384,283 |        |  | $ | (1,179  | )       |   | $ | 1,519,466 |       
|Costs and expenses             |                  |                |               |              |           |              | 86,636        |             |               |                   | 1,359,664 |        |  |   | (1,179  | )       |   |   | 1,445,121 |       
|                               |                  |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   |           |       
|                               | Operating income |                |                |             |           |              |               | 49,726      |               |                   |           | 24,619 |  |   |         |        |   |   |           | 74,345 | 
|                               |                  |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   |           |       
|Interest expense  net         |                  |                | (23,139        | )            |           |              | (16,538       | )           |               |                   | (13,940   | )      |  |   | 23,139  |         |   |   | (30,478   | )     
|Equity earnings                |                  |                | 51,185         |              |           |              | 20,550        |             |               |                   | 8,972     |        |  |   | (74,721 | )       |   |   | 5,986     |       
|Other income  net             |                  |                | 23,139         |              |           |              | 353           |             |               |                   | 979       |        |  |   | (23,139 | )       |   |   | 1,332     |       
|                               |                  |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   |           |       
|                               | Net income       |                | $              | 51,185       |           |              | $             | 54,091      |               |                   | $         | 20,630 |  |   | $       | (74,721 | ) |   | $         | 51,185 | 
|                               |                  |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   |           |       

|                               |                                 |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   |           |        | 
|------------------------------ | ------------------------------- | -------------- | -------------- | ------------ | --------- | ------------ | ------------- | ----------- | ------------- | ----------------- | --------- | ------ |  | - | ------- | ------- | - | - | --------- | ------ | 
|                               |                                 |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   | TEPPCO   
|                               |                                 |                | TEPPCO         |              | Guarantor |              | Non-Guarantor |             | Consolidating |                   | Partners,
|Six Months Ended June 30, 2001 |                                 | Partners, L.P. |                | Subsidiaries |           | Subsidiaries |               | Adjustments |               | L.P. Consolidated
|                               |                                 |                |                |              |           |              |               |             |               |                  
|                               |                                 |                | (in thousands)
|Operating revenues             |                                 | $              |               |              |           | $            | 140,847       |             |               | $                 | 1,718,070 |        |  | $ |        |         |   | $ | 1,858,917 |       
|Costs and expenses             |                                 |                |               |              |           |              | 71,253        |             |               |                   | 1,698,289 |        |  |   |        |         |   |   | 1,769,542 |       
|                               |                                 |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   |           |       
|                               | Operating income                |                |                |             |           |              |               | 69,594      |               |                   |           | 19,781 |  |   |         |        |   |   |           | 89,375 | 
|                               |                                 |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   |           |       
|Interest expense  net         |                                 |                | (17,803        | )            |           |              | (14,979       | )           |               |                   | (15,772   | )      |  |   | 17,803  |         |   |   | (30,751   | )     
|Equity earnings                |                                 |                | 68,773         |              |           |              | 14,180        |             |               |                   | 9,964     |        |  |   | (83,292 | )       |   |   | 9,625     |       
|Other income  net             |                                 |                | 17,803         |              |           |              | 681           |             |               |                   | 546       |        |  |   | (17,803 | )       |   |   | 1,227     |       
|                               |                                 |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   |           |       
|                               | Income before minority interest |                |                | 68,773       |           |              |               | 69,476      |               |                   |           | 14,519 |  |   |         | (83,292 | ) |   |           | 69,476 | 
|Minority interest              |                                 |                |               |              |           |              |              |             |               |                   |          |        |  |   | (703    | )       |   |   | (703      | )     
|                               |                                 |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   |           |       
|                               | Net income                      |                | $              | 68,773       |           |              | $             | 69,476      |               |                   | $         | 14,519 |  |   | $       | (83,995 | ) |   | $         | 68,773 | 
|                               |                                 |                |                |              |           |              |               |             |               |                   |           |        |  |   |         |         |   |   |           |       

23



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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,
|Six Months Ended June 30, 2002                       |            | Partners, L.P.                                                                              |                                             | Subsidiaries |                | Subsidiaries |           | Adjustments |               | L.P. Consolidated
|                                                     |            |                                                                                             |                                             |              |                |              |           |             |               |                  
|                                                     |            |                                                                                             |                                             |              | (in thousands)
|Cash flows from operating activities                 |            |                                                                                             |                                             |              |                |              |           |             |               |                   |               |        |           |         |          |         |   |         |          |       
|                                                     | Net income |                                                                                             | $                                           | 51,185       |                |              | $         | 54,091      |               |                   | $             | 20,630 |           |         | $        | (74,721 | ) |         | $        | 51,185 |       
|                                                     |            | Adjustments to reconcile net income to
net cash provided by (used in)
operating activities: |                                             |              |                |              |           |             |               |                   |               |        |           |         |          |         |   |         |          |        |        |       
|                                                     |            |                                                                                             | Depreciation and amortization               |              |                |             |           |             |               | 25,021            |               |        |           | 8,619   |          |         |   |        |          |        |        | 33,640 | 
|                                                     |            |                                                                                             | Equity earnings, net of distributions       |              |                | 17,391       |           |             |               | 2,142             |               |        |           | 4,458   |          |         |   | (16,547 | )        |        |        | 7,444  | 
|                                                     |            |                                                                                             | Changes in assets and liabilities
and other |              |                | (564,188     | )         |             |               | 25,389            |               |        |           | (17,880 | )        |         |   | 561,868 |          |        |        | 5,189  | 
|                                                     |            |                                                                                             |                                             |              |                |              |           |             |               |                   |               |        |           |         |          |         |   |         |          |        |       
|Net cash provided by (used in) operating
activities  |            |                                                                                             | (495,612                                    | )            |                |              | 106,643   |             |               |                   | 15,827        |        |           |         | 470,600  |         |   |         | 97,458   |       
|                                                     |            |                                                                                             |                                             |              |                |              |           |             |               |                   |               |        |           |         |          |         |   |         |          |        |       
|Cash flows from investing activities                 |            |                                                                                             | (58,406                                     | )            |                |              | (511,431  | )           |               |                   | (140,080      | )      |           |         | 58,406   |         |   |         | (651,511 | )     
|Cash flows from financing activities                 |            |                                                                                             | 554,018                                     |              |                |              | 408,499   |             |               |                   | 120,467       |        |           |         | (529,006 | )       |   |         | 553,978  |       
|                                                     |            |                                                                                             |                                             |              |                |              |           |             |               |                   |               |        |           |         |          |         |   |         |          |        |       
|Net increase (decrease) in cash and cash
equivalents |            |                                                                                             |                                            |              |                |              | 3,711     |             |               |                   | (3,786        | )      |           |         |         |         |   |         | (75      | )     
|Cash and cash equivalents at beginning of
period     |            |                                                                                             |                                            |              |                |              | 3,655     |             |               |                   | 21,824        |        |           |         |         |         |   |         | 25,479   |       
|                                                     |            |                                                                                             |                                             |              |                |              |           |             |               |                   |               |        |           |         |          |         |   |         |          |        |       
|Cash and cash equivalents at end of period           |            | $                                                                                           |                                            |              |                | $            | 7,366     |             |               | $                 | 18,038        |        |           | $       |         |         |   | $       | 25,404   |       
|                                                     |            |                                                                                             |                                             |              |                |              |           |             |               |                   |               |        |           |         |          |         |   |         |          |        |       

|                                                    |            |                                                                                             |                                             |              |                |              |           |             |               |                   |               |        |           |         |         |         |   |        |         |        |        |         |  
|--------------------------------------------------- | ---------- | ------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------ | -------------- | ------------ | --------- | ----------- | ------------- | ----------------- | ------------- | ------ | --------- | ------- | ------- | ------- | - | ------ | ------- | ------ | ------ | ------- | -
|                                                    |            |                                                                                             |                                             |              |                |              |           |             |               |                   |               |        |           |         |         |         |   |        |         |        | TEPPCO
|                                                    |            |                                                                                             |                                             |              | TEPPCO         |              | Guarantor |             | Non-Guarantor |                   | Consolidating |        | Partners,
|Six Months Ended June 30, 2001                      |            | Partners, L.P.                                                                              |                                             | Subsidiaries |                | Subsidiaries |           | Adjustments |               | L.P. Consolidated
|                                                    |            |                                                                                             |                                             |              |                |              |           |             |               |                  
|                                                    |            |                                                                                             |                                             |              | (in thousands)
|Cash flows from operating activities                |            |                                                                                             |                                             |              |                |              |           |             |               |                   |               |        |           |         |         |         |   |        |         |       
|                                                    | Net income |                                                                                             | $                                           | 68,773       |                |              | $         | 69,476      |               |                   | $             | 14,519 |           |         | $       | (83,995 | ) |        | $       | 68,773 |       
|                                                    |            | Adjustments to reconcile net income to
net cash provided by (used in)
operating activities: |                                             |              |                |              |           |             |               |                   |               |        |           |         |         |         |   |        |         |        |        |        
|                                                    |            |                                                                                             | Depreciation and amortization               |              |                |             |           |             |               | 13,376            |               |        |           | 7,388   |         |         |   |       |         |        |        | 20,764  |  
|                                                    |            |                                                                                             | Equity earnings, net of distributions       |              |                | (19,750      | )         |             |               | 1,279             |               |        |           | 4,212   |         |         |   | 18,716 |         |        |        | 4,457   |  
|                                                    |            |                                                                                             | Changes in assets and liabilities
and other |              |                | 1            |           |             |               | (1,792            | )             |        |           | (31,374 | )       |         |   | 703    |         |        |        | (32,462 | )
|                                                    |            |                                                                                             |                                             |              |                |              |           |             |               |                   |               |        |           |         |         |         |   |        |         |        |       
|Net cash provided by (used in) operating
activities |            |                                                                                             | 49,024                                      |              |                |              | 82,339    |             |               |                   | (5,255        | )      |           |         | (64,576 | )       |   |        | 61,532  |       
|                                                    |            |                                                                                             |                                             |              |                |              |           |             |               |                   |               |        |           |         |         |         |   |        |         |        |       
|Cash flows from investing activities                |            |                                                                                             | (47,139                                     | )            |                |              | (48,554   | )           |               |                   | (25,450       | )      |           |         | 47,139  |         |   |        | (74,004 | )     
|Cash flows from financing activities                |            |                                                                                             | (1,885                                      | )            |                |              | (42,951   | )           |               |                   | 25,577        |        |           |         | 17,437  |         |   |        | (1,822  | )     
|                                                    |            |                                                                                             |                                             |              |                |              |           |             |               |                   |               |        |           |         |         |         |   |        |         |        |       
|Net decrease in cash and cash equivalents           |            |                                                                                             |                                            |              |                |              | (9,166    | )           |               |                   | (5,128        | )      |           |         |        |         |   |        | (14,294 | )     
|Cash and cash equivalents at beginning of
period    |            |                                                                                             |                                            |              |                |              | 9,166     |             |               |                   | 17,929        |        |           |         |        |         |   |        | 27,095  |       
|                                                    |            |                                                                                             |                                             |              |                |              |           |             |               |                   |               |        |           |         |         |         |   |        |         |        |       
|Cash and cash equivalents at end of period          |            | $                                                                                           |                                            |              |                | $            |          |             |               | $                 | 12,801        |        |           | $       |        |         |   | $      | 12,801  |       
|                                                    |            |                                                                                             |                                             |              |                |              |           |             |               |                   |               |        |           |         |         |         |   |        |         |        |       

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##### Table of Contents



TEPPCO PARTNERS, L.P.

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

NOTE 14. SUBSEQUENT EVENTS

On July 16, 2002, we terminated our interest rate swap agreements that
were designated as hedges to our exposure to changes in the fair value of our
$500 million principal amount of 7.625% fixed rate Senior Notes due 2012. The
fair value upon termination of the interest rate swap agreements was $25.8
million. Approximately $7.8 million had been recognized as a reduction to
interest expense from the inception of the swap agreement on February 20, 2002,
through its termination on July 16, 2002. The remaining gain of $18 million
will be amortized as a reduction to future interest expense over the remaining
term of the Senior Notes.

Additionally, on July 16, 2002, we entered into new interest rate swap
agreements to hedge our future exposure to changes in the fair value of our
$500 million principal amount of 7.625% fixed rate Senior Notes due 2012. We
have designated these swap agreements 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 these swap agreements, we pay
a floating rate based on a six month U.S. Dollar LIBOR rate, plus a spread,
which increased by approximately 50 basis points from the previous swap
agreements, and receive a fixed rate of interest of 7.625%.

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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 certain trends, future plans or contingencies that
could affect future liquidity or earnings. These Consolidated Financial
Statements should be read in conjunction with the financial statements and
related notes, together with our discussion and analysis of financial position
and results of operations included in our Annual Report on Form 10-K, as
amended, for the year ended December 31, 2001.

We operate and report in three business segments:

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

Our reportable segments offer different products and services and are
managed separately because each requires different business strategies. TEPPCO
GP, 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 to
reflect our entry into the natural gas gathering business and the expanded
scope of NGLs operations. We transferred the fractionation of NGLs, which were
previously reflected as part of the Downstream Segment, to the Midstream
Segment. The operation of NGL pipelines, which was previously reflected as
part of the Upstream Segment, was also transferred to the Midstream Segment.
We have adjusted our period-to-period comparisons to conform to the current
presentation.

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

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

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

26Table of Contents

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.

On March 1, 2002, we acquired the Chaparral NGL system from Diamond-Koch
II, L.P. and Diamond-Koch III, L.P. for $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 our existing
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.

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

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##### Table of Contents



Results of Operations

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

|                          |                           |                          |                                |         |                             |        |                           |         |           |        |         |           |           |        |         |           |           |         | 
|------------------------- | ------------------------- | ------------------------ | ------------------------------ | ------- | --------------------------- | ------ | ------------------------- | ------- | --------- | ------ | ------- | --------- | --------- | ------ | ------- | --------- | --------- | ------- | 
|                          |                           |                          |                                |         | Three Months Ended June 30, |        | Six Months Ended June 30,
|                          |                           |                          |                                |         |                             |        |                          
|                          |                           |                          |                                |         | 2002                        |        | 2001                      |         | 2002      |        | 2001   
|                          |                           |                          |                                |         |                             |        |                           |         |           |        |        
|Operating revenues:       |                           |                          |                                |         |                             |        |                           |         |           |        |         |           |           |        |         |          
|                          | Downstream Segment        |                          | $                              | 54,656  |                             |        | $                         | 78,546  |           |        | $       | 114,242   |           |        | $       | 140,847   |          
|                          | Upstream Segment          |                          |                                | 809,779 |                             |        |                           | 987,775 |           |        |         | 1,363,667 |           |        |         | 1,704,104 |          
|                          | Midstream Segment         |                          |                                | 24,366  |                             |        |                           | 7,361   |           |        |         | 42,736    |           |        |         | 13,966    |          
|                          | Intercompany eliminations |                          |                                | (472    | )                           |        |                           |        |           |        |         | (1,179    | )         |        |         |          |          
|                          |                           |                          |                                |         |                             |        |                           |         |           |        |         |           |           |        |         |           |           |        
|                          |                           | Total operating revenues |                                |         | 888,329                     |        |                           |         | 1,073,682 |        |         |           | 1,519,466 |        |         |           | 1,858,917 |        
|                          |                           |                          |                                |         |                             |        |                           |         |           |        |         |           |           |        |         |           |           |        
|Operating income:         |                           |                          |                                |         |                             |        |                           |         |           |        |         |           |           |        |         |          
|                          | Downstream Segment        |                          |                                | 18,577  |                             |        |                           | 41,314  |           |        |         | 42,224    |           |        |         | 69,594    |          
|                          | Upstream Segment          |                          |                                | 6,703   |                             |        |                           | 7,163   |           |        |         | 12,672    |           |        |         | 11,028    |          
|                          | Midstream Segment         |                          |                                | 11,717  |                             |        |                           | 4,592   |           |        |         | 19,449    |           |        |         | 8,753     |          
|                          |                           |                          |                                |         |                             |        |                           |         |           |        |         |           |           |        |         |           |           |        
|                          |                           | Total operating income   |                                |         | 36,997                      |        |                           |         | 53,069    |        |         |           | 74,345    |        |         |           | 89,375    |        
|                          |                           |                          |                                |         |                             |        |                           |         |           |        |         |           |           |        |         |           |           |        
|Earnings before interest: |                           |                          |                                |         |                             |        |                           |         |           |        |         |           |           |        |         |          
|                          | Downstream Segment        |                          |                                | 16,457  |                             |        |                           | 41,363  |           |        |         | 39,432    |           |        |         | 69,936    |          
|                          | Upstream Segment          |                          |                                | 11,841  |                             |        |                           | 12,335  |           |        |         | 22,601    |           |        |         | 21,547    |          
|                          | Midstream Segment         |                          |                                | 11,879  |                             |        |                           | 4,583   |           |        |         | 19,630    |           |        |         | 8,744     |          
|                          |                           |                          |                                |         |                             |        |                           |         |           |        |         |           |           |        |         |           |           |        
|                          |                           |                          | Total earnings before interest |         |                             | 40,177 |                           |         |           | 58,281 |         |           |           | 81,663 |         |           |           | 100,227 | 
|                          |                           |                          |                                |         |                             |        |                           |         |           |        |         |           |           |        |         |           |           |        
|Interest expense          |                           |                          | (16,829                        | )       |                             |        | (15,392                   | )       |           |        | (33,616 | )         |           |        | (31,686 | )        
|Interest capitalized      |                           |                          | 1,029                          |         |                             |        | 590                       |         |           |        | 3,138   |           |           |        | 935     |          
|Minority interest         |                           |                          |                               |         |                             |        | (441                      | )       |           |        |        |           |           |        | (703    | )        
|                          |                           |                          |                                |         |                             |        |                           |         |           |        |         |           |           |        |         |           |           |        
|                          |                           |                          | Net income                     |         | $                           | 24,377 |                           |         | $         | 43,038 |         |           | $         | 51,185 |         |           | $         | 68,773  | 
|                          |                           |                          |                                |         |                             |        |                           |         |           |        |         |           |           |        |         |           |           |        

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

Downstream Segment

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

|                          |  |                         |                                  |   |                                           |        |            |   |            |        |                  |  |      |     |            |   |        |        |  |   |        |        |  |  |     |     |   
|------------------------- |  | ----------------------- | -------------------------------- | - | ----------------------------------------- | ------ | ---------- | - | ---------- | ------ | ---------------- |  | ---- | --- | ---------- | - | ------ | ------ |  | - | ------ | ------ |  |  | --- | --- | --
|                          |  |                         |                                  |   | Three Months Ended                        |        |            |   |            |        | Six Months Ended |  |      |     |           
|                          |  |                         |                                  |   | June 30,                                  |        | Percentage |   | June 30,   |        | Percentage      
|                          |  |                         |                                  |   |                                           |        | Increase   |   |            |        | Increase        
|                          |  |                         |                                  |   | 2002                                      |        | 2001       |   | (Decrease) |        | 2002             |  | 2001 |     | (Decrease)
|                          |  |                         |                                  |   |                                           |        |            |   |            |        |                  |  |      |     |           
|                          |  |                         |                                  |   | (in thousands, except tariff information)
|Volumes Delivered         |  |                         |                                  |   |                                           |        |            |   |            |        |                  |  |      |     |            |   |        |        |  |   |        |        |  | 
|                          |  | Refined products        |                                  |   | 35,344                                    |        |            |   | 33,360     |        |                  |  | 6    | %   |            |   | 61,109 |        |  |   | 60,548 |        |  |  | 1   | %  
|                          |  | LPGs                    |                                  |   | 7,056                                     |        |            |   | 6,907      |        |                  |  | 2    | %   |            |   | 19,091 |        |  |   | 18,558 |        |  |  | 3   | %  
|                          |  | Mont Belvieu operations |                                  |   | 5,586                                     |        |            |   | 4,571      |        |                  |  | 22   | %   |            |   | 15,257 |        |  |   | 10,836 |        |  |  | 41  | %  
|                          |  |                         |                                  |   |                                           |        |            |   |            |        |                  |  |      |     |            |   |        |        |  |   |        |        |  |  |     |    
|                          |  |                         | Total                            |   |                                           | 47,986 |            |   |            | 44,838 |                  |  |      | 7   | %          |   |        | 95,457 |  |   |        | 89,942 |  |  |     | 6   | % 
|                          |  |                         |                                  |   |                                           |        |            |   |            |        |                  |  |      |     |            |   |        |        |  |   |        |        |  |  |     |    
|Average Tariff per Barrel |  |                         |                                  |   |                                           |        |            |   |            |        |                  |  |      |     |            |   |        |        |  |   |        |        |  | 
|
|                          |  | Refined products        |                                  | $ | 0.90                                      |        |            | $ | 0.97       |        |                  |  | (7   | %)  |            | $ | 0.93   |        |  | $ | 0.97   |        |  |  | (4  | %) 
|                          |  | LPGs                    |                                  |   | 1.53                                      |        |            |   | 1.96       |        |                  |  | (22  | %)  |            |   | 1.79   |        |  |   | 2.07   |        |  |  | (14 | %) 
|                          |  | Mont Belvieu operations |                                  |   | 0.13                                      |        |            |   | 0.18       |        |                  |  | (28  | %)  |            |   | 0.14   |        |  |   | 0.17   |        |  |  | (18 | %) 
|                          |  |                         | Average system tariff per barrel |   | $                                         | 0.90   |            |   | $          | 1.04   |                  |  |      | (14 | %)         |   | $      | 0.98   |  |   | $      | 1.10   |  |  |     | (11 | %)
|                          |  |                         |                                  |   |                                           |        |            |   |            |        |                  |  |      |     |            |   |        |        |  |   |        |        |  |  |     |    

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Three Months ended June 30, 2002 compared to Three Months ended June 30,
2001

Our Downstream Segment reported earnings before interest of $16.5 million
for the three months ended June 30, 2002, compared with earnings before
interest of $41.4 million for the three months ended June 30, 2001. Earnings
before interest decreased $24.9 million primarily due to a decrease of $23.9
million in operating revenues and losses of $2.2 million from equity
investments, partially offset by a decrease of $1.2 million in costs and
expenses. We discuss the factors influencing these variances below.

Revenues from refined products transportation decreased $19.6 million for
the three months ended June 30, 2002, compared with the three months ended June
30, 2001, due primarily to $18.9 million of revenue recognized in the 2001
period from a cash settlement received from a canceled transportation agreement
with Pennzoil-Quaker State Company (Pennzoil) and the recognition of $1.7
million of previously deferred revenue related to the approval of
market-based-rates during the second quarter of 2001. These decreases were
partially offset by a 6% increase in refined products volumes delivered during
the second quarter of 2002, primarily due to barrels received into our pipeline
from Centennial at Creal Springs, Illinois. Centennial commenced refined
products deliveries to us beginning in April 2002. The overall increase in
refined products deliveries was partially offset by a 0.7 million barrel
decrease in methyl tertiary butyl ether (MTBE) deliveries as a result of the
expiration of contract deliveries to our marine terminal near Beaumont, Texas,
effective April 2001. As a result of the contract expiration, we no longer
transport MTBE through our Products pipeline system. The refined products
average rate per barrel decreased 7% from the prior-year period due to the
impact of the Midwest origin point for volumes received from Centennial, which
was partially offset by decreased short-haul MTBE volumes delivered and higher
market-based tariff rates, which went into effect in July 2001.

Revenues from LPGs transportation decreased $2.7 million for the three
months ended June 30, 2002, compared with the three months ended June 30, 2001,
primarily due to decreased deliveries of propane in the upper Midwest and
Northeast market areas caused by lower prices from competing Canadian and
mid-continent propane supply as compared to propane originating from the Gulf
Coast. Total LPGs volumes delivered increased 2% as a result of increased
short-haul deliveries to a petrochemical facility on the upper Texas Gulf
Coast. The LPGs average rate per barrel decreased 22% from the prior-year
period as a result of a decreased percentage of long-haul deliveries during the
three months ended June 30, 2002.

Revenues generated from Mont Belvieu operations decreased $0.1 million
during the three months ended June 30, 2002, compared with the three months
ended June 30, 2001, as a result of increased contract shuttle deliveries,
which generally carry lower rates. Total Mont Belvieu shuttle volumes
delivered increased 22% during the three months ended June 30, 2002, compared
with the three months ended June 30, 2001, due to increased petrochemical
demand.

Other operating revenues decreased $1.5 million during the three months
ended June 30, 2002, compared with the three months ended June 30, 2001,
primarily due to lower propane deliveries at our Providence, Rhode Island,
import facility, lower refined product rental charges and lower margins on
product inventory sales. These decreases were partially offset by increased
refined products and LPGs loading fees.

Costs and expenses decreased $1.2 million for the three months ended June
30, 2002, compared with the three months ended June 30, 2001. The decrease was
comprised of a $3.7 million decrease in operating fuel and power expense,
partially offset by a $1 million increase in operating, general and
administrative expenses, a $0.7 million increase in depreciation and
amortization expense, and a $0.8 million increase in taxes  other than income
taxes. Operating fuel and power expense decreased as a result of decreased
mainline throughput and lower electric power costs. Operating, general and
administrative expenses increased primarily due to increased consulting and
contract services, increased rental charges and increased labor costs.
Depreciation expense increased from the prior-year period because of assets
placed in service during 2001. Taxes  other than income taxes increased as a
result of a higher property base in 2002.

Net losses from equity investments totaled $2.2 million during the three
months ended June 30, 2002, due to start-up expenses of Centennial. Centennial
commenced operations in early April 2002.

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Six Months Ended June 30, 2002 compared to Six Months Ended June 30, 2001

Our Downstream Segment reported earnings before interest of $39.4 million
for the six months ended June 30, 2002, compared with earnings before interest
of $69.9 million for the six months ended June 30, 2001. Earnings before
interest decreased $30.5 million primarily due to a decrease of $26.6 million
in operating revenues, an increase of $0.8 million in costs and expenses and
losses of $3 million from equity investments. We discuss the factors
influencing these variances below.

Revenues from refined products transportation decreased $20.6 million for
the six months ended June 30, 2002, compared with the six months ended June 30,
2001, due primarily to $18.9 million of revenue recognized in the 2001 period
from a cash settlement received from a canceled transportation agreement with
Pennzoil and the recognition of $1.7 million of previously deferred revenue
related to the approval of market-based-rates during the second quarter of
2001. These decreases were partially offset by a 1% increase in refined
products volumes delivered during the six months ended June 30, 2002, primarily
due to barrels received into our pipeline from Centennial at Creal Springs,
Illinois. Centennial commenced refined products deliveries to us beginning in
April 2002. The overall increase in refined products deliveries was partially
offset by a 1.3 million barrel decrease in MTBE deliveries as a result of the
expiration of contract deliveries to our marine terminal near Beaumont, Texas,
effective April 2001. As a result of the contract expiration, we no longer
transport MTBE through our Products pipeline system. The refined products
average rate per barrel decreased 4% from the prior-year period due to the
impact of the Midwest origin point for volumes received from Centennial, which
was partially offset by decreased short-haul MTBE volumes delivered and higher
market-based tariff rates, which went into effect in July 2001.

Revenues from LPGs transportation decreased $4.3 million for the six
months ended June 30, 2002, compared with the six months ended June 30, 2001,
primarily due to decreased deliveries of propane in the upper Midwest and
Northeast market areas attributable to warmer than normal weather. The
decrease is also due to lower prices from competing Canadian and mid-continent
propane supply as compared to propane originating from the Gulf Coast. Total
LPGs volumes delivered increased 3% as a result of increased short-haul
deliveries to a petrochemical facility on the upper Texas Gulf Coast. The LPGs
average rate per barrel decreased 14% from the prior-year period as a result of
a decreased percentage of long-haul deliveries during the six months ended June
30, 2002.

Revenues generated from Mont Belvieu operations increased $1.5 million
during the six months ended June 30, 2002, compared with the six months ended
June 30, 2001, as a result of increased storage revenue and brine service
revenue. Mont Belvieu shuttle volumes delivered increased 41% during the six
months ended June 30, 2002, compared with the six months ended June 30, 2001,
due to increased petrochemical demand. The Mont Belvieu average rate per
barrel decreased during the six months ended June 30, 2002, as a result of
increased contract shuttle deliveries, which generally carry lower rates.

Other operating revenues decreased $3.1 million during the six months
ended June 30, 2002, compared with the six months ended June 30, 2001,
primarily due to lower propane deliveries at our Providence, Rhode Island,
import facility, lower refined product rental charges, lower margins on product
inventory sales, and increased losses as a result of exchanging products at
different geographic points of delivery to position product in the Midwest
market area. These decreases were partially offset by increased refined
products and LPGs loading fees.

Costs and expenses increased $0.8 million for the six months ended June
30, 2002, compared with the six months ended June 30, 2001. The increase was
made up of a $3.6 million increase in operating, general and administrative
expenses, a $0.8 million increase in depreciation and amortization expense, and
a $1 million increase in taxes  other than income taxes. These increases
were partially offset by a $4.6 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 and lower power costs. Taxes  other than income taxes increased as
a result of a higher property base in 2002.

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Net losses from equity investments totaled $3 million during the six
months ended June 30, 2002, due to pre-operating expenses and start-up costs of
Centennial. Centennial commenced operations in early April 2002.

Upstream Segment

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

|                                       |                          |              |       |                    |        |            |       |            |        |                  |    |      |    |            |       |        |        |  |       |        |        |  |    |    |    |  
|-------------------------------------- | ------------------------ | ------------ | ----- | ------------------ | ------ | ---------- | ----- | ---------- | ------ | ---------------- | -- | ---- | -- | ---------- | ----- | ------ | ------ |  | ----- | ------ | ------ |  | -- | -- | -- | -
|                                       |                          |              |       | Three Months Ended |        |            |       |            |        | Six Months Ended |    |      |    |           
|                                       |                          |              |       | June 30,           |        | Percentage |       | June 30,   |        | Percentage      
|                                       |                          |              |       |                    |        | Increase   |       |            |        | Increase        
|                                       |                          |              |       | 2002               |        | 2001       |       | (Decrease) |        | 2002             |    | 2001 |    | (Decrease)
|                                       |                          |              |       |                    |        |            |       |            |        |                  |    |      |    |           
|Margins:                               |                          |              |       |                    |        |            |       |            |        |                  |    |      |    |            |       |        |        |  |       |        |        |  |    |   
|                                       | Crude oil transportation |              | $     | 9,721              |        |            | $     | 8,921      |        |                  |    | 9    | %  |            | $     | 18,909 |        |  | $     | 17,046 |        |  |    | 11 | % 
|                                       | Crude oil marketing      |              |       | 5,306              |        |            |       | 6,276      |        |                  |    | (16  | %) |            |       | 10,070 |        |  |       | 9,827  |        |  |    | 3  | % 
|                                       | Crude oil terminaling    |              |       | 2,543              |        |            |       | 2,546      |        |                  |    |     |    |            |       | 4,874  |        |  |       | 4,674  |        |  |    | 4  | % 
|                                       | Lubrication oil sales    |              |       | 1,230              |        |            |       | 984        |        |                  |    | 25   | %  |            |       | 2,365  |        |  |       | 2,118  |        |  |    | 12 | % 
|                                       |                          |              |       |                    |        |            |       |            |        |                  |    |      |    |            |       |        |        |  |       |        |        |  |    |    |   
|                                       |                          | Total margin |       | $                  | 18,800 |            |       | $          | 18,727 |                  |    |      |   |            |       | $      | 36,218 |  |       | $      | 33,665 |  |    |    | 8  | %
|                                       |                          |              |       |                    |        |            |       |            |        |                  |    |      |    |            |       |        |        |  |       |        |        |  |    |    |   
|Total barrels:                         |                          |              |       |                    |        |            |       |            |        |                  |    |      |    |            |       |        |        |  |       |        |        |  |    |   
|                                       | Crude oil transportation |              |       | 21,672             |        |            |       | 21,851     |        |                  |    | (1   | %) |            |       | 42,788 |        |  |       | 37,596 |        |  |    | 14 | % 
|                                       | Crude oil marketing      |              |       | 42,927             |        |            |       | 44,026     |        |                  |    | (3   | %) |            |       | 73,279 |        |  |       | 72,451 |        |  |    | 1  | % 
|                                       | Crude oil terminaling    |              |       | 33,064             |        |            |       | 32,460     |        |                  |    | 2    | %  |            |       | 62,339 |        |  |       | 57,122 |        |  |    | 9  | % 
|Lubrication oil volume (total gallons) |                          |              | 2,698 |                    |        |            | 2,134 |            |        |                  | 26 | %    |    |            | 4,892 |        |        |  | 4,389 |        |        |  | 12 | % 
|Margin per barrel:                     |                          |              |       |                    |        |            |       |            |        |                  |    |      |    |            |       |        |        |  |       |        |        |  |    |   
|                                       | Crude oil transportation |              | $     | 0.449              |        |            | $     | 0.408      |        |                  |    | 10   | %  |            | $     | 0.442  |        |  | $     | 0.453  |        |  |    | (3 | %)
|                                       | Crude oil marketing      |              |       | 0.124              |        |            |       | 0.143      |        |                  |    | (13  | %) |            |       | 0.137  |        |  |       | 0.136  |        |  |    | 1  | % 
|                                       | Crude oil terminaling    |              |       | 0.077              |        |            |       | 0.078      |        |                  |    | (2   | %) |            |       | 0.078  |        |  |       | 0.082  |        |  |    | (4 | %)
|Lubrication oil margin (per gallon)    |                          |              | 0.456 |                    |        |            | 0.461 |            |        |                  | (1 | %)   |    |            | 0.483 |        |        |  | 0.483 |        |        |  |   |   

Three Months ended June 30, 2002 compared to Three Months ended June 30, 2001

Our Upstream Segment reported earnings before interest of $11.8 million
for the three months ended June 30, 2002, compared with earnings before
interest of $12.3 million for the three months ended June 30, 2001. Earnings
before interest decreased $0.5 million primarily due to a $0.2 million decrease
in equity earnings of Seaway and a $0.4 million decrease in other revenue. We
discuss the factors influencing these variances below.

Our margin increased $0.1 million during the three months ended June 30,
2002, compared with the three months ended June 30, 2001. Crude oil
transportation margin increased $0.8 million primarily due to higher revenues
on our Basin and West Texas systems. Lubrication oil sales margin increased
$0.3 million due to increased volumes related to the acquisition of a
lubrication oil distributor in Amarillo, Texas, in the fourth quarter of 2001.
Crude oil marketing margin decreased $1 million primarily due to reduced
volumes marketed on Seaway by our marketing affiliate, partially offset by
renegotiated supply contracts and lower trucking expenses.

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

Costs and expenses, excluding expenses associated with purchases of crude
oil and lubrication oil, decreased slightly during the three months ended June
30, 2002, compared with the three months ended June 30, 2001. Taxes  other
than income taxes decreased by $1 million due to a reduction in estimated
property taxes for the period. Depreciation and amortization expense decreased
by $0.7 million due to the adoption of SFAS 142 effective January 1, 2002, (see
Note 3. Goodwill and Other Intangible Assets), in which goodwill and excess
investment are no longer being amortized, and operating fuel and power expense
decreased by $0.1 million due to lower electric power costs. These decreases
were offset by a $1.7 million increase in operating, general and administrative
expenses primarily due to increased labor related costs and increased general
and administrative supplies and services expense.

Equity earnings in Seaway for the three months ended June 30, 2002,
decreased $1 million from the three months ended June 30, 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.

Six Months ended June 30, 2002 compared to Six Months ended June 30, 2001

Our Upstream Segment reported earnings before interest of $22.6 million
for the six months ended June 30, 2002, compared with earnings before interest
of $21.5 million for the six months ended June 30, 2001. Earnings before
interest increased $1.1 million primarily due to a $2.6 million increase in
margin and a $0.4 million increase in other income  net. These increases
were partially offset by a $1 million decrease in equity earnings of Seaway, a
$0.6 million decrease in other revenue and a $0.1 million increase in costs and
expenses (excluding purchases of crude oil and lubrication oil). We discuss
the factors influencing these variances below.

Our margin increased $2.6 million during the six months ended June 30,
2002, compared with the six months ended June 30, 2001. Crude oil
transportation margin increased $1.9 million primarily due to volumes
transported on the pipeline assets acquired from Valero Energy Corp. (formerly
Ultramar Diamond Shamrock Corporation) (UDS) in March 2001, and higher
revenues on our Basin and West Texas systems. Crude oil marketing margin
increased $0.2 million primarily due to increased volumes marketed,
renegotiated supply 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. Lubrication oil sales margin
increased $0.3 million due to increased volumes related to the acquisition of a
lubrication oil distributor in Amarillo, Texas, in the fourth quarter of 2001.

Other operating revenues of the Upstream Segment decreased $0.6 million
for the six months ended June 30, 2002, compared with the six months ended June
30, 2001, due to lower revenue from documentation and other services to support
customers trading activity at Midland, Texas, and Cushing, Oklahoma.

Costs and expenses, excluding expenses associated with purchases of crude
oil and lubrication oil, increased $0.1 million during the six months ended
June 30, 2002, compared with the six months ended June 30, 2001. The increase
was comprised of a $1.2 million increase in operating, general and
administrative expenses due to increased labor related costs and increased
general and administrative supplies and services expense, and a $0.3 million
increase in operating fuel and power expense. These increases were partially
offset by a $0.9 million decrease in taxes  other than income taxes due to
reductions in property tax accruals. Depreciation and amortization expense
decreased by $0.4 million due to the adoption of SFAS 142 effective January 1,
2002, in which goodwill and excess investment are no longer being amortized,
partially offset by increased depreciation expense on the assets acquired from
UDS.

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Equity earnings in Seaway for the six months ended June 30, 2002,
decreased $1 million from the six months ended June 30, 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 and six months ended June 30, 2002, and 2001:

|                         |                                         |  |                    |        |            |  |            |       |                  |  |      |     |            |  |   |         |  |  |   |        |  |  |  |     |   
|------------------------ | --------------------------------------- |  | ------------------ | ------ | ---------- |  | ---------- | ----- | ---------------- |  | ---- | --- | ---------- |  | - | ------- |  |  | - | ------ |  |  |  | --- | --
|                         |                                         |  | Three Months Ended |        |            |  |            |       | Six Months Ended |  |      |     |           
|                         |                                         |  | June 30,           |        | Percentage |  | June 30,   |       | Percentage      
|                         |                                         |  |                    |        | Increase   |  |            |       | Increase        
|                         |                                         |  | 2002               |        | 2001       |  | (Decrease) |       | 2002             |  | 2001 |     | (Decrease)
|                         |                                         |  |                    |        |            |  |            |       |                  |  |      |     |           
|Gathering  Natural Gas: |                                         |  |                    |        |            |  |            |       |                  |  |      |     |            |  |   |         |  |  |   |        |  |  |  |    
|                         | Million cubic feet                      |  |                    | 59,805 |            |  |            |      |                  |  |      |    |            |  |   | 109,976 |  |  |   |       |  |  |  |    |   
|                         | Million British
thermal units
(MMBtu) |  |                    | 66,493 |            |  |            |      |                  |  |      |    |            |  |   | 122,221 |  |  |   |       |  |  |  |    |   
|                         | Average fee per MMBtu                   |  | $                  | 0.172  |            |  |            |      |                  |  |      |    |            |  | $ | 0.172   |  |  |   |       |  |  |  |    |   
|Transportation  NGLs:   |                                         |  |                    |        |            |  |            |       |                  |  |      |     |            |  |   |         |  |  |   |        |  |  |  |    
|                         | Thousand barrels                        |  |                    | 15,557 |            |  |            | 5,436 |                  |  |      | 186 | %          |  |   | 23,471  |  |  |   | 10,198 |  |  |  | 130 | % 
|                         | Average rate per barrel                 |  | $                  | 0.678  |            |  | $          | 1.024 |                  |  |      | (34 | %)         |  | $ | 0.718   |  |  | $ | 1.024  |  |  |  | (30 | %)
|Fractionation  NGLs:    |                                         |  |                    |        |            |  |            |       |                  |  |      |     |            |  |   |         |  |  |   |        |  |  |  |    
|                         | Thousand barrels                        |  |                    | 1,032  |            |  |            | 1,044 |                  |  |      | (1  | %)         |  |   | 2,043   |  |  |   | 2,059  |  |  |  | (1  | %)
|                         | Average rate per barrel                 |  | $                  | 1.840  |            |  | $          | 1.831 |                  |  |      | 1   | %          |  | $ | 1.827   |  |  | $ | 1.805  |  |  |  | 1   | % 
|Sales  Condensate:      |                                         |  |                    |        |            |  |            |       |                  |  |      |     |            |  |   |         |  |  |   |        |  |  |  |    
|                         | Thousand barrels                        |  |                    | 18.3   |            |  |            |      |                  |  |      |    |            |  |   | 50.6    |  |  |   |       |  |  |  |    |   
|                         | Average rate per barrel                 |  | $                  | 28.37  |            |  |            |      |                  |  |      |    |            |  | $ | 23.99   |  |  |   |       |  |  |  |    |   

Three Months ended June 30, 2002 compared to Three Months ended June 30, 2001

Our Midstream Segments earnings before interest totaled $11.9 million for
the three months ended June 30, 2002, compared with earnings before interest of
$4.6 million for the three months ended June 30, 2001. The $7.3 million
increase in earnings before interest was due to a $17 million increase in
operating revenues, partially offset by a $9.9 million increase in costs and
expenses. We discuss the factors influencing these variances below.

Operating revenues increased $17 million during the three months ended
June 30, 2002, compared with the three months ended June 30, 2001. Natural gas
gathering revenues from the Jonah system (acquired on September 30, 2001)
totaled $11.5 million and volumes delivered totaled 59.8 billion cubic feet.
Other revenues increased $0.5 million due to sales of gas condensate from the
Jonah system. NGL transportation revenues increased $5.1 million, primarily
due to the acquisition of Chaparral on March 1, 2002, partially offset by lower
revenues on a take-or-pay contract on the Dean system that was in effect until
the bankruptcy of Enron Corp. in December 2001. The decrease in the NGL
transportation average rate per barrel resulted from the cancellation of the
Enron Corp. take-or-pay contract, and a lower average rate per barrel on
volumes transported on Chaparral.

Costs and expenses increased $9.9 million during the three months ended
June 30, 2002, compared with the three months ended June 30, 2001. The increase
was comprised of a $6.7 million increase in depreciation and amortization
expense, a $2.4 million increase in operating, general and administrative
expense and a $0.8 million increase in operating fuel and power costs. Of
these increases, $10.3 million related to the Jonah and Chaparral

33Table of Contentsassets acquired on September 30, 2001, and March 1, 2002, respectively,
partially offset by a $0.4 million decrease in expenses related to the other
assets of the Midstream Segment.Six Months ended June 30, 2002 compared to Six Months ended June 30, 2001Our Midstream Segments earnings before interest totaled $19.6 million for
the six months ended June 30, 2002, compared with earnings before interest of
$8.7 million for the six months ended June 30, 2001. The $10.9 million
increase in earnings before interest was due to a $28.8 million increase in
operating revenues, partially offset by an $18.1 million increase in costs and
expenses. We discuss the factors influencing these variances below.Operating revenues increased $28.8 million during the six months ended
June 30, 2002, compared with the six months ended June 30, 2001. Natural gas
gathering revenues from the Jonah system totaled $21 million and volumes
delivered totaled 110 billion cubic feet. Other revenues increased $1.2
million due to sales of gas condensate from the Jonah system. NGL
transportation revenues increased $6.6 million, primarily due to the
acquisition of Chaparral on March 1, 2002, partially offset by lower revenues
on a take-or-pay contract on the Dean system that was in effect until the
bankruptcy of Enron Corp. in December 2001. The decrease in the NGL
transportation average rate per barrel resulted from the cancellation of the
Enron Corp. take-or-pay contract, and a lower average rate per barrel on
volumes transported on Chaparral.Costs and expenses increased $18.1 million during the six months ended
June 30, 2002, compared with the six months ended June 30, 2001. The increase
was comprised of a $12.5 million increase in depreciation and amortization
expense, a $3.8 million increase in operating, general and administrative
expense, a $1.4 million increase in operating fuel and power costs and a $0.4
million increase in taxes  other than income taxes. Of these increases,
$18.7 million related to the Jonah and Chaparral assets acquired on September
30, 2001, and March 1, 2002, respectively, partially offset by a $0.6 million
decrease in expenses related to the other assets of the Midstream Segment.Interest Expense and Capitalized InterestThree Months ended June 30, 2002 compared to Three Months ended June 30, 2001Interest expense increased $1.4 million during the three months ended June
30, 2002, compared with the three months ended June 30, 2001, primarily due to
higher outstanding debt, partially offset by lower LIBOR rates in effect during
2002.Capitalized interest increased $0.4 million during the three months ended
June 30, 2002, compared with the three months ended June 30, 2001, due to
increased balances on construction work-in-progress during the second quarter
of 2002.Six Months ended June 30, 2002 compared to Six Months ended June 30, 2001Interest expense increased $1.9 million during the six months ended June
30, 2002, compared with the six months ended June 30, 2001, primarily due to
higher outstanding debt, partially offset by lower LIBOR rates in effect during
2002.Capitalized interest increased $2.2 million during the six months ended
June 30, 2002, compared with the six months ended June 30, 2001, due to
increased balances during 2002 on construction work-in-progress and the
investment during the construction of Centennial.Financial Condition and LiquidityNet cash from operations totaled $97.5 million for the six months ended
June 30, 2002. This cash was made up of $84.8 million of income before charges
for depreciation and amortization and $12.7 million of cash34Table of Contents

provided by working capital changes. This compares with net cash from
operations of $61.5 million for the corresponding period in 2001, comprised of
$89.5 million of income before charges for depreciation and amortization,
partially offset by $28 million of cash used for working capital changes. Net
cash from operations for the six months ended June 30, 2002, and 2001, included
interest payments of $19.5 million and $32.2 million, respectively.

Cash flows used in investing activities during the six months ended June
30, 2002, was comprised of $7.3 million for the final purchase price
adjustments on the acquisition of Jonah, $63.6 million of capital expenditures,
$7.7 million of cash contributions for our interest in Centennial, $132.1
million for the purchase of Chaparral on March 1, 2002, and $444.2 million for
the purchase of Val Verde on June 30, 2002. These uses of cash were partially
offset by $3.4 million in cash proceeds from the sale of assets. Cash flows
used in investing activities during the six months ended June 30, 2001, were
comprised of $20 million for the purchase of assets from UDS on March 1, 2001,
$33.4 million of capital expenditures, and $25.1 million of cash contributions
for our interest in Centennial. These uses of cash were partially offset by
$1.3 million of cash received from the sale of vehicles and $3.2 million
received on matured cash investments.

Centennial entered into credit facilities totaling $150 million. The
proceeds were used to fund construction and conversion costs of its pipeline
system. As of June 30, 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. 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, at our option, on either the lenders base rate plus a spread,
or LIBOR plus a spread in effect at the time of the borrowings. The credit
agreement for the Three Year Facility contains restrictive financial covenants
that require us to maintain a minimum level of partners capital as well as
maximum debt-to-EBITDA (earnings before interest expense, income tax expense
and depreciation and amortization expense) and minimum fixed charge coverage
ratios. On 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. To facilitate our financing of a portion of the purchase price of the
Val Verde assets, on June 27, 2002, the Three Year Facility was amended to
increase the maximum debt-to-EBITDA ratio covenant to allow us to incur
additional indebtedness. We then drew down the existing capacity of the Three
Year Facility. At June 30, 2002, $500 million was outstanding under the Three
Year Facility at a weighted average interest rate of 3.5%. As of June 30,
2002, we were in compliance with the covenants contained in this credit
agreement.

On April 6, 2001, we entered into a 364-day, $200 million revolving credit
agreement (Short-term Revolver). The interest rate is based, at our option,
on either the lenders base rate plus a spread, or LIBOR plus a spread in
effect at the time of the borrowings. The credit agreement contains restrictive
financial covenants that require us to maintain a minimum level of partners
capital as well as maximum debt-to-EBITDA and minimum fixed charge coverage
ratios. On March 27, 2002, the Short-term Revolver was extended for an
additional period of 364 days, ending in April 2003. To facilitate our
financing of a portion of the purchase price of the Val Verde assets, on June
27, 2002, the Short-term Revolver was amended to increase the maximum
debt-to-EBITDA ratio covenant to allow us to incur additional indebtedness. We
then drew down $72 million under the Short-term

35Table of ContentsRevolver. At June 30, 2002, $72 million was outstanding under the Short-term
Revolver at an interest rate of 3.5%. As of June 30, 2002, we were in
compliance with the covenants contained in this credit agreement.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 5. 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. The
7.625% Senior Notes were issued at a discount and are being accreted to their
face value over the term of the notes. We used the proceeds from the offering
to reduce a portion of the outstanding balances of our credit facilities,
described above, including those issued in connection with the acquisition of
Jonah. The Senior Notes may be redeemed at any time at our option with the
payment of accrued interest and a make-whole premium determined by discounting
remaining interest and principal payments using a discount rate equal to the
rate of the United States Treasury securities of comparable remaining maturity
plus 35 basis points. The indenture governing the 7.625% Senior Notes contains
covenants, including, but not limited to, covenants limiting the creation of
liens securing indebtedness and sale and leaseback transactions. However, the
indenture does not limit our ability to incur additional indebtedness. As of
June 30, 2002, we were in compliance with the covenants of these Senior Notes.On June 27, 2002, we entered into a $200 million six-month term loan with
SunTrust Bank (Six-Month Term Loan). We borrowed $200 million under the
Six-Month Term Loan to acquire the Val Verde assets (see Note 5.
Acquisitions). The Six-Month Term Loan is payable in December 2002. The
interest rate is based, at our option, on either the lenders base rate plus a
spread, or LIBOR plus a spread in effect at the time of the borrowings. The
credit agreement contains restrictive financial covenants that require us to
maintain a minimum level of partners capital as well as maximum debt-to-EBITDA
and minimum fixed charge coverage ratios. At June 30, 2002, $200 million was
outstanding under the Six-Month Term Loan at an interest rate of 3.3%. As of
June 30, 2002, we were in compliance with the covenants contained in this
credit agreement.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.36Table of ContentsThe following table summarizes our credit facilities as of June 30, 2002
(in millions):

|                    |  |                     |       |           |  |           |       |  |  |               |  | 
|------------------- |  | ------------------- | ----- | --------- |  | --------- | ----- |  |  | ------------- |  | 
|                    |  | As of June 30, 2002
|                    |  |                    
|                    |  |                     |       |           |  | Available |       |  |  |              
|                    |  | Outstanding         |       | Borrowing |  | Maturity 
|Description:        |  | Principal           |       | Capacity  |  | Date     
|                    |  |                     |       |           |  |          
|Short-term Revolver |  | $                   | 72.0  |           |  | $         | 128.0 |  |  | April 2003   
|Six-Month Term Loan |  |                     | 200.0 |           |  |           |      |  |  | December 2002
|Three Year Facility |  |                     | 500.0 |           |  |           |      |  |  | 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 $68.5 million ($1.15 per Unit) and $49.5
million ($1.05 per Unit) for each of the six months ended June 30, 2002, and
2001, respectively. Additionally, on July 18, 2002, we declared a cash
distribution of $0.60 per Limited Partner Unit and Class B Unit for the quarter
ended June 30, 2002. We paid the distribution of $39.8 million on August 8,
2002, to unitholders of record on July 31, 2002.

On February 6, 2001, we issued by public offering 2 million Limited
Partner Units at $25.50 per Unit. The proceeds from the offering, net of
underwriting discount, totaled approximately $48.7 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 November 14, 2001, we issued by public offering 5.5 million Limited
Partner Units at $34.25 per Unit. The proceeds from the offering, net of
underwriting discount, totaled approximately $180.3 million and were used to
repay $160 million under the Bridge Facility that was used to fund the Jonah
acquisition. The remaining proceeds were used to finance contributions to
Centennial and for other capital expenditures.

On March 22, 2002, we issued by public offering 1.92 million Limited
Partner Units (which included the overallotment provision) at $29.85 per Unit.
The proceeds from the offering, net of underwriting discount, totaled
approximately $57.3 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.

On July 11, 2002, we issued by public offering 3 million Limited Partner
Units at $30.15 per Unit. The proceeds from the offering, net of underwriting
discount, totaled approximately $86.6 million and were used to reduce
borrowings under our Six-Month Term Loan. In accordance with SFAS No. 6,
Classification of Short-term Obligations Expected to be Refinanced,the amount
repaid on July 11, 2002, $86.6 million, is classified as long-term debt at June
30, 2002. On August 14, 2002, 175,000 Units were issued in
connection with the over-allotment provision of the offering on July
11, 2002. Proceeds from the over-allotment totaled $5.1 million and
were used for general purposes.

Future Capital Needs and Commitments

We estimate that capital expenditures, excluding acquisitions, for 2002
will be approximately $139 million (which includes $6 million of capitalized
interest). We expect to use approximately $100 million for revenue generating
projects, approximately $23 million for maintenance capital spending and
approximately $10 million for system upgrade projects. Revenue generating
projects will include approximately $45 million for Phase II expansion of the
Jonah system, $17 million for expansion of other Midstream assets and $38
million to expand our service capabilities including the installation of a
brine pond at our Mont Belvieu LPGs storage facility, the installation of
improvements at our Princeton, Indiana, LPGs truck loading facilities, and the
completion of facilities to support receipt and delivery locations with
Centennial. We expect to use approximately $4.1 million of maintenance
capital spending for pipeline rehabilitation projects to comply with
regulations enacted by the United States Department of Transportation Office of
Pipeline Safety. We continually review and evaluate potential capital
improvements and expansions that would be complementary to our present business
segments. These expenditures can vary greatly depending on the magnitude of our
transactions. We may finance capital expenditures through internally generated
funds, debt or the issuance of additional equity.

Our debt repayment obligations consist of payments for principal and
interest on (i) outstanding principal amounts under the Six-Month Term Loan due
in December 2002 ($200 million at June 30, 2002), (ii) outstanding principal
amounts under the Short-term Revolver due in April 2004 ($72 million at June
30, 2002), (iii) outstanding principal amounts under the Three Year Facility
due in April 2004 ($500 million at June 30, 2002), (iv) the TE

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Products Senior Notes, $180 million principal amount due January 15, 2008,
and $210 million principal amount due January 15, 2028, and (v) our $500
million 7.625% Senior Notes due February 15, 2012.

TE Products is contingently liable as guarantor for the lesser of
one-third or $50 million principal amount (plus interest) of the borrowings of
Centennial. We expect to contribute an additional $3 million to Centennial for
the remaining six 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 debt repayment obligations and material
contractual commitments as of June 30, 2002 (in millions).

|                                |       |   |                                            |         |        |   |           |       |           |   |       |       |  |   |      |      |         |   |       |       | 
|------------------------------- | ----- | - | ------------------------------------------ | ------- | ------ | - | --------- | ----- | --------- | - | ----- | ----- |  | - | ---- | ---- | ------- | - | ----- | ----- | 
|                                |       |   | Amount of Commitment Expiration Per Period
|                                |       |   |                                           
|                                |       |   |                                            |         |        |   | Less than |       |           |   |       |       |  |   |      |      | After 5
|                                |       |   | Total                                      |         | 1 Year |   | 2-3 Years |       | 4-5 Years |   | Years
|                                |       |   |                                            |         |        |   |           |       |           |   |      
|Six-Month Term Loan             |       | $ | 200.0                                      |         |        | $ | 200.0     |       |           | $ |      |       |  | $ |     |      |         | $ |      |      
|Short-term Revolver             |       |   | 72.0                                       |         |        |   | 72.0      |       |           |   |      |       |  |   |     |      |         |   |      |      
|Three Year Facility             |       |   | 500.0                                      |         |        |   |          |       |           |   | 500.0 |       |  |   |     |      |         |   |      |      
|6.45% Senior Notes due 2008 (1) |       |   | 180.0                                      |         |        |   |          |       |           |   |      |       |  |   |     |      |         |   | 180.0 |      
|7.51% Senior Notes due 2028 (1) |       |   | 210.0                                      |         |        |   |          |       |           |   |      |       |  |   |     |      |         |   | 210.0 |      
|7.625% Senior Notes due 2012    |       |   | 500.0                                      |         |        |   |          |       |           |   |      |       |  |   |     |      |         |   | 500.0 |      
|Centennial cash contributions   |       |   | 3.0                                        |         |        |   | 3.0       |       |           |   |      |       |  |   |     |      |         |   |      |      
|Operating leases                |       |   | 35.6                                       |         |        |   | 9.1       |       |           |   | 15.9  |       |  |   | 10.3 |      |         |   | 0.3   |      
|                                |       |   |                                            |         |        |   |           |       |           |   |       |       |  |   |      |      |         |   |       |       | 
|                                | Total |   | $                                          | 1,700.6 |        |   | $         | 284.1 |           |   | $     | 515.9 |  |   | $    | 10.3 |         |   | $     | 890.3 | 
|                                |       |   |                                            |         |        |   |           |       |           |   |       |       |  |   |      |      |         |   |       |       | 



---

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

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

Sources of Future Capital

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

As of June 30, 2002, we had approximately $128 million in available
borrowing capacity under the Short-term Revolver.

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

On May 29, 2002, Moodys Investors Service downgraded our senior unsecured
debt rating to Baa3 from Baa2. Our subsidiary, TE Products was also included
in this downgrade. These ratings were given with stable outlooks, and followed
our announcement of the $444 million acquisition of Val Verde. The downgrades
reflect Moodys concern that we have a high level of debt relative to many of
our peers and that our debt may be continually higher than our long-term
targets if we continue to make a series of acquisitions of increasingly larger
size. Because of our high distribution rate, we are particularly reliant on
external financing to finance our acquisitions. Moodys

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indicated that our cash flows are becoming less predictable as a result of
our acquisitions and expansion into the crude oil and natural gas gathering
businesses. We are evaluating alternatives to lowering our debt-to-EBITDA
ratio. Further reductions in our credit ratings could increase the debt
financing costs or possibly reduce the availability of financing. A rating
reflects only the view of a rating agency and is not a recommendation to buy,
sell or hold any indebtedness. Any rating can be revised upward or downward or
withdrawn at any time by a rating agency if it decides that the circumstances
warrant such a change.

Other Considerations

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

In 1994, we entered into an Agreed Order with the 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 June
30, 2002, for future remediation costs at the Seymour terminal. We do not
expect that the completion of the remediation program will have a future
material adverse effect on our financial position, results of operations or
cash flows.

In 1994, the 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 June 30, 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 million in specified environmental
liabilities, and DEFS is responsible for those environmental liabilities in
excess of $3 million, up to a maximum amount of $25 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 June 30, 2002, an accrual of $5.3 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.

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New Accounting Pronouncements

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

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

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

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




Forward-Looking Statements

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

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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 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 June 30, 2002, the Upstream Segment had no open positions on
derivative financial contracts.

At June 30, 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 June 30, 2002, the estimated fair value of the TE Products Senior
Notes was approximately $371 million. At June 30, 2002, $500 million principal
amount of 7.625% Senior Notes due 2012 was outstanding. At June 30, 2002, the
estimated fair value of the $500 million Senior Notes was approximately $497.8
million.

As of June 30, 2002, TE Products had an interest rate swap agreement in
place to hedge its exposure to changes in the fair value of its fixed rate
7.51% TE Products Senior Notes due 2028. We 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%.
During the six months ended June 30, 2002, we recognized a gain of $3.6
million, recorded as a reduction of interest expense, on the interest rate
swap. During the quarter ended June 30, 2002, we measured the hedge
effectiveness of this interest rate swap, and noted that no gain or loss from
ineffectiveness was required to be recognized.

As of June 30, 2002, we had an interest rate swap agreement in place to
hedge our exposure to increases in the benchmark interest rate underlying our
variable rate revolving credit 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 six months ended
June 30, 2002, and 2001, we recognized $6.3 million and $2.2 million,
respectively, in losses, included in interest expense, on the interest rate
swap attributable to interest costs occurring in 2002 and 2001. During the
quarter ended June 30, 2002, we measured the hedge effectiveness of this
interest rate swap, and noted that no gain or loss from ineffectiveness was
required to be recognized. The fair value of the interest rate swap agreement
was a loss of approximately $20 million and $20.3 million at June 30, 2002, and
December 31, 2001, respectively. We anticipate that approximately $10.6
million of the fair value will be transferred into earnings over the next
twelve months.

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As of June 30, 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%. During the six
months ended June 30, 2002, we recognized a gain of $6.9 million, recorded as a
reduction of interest expense, on the interest rate swaps. During the quarter
ended June 30, 2002, we measured the hedge effectiveness of these interest rate
swaps, and noted that no gain or loss from ineffectiveness was required to be
recognized.

On July 16, 2002, we terminated our interest rate swap agreements that
were designated as hedges to our exposure to changes in the fair value of our
$500 million principal amount of 7.625% fixed rate Senior Notes due 2012. The
fair value upon termination of the interest rate swap agreements was $25.8
million. Approximately $7.8 million had been recognized as a reduction to
interest expense from the inception of the swap agreement on February 20, 2002,
through its termination on July 16, 2002. The remaining gain of $18 million
will be amortized as a reduction to future interest expense over the remaining
term of the Senior Notes.

Additionally, on July 16, 2002, we entered into new interest rate swap
agreements to hedge our future exposure to changes in the fair value of our
$500 million principal amount of 7.625% fixed rate Senior Notes due 2012. We
have designated these swap agreements 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 these swap agreements, we pay
a floating rate based on a six month U.S. Dollar LIBOR rate, plus a spread,
which increased by approximately 50 basis points from the previous swap
agreements, and receive a fixed rate of interest of 7.625%.




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).                                                                                                                 

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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.4     |  | Form of Indenture between TEPPCO Partners, L.P., as issuer,
TE Products Pipeline Company, Limited Partnership, TCTM, L.P.,
TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering Company, as
subsidiary guarantors, and First Union National Bank, NA, as
trustee, dated as of February 20, 2002 (Filed as Exhibit 99.2 to
Form 8-K of TEPPCO Partners, L.P. (Commission File No. 1-10403)
dated as of February 20, 2002 and incorporated herein by
reference).          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.5     |  | First Supplemental Indenture between TEPPCO Partners, L.P.,
as issuer, TE Products Pipeline Company, Limited Partnership, TCTM,
L.P., TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering
Company, as subsidiary guarantors, and First Union National Bank,
NA, as trustee, dated as of February 20, 2002 (Filed as Exhibit 99.3
to Form 8-K of TEPPCO Partners, L.P (Commission File No. 1-10403)
dated as of February 20, 2002 and incorporated herein by
reference).
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.6*    |  | Supplemental Indenture, dated as of June 27, 2002, among
TEPPCO Partners, L.P., as issuer, TE Products Pipeline Company,
Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P.,
and Jonah Gas Gathering Company, as Initial Subsidiary Guarantors,
and Val Verde Gas Gathering Company, L.P., as New Subsidiary
Guarantor, and Wachovia Bank, National Association, formerly known
as First Union National Bank, as trustee.                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|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. (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+   |  | 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).                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.9+   |  | 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).                                                                                                                                                                                       

43



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.10   |  | 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).                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.11   |  | 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).                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.12   |  | 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).                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.13   |  | 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).                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.14+  |  | Form of Employment Agreement between the Company and Thomas R.
Harper, Charles H. Leonard, James C. Ruth, John N. Goodpasture,
Leonard W. Mallett, Stephen W. Russell, David E. Owen, and Barbara
A. Carroll (Filed as Exhibit 10.20 to Form 10-K of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the year ended December 31,
1998 and incorporated herein by reference).               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.15   |  | 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).                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.16   |  | Services and Transportation Agreement between TE Products
Pipeline Company, Limited Partnership and Fina Oil and Chemical
Company, BASF Corporation and BASF Fina Petrochemical Limited
Partnership, dated February 9, 1999 (Filed as Exhibit 10.22 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1999 and incorporated herein by
reference).
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.17   |  | 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).                                                                                                                                                                              
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.18+  |  | 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).                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.19+  |  | 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).                                                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.20+  |  | 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).                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.21+  |  | 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).                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.22+  |  | 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).                                                                                                                         

44



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.23   |  | 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).                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.24+  |  | 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).                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.25+  |  | 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).                                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.26+  |  | 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).                                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.27   |  | 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).                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.28   |  | Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent, and Certain Lenders, dated as
of April 6, 2001 ($200,000,000 Revolving Facility) (Filed as Exhibit
10.32 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended March 31, 2001 and incorporated
herein by reference).                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.29   |  | 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).                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.30   |  | 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).                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.31   |  | 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).                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.32   |  | 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).                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.33   |  | 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).                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.34   |  | 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).

45



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.35   |  | 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).                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.36   |  | 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).                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.37   |  | 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).              
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.38   |  | 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).                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.39   |  | Agreement of Limited Partnership of TEPPCO Midstream
Companies, L.P., dated September 24, 2001 (Filed as Exhibit 3.10 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the quarter ended September 30, 2001 and incorporated herein by
reference).                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.40   |  | 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).                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.41   |  | 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).                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.42   |  | Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent and Certain Lenders, as
Lenders dated as of March 28, 2002 ($200,000,000 Revolving Credit
Facility) (Filed as Exhibit 10.44 to Form 10-Q of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the three months ended March
31, 2002 and incorporated herein by reference).                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.43   |  | Amended and Restated Credit Agreement among TEPPCO Partners,
L.P. as Borrower, SunTrust Bank, as Administrative Agent and LC
Issuing Bank and Certain Lenders, as Lenders dated as of March 28,
2002 ($500,000,000 Revolving Facility) (Filed as Exhibit 10.45 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the three months ended March 31, 2002 and incorporated herein by
reference).   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.44   |  | Purchase and Sale Agreement between Burlington Resources
Gathering Inc. as Seller and TEPPCO Partners, L.P., as Buyer, dated
May 24, 2002 (Filed as Exhibit 99.1 to Form 8-K of TEPPCO Partners,
L.P. (Commission File No. 1-10403) dated as of July 2, 2002 and
incorporated herein by reference).                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.45   |  | Credit Agreement among TEPPCO Partners, L.P., as Borrower,
SunTrust Bank, as Administrative Agent and Certain Lenders, as
Lenders dated as of June 27, 2002 ($200,000,000 Term Facility)
(Filed as Exhibit 99.2 to Form 8-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) dated as of July 2, 2002 and
incorporated herein by reference).                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.46   |  | Amendment, dated as of June 27, 2002 to the Amended and
Restated Credit Agreement among TEPPCO Partners, L.P., as Borrower,
SunTrust Bank, as Administrative Agent, and Certain Lenders, dated
as of March 28, 2002 ($500,000,000 Revolving Credit
Facility) (Filed as Exhibit 99.3 to Form 8-K of TEPPCO
Partners, L.P. (Commission File No. 1-10403) dated as of July
2, 2002 and incorporated herein by reference).

46



---



##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.47   |  | Amendment 1, dated as of June 27, 2002 to the Credit
Agreement among TEPPCO Partners, L.P., as Borrower, SunTrust Bank,
as Administrative Agent and Certain Lenders, dated as of March 28,
2002 ($200,000,000 Revolving Credit Facility) (Filed as Exhibit 99.4
to Form 8-K of TEPPCO Partners, L.P. (Commission File No. 1-10403)
dated as of July 2, 2002 and incorporated herein by reference).
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.48*  |  | Agreement of Limited Partnership of Val Verde Gas Gathering
Company, L.P., dated May 29, 2002.                                                                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.49+* |  | Texas Eastern Products Pipeline Company, LLC 2002 Phantom Unit
Retention Plan, effective June 1, 2002.                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|12.1*   |  | Statement of Computation of Ratio of Earnings to Fixed Charges.                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|21*     |  | Subsidiaries of the Partnership.                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|99.1*   |  | Certification of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|99.2*   |  | Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                



---

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

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

Reports on Form 8-K were filed on April 16, 2002, April 24, 2002 and June 4, 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. PEARLBarry R. Pearl,
President and Chief Executive Officer                   | 
|
| | By: |  | /s/ CHARLES H. LEONARDCharles H. Leonard,
Senior Vice President and Chief
Financial Officer | 

Date: August 14, 2002

47



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##### Table of Contents



EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|3.1     |  | Certificate of Limited Partnership of TEPPCO Partners, L.P.
(Filed as Exhibit 3.2 to the Registration Statement of TEPPCO
Partners, L.P. (Commission File No. 33-32203) and incorporated
herein by reference).                                                                                                                                                                                                                                                              
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|3.2     |  | Third Amended and Restated Agreement of Limited Partnership
of TEPPCO Partners, L.P., dated September 21, 2001 (Filed as Exhibit
3.7 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended September 30, 2001 and incorporated
herein by reference).                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.1     |  | Form of Certificate representing Limited Partner Units (Filed
as Exhibit 4.1 to the Registration Statement of TEPPCO Partners,
L.P. (Commission File No. 33-32203) and incorporated herein by
reference).                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.2     |  | Form of Indenture between TE Products Pipeline Company,
Limited Partnership and The Bank of New York, as Trustee, dated as
of January 27, 1998 (Filed as Exhibit 4.3 to TE Products Pipeline
Company, Limited Partnerships Registration Statement on Form S-3
(Commission File No. 333-38473) and incorporated herein by
reference).                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.3     |  | Form of Certificate representing Class B Units (Filed as
Exhibit 4.3 to Form 10-K of TEPPCO Partners, L.P. (Commission File
No. 1-10403) for the year ended December 31, 1998 and incorporated
herein by reference).                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.4     |  | Form of Indenture between TEPPCO Partners, L.P., as issuer,
TE Products Pipeline Company, Limited Partnership, TCTM, L.P.,
TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering Company, as
subsidiary guarantors, and First Union National Bank, NA, as
trustee, dated as of February 20, 2002 (Filed as Exhibit 99.2 to
Form 8-K of TEPPCO Partners, L.P. (Commission File No. 1-10403)
dated as of February 20, 2002 and incorporated herein by
reference).          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.5     |  | First Supplemental Indenture between TEPPCO Partners, L.P.,
as issuer, TE Products Pipeline Company, Limited Partnership, TCTM,
L.P., TEPPCO Midstream Companies, L.P. and Jonah Gas Gathering
Company, as subsidiary guarantors, and First Union National Bank,
NA, as trustee, dated as of February 20, 2002 (Filed as Exhibit 99.3
to Form 8-K of TEPPCO Partners, L.P (Commission File No. 1-10403)
dated as of February 20, 2002 and incorporated herein by
reference).
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|4.6*    |  | Supplemental Indenture, dated as of June 27, 2002, among
TEPPCO Partners, L.P., as issuer, TE Products Pipeline Company,
Limited Partnership, TCTM, L.P., TEPPCO Midstream Companies, L.P.,
and Jonah Gas Gathering Company, as Initial Subsidiary Guarantors,
and Val Verde Gas Gathering Company, L.P., as New Subsidiary
Guarantor, and Wachovia Bank, National Association, formerly known
as First Union National Bank, as trustee.                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|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. (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+   |  | 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).                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.9+   |  | 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).                                                                                                                                                                                       

48



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.10   |  | 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).                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.11   |  | 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).                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.12   |  | 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).                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.13   |  | 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).                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.14+  |  | Form of Employment Agreement between the Company and Thomas R.
Harper, Charles H. Leonard, James C. Ruth, John N. Goodpasture,
Leonard W. Mallett, Stephen W. Russell, David E. Owen, and Barbara
A. Carroll (Filed as Exhibit 10.20 to Form 10-K of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the year ended December 31,
1998 and incorporated herein by reference).               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.15   |  | 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).                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.16   |  | Services and Transportation Agreement between TE Products
Pipeline Company, Limited Partnership and Fina Oil and Chemical
Company, BASF Corporation and BASF Fina Petrochemical Limited
Partnership, dated February 9, 1999 (Filed as Exhibit 10.22 to Form
10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for the
quarter ended March 31, 1999 and incorporated herein by
reference).
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.17   |  | 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).                                                                                                                                                                              
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.18+  |  | 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).                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.19+  |  | 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).                                                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.20+  |  | 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).                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.21+  |  | 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).                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.22+  |  | 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).                                                                                                                         

49



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.23   |  | 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).                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.24+  |  | 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).                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.25+  |  | 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).                                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.26+  |  | 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).                                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.27   |  | 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).                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.28   |  | Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent, and Certain Lenders, dated as
of April 6, 2001 ($200,000,000 Revolving Facility) (Filed as Exhibit
10.32 to Form 10-Q of TEPPCO Partners, L.P. (Commission File No.
1-10403) for the quarter ended March 31, 2001 and incorporated
herein by reference).                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.29   |  | 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).                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.30   |  | 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).                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.31   |  | 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).                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.32   |  | 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).                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.33   |  | 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).                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|10.34   |  | 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).

50



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.35   |  | 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).                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.36   |  | 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).                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.37   |  | 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).              
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.38   |  | 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).                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.39   |  | Agreement of Limited Partnership of TEPPCO Midstream
Companies, L.P., dated September 24, 2001 (Filed as Exhibit 3.10 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the quarter ended September 30, 2001 and incorporated herein by
reference).                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.40   |  | 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).                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.41   |  | 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).                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.42   |  | Credit Agreement among TEPPCO Partners, L.P. as Borrower,
SunTrust Bank as Administrative Agent and Certain Lenders, as
Lenders dated as of March 28, 2002 ($200,000,000 Revolving Credit
Facility) (Filed as Exhibit 10.44 to Form 10-Q of TEPPCO Partners,
L.P. (Commission File No. 1-10403) for the three months ended March
31, 2002 and incorporated herein by reference).                                      
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.43   |  | Amended and Restated Credit Agreement among TEPPCO Partners,
L.P. as Borrower, SunTrust Bank, as Administrative Agent and LC
Issuing Bank and Certain Lenders, as Lenders dated as of March 28,
2002 ($500,000,000 Revolving Facility) (Filed as Exhibit 10.45 to
Form 10-Q of TEPPCO Partners, L.P. (Commission File No. 1-10403) for
the three months ended March 31, 2002 and incorporated herein by
reference).   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.44   |  | Purchase and Sale Agreement between Burlington Resources
Gathering Inc. as Seller and TEPPCO Partners, L.P., as Buyer, dated
May 24, 2002 (Filed as Exhibit 99.1 to Form 8-K of TEPPCO Partners,
L.P. (Commission File No. 1-10403) dated as of July 2, 2002 and
incorporated herein by reference).                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.45   |  | Credit Agreement among TEPPCO Partners, L.P., as Borrower,
SunTrust Bank, as Administrative Agent and Certain Lenders, as
Lenders dated as of June 27, 2002 ($200,000,000 Term Facility)
(Filed as Exhibit 99.2 to Form 8-K of TEPPCO Partners, L.P.
(Commission File No. 1-10403) dated as of July 2, 2002 and
incorporated herein by reference).                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.46   |  | Amendment, dated as of June 27, 2002 to the Amended and
Restated Credit Agreement among TEPPCO Partners, L.P., as Borrower,
SunTrust Bank, as Administrative Agent, and Certain Lenders, dated
as of March 28, 2002 ($500,000,000 Revolving Credit
Facility) (Filed as Exhibit 99.3 to Form 8-K of TEPPCO
Partners, L.P. (Commission File No. 1-10403) dated as of July
2, 2002 and incorporated herein by reference).

51



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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.47   |  | Amendment 1, dated as of June 27, 2002 to the Credit
Agreement among TEPPCO Partners, L.P., as Borrower, SunTrust Bank,
as Administrative Agent and Certain Lenders, dated as of March 28,
2002 ($200,000,000 Revolving Credit Facility) (Filed as Exhibit 99.4
to Form 8-K of TEPPCO Partners, L.P. (Commission File No. 1-10403)
dated as of July 2, 2002 and incorporated herein by reference).
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.48*  |  | Agreement of Limited Partnership of Val Verde Gas Gathering
Company, L.P., dated May 29, 2002.                                                                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|10.49+* |  | Texas Eastern Products Pipeline Company, LLC 2002 Phantom Unit
Retention Plan, effective June 1, 2002.                                                                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|12.1*   |  | Statement of Computation of Ratio of Earnings to Fixed Charges.                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|21*     |  | Subsidiaries of the Partnership.                                                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|99.1*   |  | Certification of Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                   
|99.2*   |  | Certification of Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                



---

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

52