SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                   -----------

                                    FORM 10-K
                                   -----------

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

             (SPECIAL FINANCIAL REPORT PURSUANT TO SECTION 15(D)(2))

                           For  the  fiscal   year  ended   December   31,  1999
Commission file number: 333-93239-01


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


           DELAWARE                                    76-0568220
(State or other Jurisdiction of           (I.R.S. Employer Identification No.)
Incorporation or Organization)

                 2727 NORTH LOOP WEST, HOUSTON, TEXAS 77008-1037
               (Address of principal executive offices) (zip code)
       Registrant's telephone number, including area code : (713) 880-6500

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE.

        SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE.

         This  Special  Financial  Report is being  filed  pursuant  to  Section
15(d)(2) of the  Securities  Act of 1933.  This  report  contains  only  audited
financial  statements  for the fiscal  year ending  December  31, 1999 and other
periods, as applicable,  and has been signed in accordance with the requirements
of the annual report form.

         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 No _X_

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ X ]

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

<PAGE>

                               ENTERPRISE PRODUCTS
                               OPERATING L.P. AND
                                  SUBSIDIARIES



                 CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS
                   ENDED DECEMBER 31, 1997, 1998 AND 1999 AND
                          INDEPENDENT AUDITORS' REPORT
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS



                                                                            PAGE

ENTERPRISE PRODUCTS OPERATING L.P.

    Independent Auditors' Report ............................................F-2

    Consolidated Balance Sheets as of December 31, 1998 and 1999.............F-3

    Statements of Consolidated Operations
        for the Years Ended December 31, 1997, 1998 and 1999 ................F-4

    Statements of Consolidated Cash
        Flows for the Years Ended December 31, 1997, 1998 and 1999...........F-5

    Statements of Consolidated Partners' Equity
        for the Years Ended December 31, 1997, 1998 and 1999 ................F-6

    Notes to Consolidated Financial Statements ..............................F-7

SUPPLEMENTAL SCHEDULE:

      Schedule II - Valuation and Qualifying Accounts




























All schedules,  except the one listed above,  have been omitted because they are
either not  applicable,  not  required  or the  information  called for  therein
appears in the consolidated financial statements or notes thereto.

                                       F-1
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

Enterprise Products Operating L.P.:

We have  audited the  accompanying  consolidated  balance  sheets of  Enterprise
Products  Operating  L.P. (the  "Company") as of December 31, 1998 and 1999, and
the related statements of consolidated  operations,  consolidated cash flows and
consolidated  partners'  equity for each of the three years in the period  ended
December 31, 1999. Our audits also included the consolidated financial statement
schedule  of the  Company  listed in the Index to  Financial  Statements.  These
consolidated  financial  statements and schedule are the  responsibility  of the
management of the Company.  Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the financial  position of the Company at December 31, 1998
and 1999,  and the results of its  operations and its cash flows for each of the
three years in the period ended  December 31, 1999 in conformity  with generally
accepted  accounting  principles.   Also,  in  our  opinion,  such  consolidated
financial  statement  schedule,   when  considered  in  relation  to  the  basic
consolidated  financial  statements  taken as a whole,  presents  fairly  in all
material respects the information set forth therein.


DELOITTE & TOUCHE LLP

Houston, Texas
February 25, 2000
(March 27, 2000, as to Note 15)

                                       F-2
<PAGE>
                       ENTERPRISE PRODUCTS OPERATING L.P.
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in Thousands)
<TABLE>
<CAPTION>

                                                                                            DECEMBER 31,
                                                                                -------------------------------------
ASSETS                                                                              1998               1999
                                                                                -------------------------------------
<S>                                                                                 <C>                <C>
CURRENT ASSETS
       Cash and cash equivalents                                                    $   24,103         $    5,159
       Accounts receivable - trade, net of allowance for doubtful accounts of
             $15,871 in 1999                                                            57,288            262,348
       Accounts receivable - affiliates                                                 15,546             53,906
       Inventories                                                                      17,574             39,907
       Current maturities of participation in notes receivable from
           unconsolidated affiliates                                                    14,737              6,519
       Prepaid and other current assets                                                  8,445             14,459
                                                                                -------------------------------------
                        Total current assets                                           137,693            382,298
PROPERTY, PLANT AND EQUIPMENT, NET                                                     499,793            767,069
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES                                91,121            280,606
PARTICIPATION IN NOTES RECEIVABLE FROM UNCONSOLIDATED AFFILIATES                        11,760
INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION OF $1,343                                               61,619
OTHER ASSETS                                                                               670              1,120
                                                                                -------------------------------------
                        TOTAL                                                       $  741,037         $1,492,712
                                                                                =====================================

                              LIABILITIES AND PARTNERS' EQUITY

CURRENT LIABILITIES
       Current maturities of long-term debt                                                            $  129,000
       Accounts payable - trade                                                     $   36,586             69,294
       Accounts payable - affiliate                                                                        64,780
       Accrued gas payables                                                             27,183            216,348
       Accrued expenses                                                                  7,540             33,160
       Other current liabilities                                                        11,462             18,176
                                                                                -------------------------------------
                        Total current liabilities                                       82,771            530,758
LONG-TERM DEBT                                                                          90,000            166,000
OTHER LONG-TERM LIABILITIES                                                                                   296
MINORITY INTEREST                                                                          993              1,032
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY
       Limited Partner                                                                 561,543            791,279
       General Partner                                                                   5,730              8,074
       Parent's Units acquired by Trust                                                                    (4,727)
                                                                                -------------------------------------
                        Total Partners' Equity                                         567,273            794,626
                                                                                -------------------------------------
                        TOTAL                                                       $  741,037         $1,492,712
                                                                                =====================================
</TABLE>



                 See Notes to Consolidated Financial Statements

                                       F-3
<PAGE>


                       ENTERPRISE PRODUCTS OPERATING L.P.
                      STATEMENTS OF CONSOLIDATED OPERATIONS
                             (Amounts in Thousands)
<TABLE>
<CAPTION>

                                                                              YEARS ENDED DECEMBER 31,
                                                               --------------------------------------------------------
                                                                      1997              1998               1999
                                                               --------------------------------------------------------
<S>                                                                   <C>                <C>               <C>
REVENUES
Revenues from consolidated operations                                 $ 1,020,281        $  738,902        $ 1,332,979
Equity income in unconsolidated affiliates                                 15,682            15,671             13,477
                                                               --------------------------------------------------------
         Total                                                          1,035,963           754,573          1,346,456
COST AND EXPENSES
Operating costs and expenses                                              938,392           685,884          1,201,605
Selling, general and administrative                                        21,891            18,216             12,500
                                                               --------------------------------------------------------
         Total                                                            960,283           704,100          1,214,105
                                                               --------------------------------------------------------
OPERATING INCOME                                                           75,680            50,473            132,351
                                                               --------------------------------------------------------
OTHER INCOME (EXPENSE)
Interest expense                                                          (25,717)          (15,057)           (16,439)
Interest income from unconsolidated affiliates                                                  809              1,625
Dividend income from unconsolidated affiliates                                                                   3,435
Interest income - other                                                     1,934               772              1,247
Other, net                                                                    793               358               (379)
                                                               --------------------------------------------------------
          Other income  (expense)                                         (22,990)          (13,118)           (10,511)
                                                               --------------------------------------------------------
INCOME BEFORE EXTRAORDINARY ITEM
    AND MINORITY INTEREST                                                  52,690            37,355            121,840

Extraordinary charge on early extinguishment of debt                                        (27,176)
                                                               --------------------------------------------------------
INCOME BEFORE MINORITY INTEREST                                            52,690            10,179            121,840
MINORITY INTEREST                                                             (78)             (122)              (110)
                                                              --------------------------------------------------------
NET INCOME                                                             $   52,612        $   10,057         $  121,730
                                                               ========================================================
</TABLE>

                 See Notes to Consolidated Financial Statements

                                       F-4
<PAGE>


                       ENTERPRISE PRODUCTS OPERATING L.P.
                      STATEMENTS OF CONSOLIDATED CASH FLOWS
                             (Amounts in Thousands)
<TABLE>
<CAPTION>

                                                                                              YEAR ENDED DECEMBER 31,
                                                                              ------------------------------------------------------
                                                                                     1997              1998               1999
                                                                              ------------------------------------------------------
<S>                                                                                  <C>               <C>                <C>
Net income                                                                            $   52,612        $   10,057        $121,730
Adjustments to  reconcile  net  income  to cash  flows  provided  by (used  for)
      operating activities:
      Extraordinary item - early extinguishment of debt                                                     27,176
      Depreciation and amortization                                                       17,684            19,194          25,315
      Equity in income of unconsolidated affiliates                                      (15,682)          (15,671)        (13,477)
      Leases paid by EPCO                                                                                   4,010           10,665
      Minority interest                                                                      78               122              110
      (Gain) loss on sale of assets                                                         155              (276)             123
      Net effect of changes in operating accounts                                         2,948           (64,906)          24,433
                                                                              ------------------------------------------------------
Operating activities cash flows                                                          57,795           (20,294)         168,899
                                                                              ------------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures                                                                    (33,636)           (8,360)         (21,235)
Proceeds from sale of assets                                                                                1,887                8
Business  acquisitions,  net of cash acquired                                                                             (208,095)
Participation in notes receivable from unconsolidated affiliates:
      Purchase of notes receivable                                                                        (33,725)
      Collection of notes receivable                                                                        7,228           19,978
Unconsolidated affiliates:
      Investments in and advances to                                                     (4,625)          (26,842)         (61,887)
      Distributions received                                                              7,279             9,117            6,008
                                                                              ------------------------------------------------------
Investing activities cash flows                                                         (30,982)          (50,695)        (265,223)
                                                                              ------------------------------------------------------
FINANCING ACTIVITIES
Long-term debt borrowings                                                                   598            90,000          350,000
Long-term debt repayments                                                               (25,978)         (257,413)        (154,923)
Net increase (decrease) in restricted cash                                               (1,171)            4,522
Cash contributions from limited partner                                                                   243,296
Cash contributions from minority interest                                                                                        7
Parent's Units acquired by consolidated Trust                                                                               (4,727)
Cash distributions to minority interest                                                                                        (78)
Cash distributions to partners                                                                            (21,865)        (112,899)
                                                                              ------------------------------------------------------
Financing activities cash flows                                                         (26,551)           58,540           77,380
                                                                              ------------------------------------------------------
CASH CONTRIBUTIONS FROM (TO) EPCO                                                        (6,299)           17,611
                                                                              ------------------------------------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                                  (6,037)            5,162          (18,944)
CASH AND CASH EQUIVALENTS, JANUARY 1                                                     24,978            18,941           24,103
                                                                              ------------------------------------------------------
CASH AND CASH EQUIVALENTS, DECEMBER 31                                                $  18,941        $   24,103         $  5,159
                                                                              ======================================================
Excluding restricted cash of $4,522 in 1997)
</TABLE>

                 See Notes to Consolidated Financial Statements

                                       F-5
<PAGE>


                       ENTERPRISE PRODUCTS OPERATING L.P.
                   STATEMENTS OF CONSOLIDATED PARTNERS' EQUITY
                             (Amounts in Thousands)
<TABLE>
<CAPTION>
                                                       LIMITED         GENERAL        PARENT'S
                                                       PARTNER         PARTNER         UNITS           TOTAL
                                                   ---------------------------------------------------------------

<S>                                                     <C>              <C>           <C>             <C>
Consolidated Partners' Equity,  December 31, 1996       $  265,145       $   2,706                     $  267,851
    Net income                                              52,081             531                         52,612
    Cash contributions to EPCO                              (6,235)            (64)                        (6,299)
                                                   ---------------------------------------------------------------
Consolidated Partners' Equity, December 31, 1997           310,991           3,173                        314,164
    Net income                                               9,955             102                         10,057
    Cash contributions by EPCO                              17,433             178                         17,611
    Leases paid by EPCO                                      3,969              41                          4,010
    Cash contributions by partners                         240,839           2,457                        243,296
    Cash distributions to partners                         (21,644)           (221)                       (21,865)
                                                   ---------------------------------------------------------------
Consolidated Partners' Equity, December 31, 1998           561,543           5,730                        567,273
    Net income                                             120,501           1,229                        121,730
    Leases paid by EPCO                                     10,557             108                         10,665
    Asset contributions by partners related to
        business acquistions                               210,436           2,148                        212,584
    Parent's Units acquired by consolidated Trust                                      $  (4,727)          (4,727)
    Cash distributions to partners                        (111,758)         (1,141)                      (112,899)
                                                   ---------------------------------------------------------------
Consolidated Partner's Equity, December 31, 1999        $  791,279       $   8,074    $   (4,727)      $  794,626
                                                   ===============================================================
</TABLE>
                 See Notes to Consolidated Financial Statements


                                       F-6
<PAGE>
                       ENTERPRISE PRODUCTS OPERATING L.P.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Prior to their consolidation,  EPCO and its affiliated companies were controlled
by members of a single family,  who  collectively  owned at least 90% of each of
the entities for all periods prior to the formation of the Company.  As of April
30, 1998, the owners of all the affiliated  companies  exchanged their ownership
interests  for shares of EPCO.  Accordingly,  each of the  affiliated  companies
became a wholly owned subsidiary of EPCO or was merged into EPCO as of April 30,
1998.  In  accordance  with  generally  accepted  accounting   principles,   the
consolidation  of the  affiliated  companies  with EPCO was  accounted  for as a
reorganization of entities under common control in a manner similar to a pooling
of interests.

Under  terms of a  contract  entered  into on May 8, 1998  between  EPCO and the
Company,  EPCO contributed all of its NGL assets through the Limited Partner and
the General  Partner to the Company  and the Company  assumed  certain of EPCO's
debt. As a result,  the Company  became the  successor to the NGL  operations of
EPCO.

Effective  July 27, 1998,  the Limited  Partner filed a  registration  statement
pursuant to an initial public offering  ("IPO") of 12,000,000  Common Units. The
Common Units sold for $22 per unit. The Limited Partner contributed the proceeds
of the IPO of  approximately  $243.3 million after  underwriting  commissions of
$16.8 million and expenses of approximately $3.9 million to the Company.

The  accompanying  consolidated  financial  statements  include  the  historical
accounts and  operations of the NGL business of EPCO,  including NGL  operations
conducted  by  affiliated  companies of EPCO prior to their  consolidation  with
EPCO. Investments in which the Company owns 20% to 50% and exercises significant
influence  over  operating  and  financial  policies are accounted for using the
equity method. All significant  intercompany accounts and transactions have been
eliminated in consolidation.

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

INVENTORIES,  consisting of NGLs and NGL  products,  are carried at the lower of
average cost or market.

EXCHANGES are movements of NGL products  between  parties to satisfy  timing and
logistical needs of the parties. NGLs and NGL products borrowed from the Company
under such  agreements  are included in  inventories,  and NGLs and NGL products
loaned to the  Company  under such  agreements  are  accrued as a  liability  in
accrued gas payables.

PROPERTY,  PLANT AND EQUIPMENT is recorded at cost and is depreciated  using the
straight-line  method  over the  asset's  estimated  useful  life.  Maintenance,
repairs and minor  renewals are charged to  operations  as incurred.  Additions,
improvements and major renewals are  capitalized.  The cost of assets retired or
sold,  together with the related accumulated  depreciation,  is removed from the
accounts, and any gain or loss on disposition is included in income.

INTANGIBLE  ASSETS  include  the  values  assigned  to  a  20-year  natural  gas
processing  agreement  and the excess cost of the  purchase  price over the fair
market  value of the assets  acquired  from Mont Belvieu  Associates.  The $54.0


                                       F-7
<PAGE>

million in intangibles related to the natural gas processing  agreement is being
amortized over the life of the agreement.  For the year 1999, approximately $1.1
million of such  amortization  was charged to expense.  The $8.7 million  excess
cost of the  purchase  price over the fair market  value of the assets  acquired
from Mont Belvieu  Associates  is being  amortized  over 20 years.  For the year
1999, approximately $0.2 million of such amortization was charged to expense.

EXCESS  COST OVER  UNDERLYING  EQUITY IN NET  ASSETS  denotes  the excess of the
Company's cost over the underlying equity in net assets of K/D/S Promix, LLC and
is  being  amortized  using  the  straight-line   method  over  20  years.  Such
amortization is reflected in the equity earnings from unconsolidated  affiliates
and aggregated $0.2 million in 1999 and none for prior periods.  The unamortized
excess was  approximately  $7.8  million at December 31, 1999 and is included in
investments in and advances to unconsolidated affiliates.

EXCESS COST AND LONG-LIVED  ASSETS held and used by the Company are reviewed for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying  amount  of an  asset  may  not be  recoverable.  The  Company  has not
recognized any impairment losses for the periods presented.

REVENUE is recognized when products are shipped or services are rendered.

USE OF ESTIMATES AND ASSUMPTIONS by management that affect the reported  amounts
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during  the  reporting  period are  required  for the  preparation  of
financial   statements  in  conformity   with  generally   accepted   accounting
principles. Actual results could differ from these estimates.

FEDERAL INCOME TAXES are not provided  because the Company and its  predecessors
either  had  elected  under  provisions  of the  Internal  Revenue  Code to be a
Partnership  or  Subchapter S  Corporation  or were  organized as other types of
pass-through  entities for federal income tax purposes. As a result, for federal
income taxes purposes, the owners are individually  responsible for the taxes on
their allocable share of the consolidated  taxable income of the Company.  State
income taxes are not material.

ENVIRONMENTAL  COSTS for  remediation  are accrued  based on  estimates of known
remediation requirements.  Such accruals are based on management's best estimate
of the ultimate costs to remediate the site.  Ongoing  environmental  compliance
costs are  charged to expense as  incurred,  and  expenditures  to  mitigate  or
prevent future environmental contamination are capitalized. Environmental costs,
accrued  environmental  liabilities  and  expenditures  to mitigate or eliminate
future  environmental  contamination  for each of the  years  in the  three-year
period  ended  December  31,  1999  were  not  significant  to the  consolidated
financial  statements.  The  Company's  estimated  liability  for  environmental
remediation is not discounted.

CASH FLOWS are computed using the indirect method.  For cash flow purposes,  the
Company  considers all highly liquid debt instruments with an original  maturity
of less than three  months at the date of purchase to be cash  equivalents.  All
cash presented as restricted cash in the Company's financial  statements was due
to requirements of the Company's debt agreements.

HEDGES,  such as swaps,  forwards and other  contracts to manage the price risks
associated with inventories,  commitments and certain  anticipated  transactions
are occasionally  entered into by the Company.  The Company defers the impact of
changes in the  market  value of these  contracts  until such time as the hedged
transaction  is completed.  At that time,  the impact of the changes in the fair
value of these  contracts is recognized.  To qualify as a hedge,  the item to be
hedged  must  expose the  Company to  commodity  or  interest  rate risk and the
hedging  instrument reduce that exposure.  Any contracts held or issued that did
not meet the  requirements  of a hedge  would be  recorded  at fair value in the
balance  sheet and any  changes in that fair value  recognized  in income.  If a
contract  designated as a hedge of commodity risk is terminated,  the associated
gain or loss is  deferred  and  recognized  in income in the same  manner as the
hedged  item.  Also,  a  contract  designated  as  a  hedge  of  an  anticipated
transaction  that is no longer  likely to occur  would be recorded at fair value
and the associated changes in fair value recognized in income.

                                       F-8
<PAGE>

MINORITY  INTEREST  represents  the Limited  Partner's 1% ownership  interest in
Enterprise  Products Texas  Operating  L.P., HSC Pipeline  Partnership  L.P. and
Propylene  Pipeline  Partnership  L.P.  The  Company  holds  the  remaining  99%
ownership interest in these entities.

DOLLAR AMOUNTS  presented in the  tabulations  within the notes to the Company's
financial  statements  are stated in  thousands  of  dollars,  unless  otherwise
indicated.

RECENT STATEMENTS OF FINANCIAL  ACCOUNTING  STANDARDS include the following:  On
June 6, 1999, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standard ("SFAS") No. 137,  "Accounting for Derivative
Instruments  and  Hedging  Activities-Deferral  of the  Effective  Date  of FASB
Statement No.  133-an  amendment of FASB  Statement  No. 133" which  effectively
delays the application of SFAS No. 133  "Accounting  for Derivative  Instruments
and Hedging  Activities"  for one year, to fiscal years beginning after June 15,
2000.  Management is currently  studying SFAS No. 133 for possible impact on the
consolidated financial statements when it is adopted in 2001.


2.  ACQUISITIONS

ACQUISITION OF TEJAS NATURAL GAS LIQUIDS, LLC

Effective  August 1, 1999, the Company  acquired Tejas Natural Gas Liquids,  LLC
("TNGL")  from a  subsidiary  of Tejas  Energy,  LLC, an  affiliate of Shell Oil
Company.  All  references  hereafter  to "Shell",  unless the context  indicates
otherwise,  shall refer collectively to Shell Oil Company,  its subsidiaries and
affiliates.  TNGL  engages  in natural  gas  processing  and NGL  fractionation,
transportation,  storage and  marketing in  Louisiana  and  Mississippi.  TNGL's
assets  include a 20-year  natural gas  processing  agreement with Shell for the
rights to process  Shell's  current and future natural gas  production  from the
state and federal  waters of the Gulf of Mexico ("Shell  Processing  Agreement")
and varying  interests in eleven natural gas  processing  plants with a combined
gross  capacity of 11.0 billion  cubic feet per day (Bcfd) and a net capacity of
3.1 Bcfd;  four NGL  fractionation  facilities with a combined gross capacity of
281,000  barrels per day (BPD) and net capacity of 131,500 BPD; four NGL storage
facilities  with  approximately  28.8 million  barrels of gross capacity and 8.8
million barrels of net capacity; and approximately 1,500 miles of NGL pipelines.

The TNGL  acquisition  was purchased  with a combination of $166 million in cash
and the issuance of 14.5 million non-distribution  bearing,  convertible Special
Units of the Limited  Partner.  The $166  million  cash  portion of the purchase
price was funded with  borrowings  under the Company's  $350 million bank credit
facility.  The  Limited  Partner's  Special  Units  were  valued  within a range
provided by an independent  investment banker using both present value and Black
Scholes  Model   methodologies.   The  consideration  for  the  acquisition  was
determined  by  arms-length  negotiation  among  the  parties.  The value of the
Special Units of $210.4 million was  contributed  by the Limited  Partner to the
Company.

The  acquisition  was accounted for under the purchase method of accounting and,
accordingly,  the purchase price has been  allocated to the assets  acquired and
liabilities  assumed  based on their  estimated  fair value at August 1, 1999 as
follows (in millions):

         Current Assets                      $  124.3
         Investments                            128.6
         Property                               216.9
         Intangible asset                        54.0
         Liabilities                           (147.4)
                                             ----------
         Total purchase price                $  376.4
                                             ==========

The $54.0 million intangible asset is the value assigned to the Shell Processing
Agreement and is being  amortized over the life of the  agreement.  For the year
ending December 31, 1999,  approximately  $1.1 million of such  amortization was
charged to expense.  The assets,  liabilities  and results of operations of TNGL


                                       F-9
<PAGE>

are  included  with  those of the  Company  as of  August  1,  1999.  Historical
information  for  periods  prior to  August 1, 1999 do not  reflect  any  impact
associated with the TNGL acquisition.

Shell has the  opportunity  to earn an additional  6.0 million  non-distribution
bearing,  convertible  special Contingency Units of the Limited Partner over the
next two years upon the achievement of certain gas production  thresholds  under
the Shell Processing  Agreement.  If such special  Contingency Units are issued,
the purchase price and the value of the natural gas processing agreement will be
adjusted accordingly.

ACQUISITION  OF KINDER  MORGAN AND EPCO  INTEREST IN MONT BELVIEU  FRACTIONATION
FACILITY

Effective July 1, 1999, the Company  acquired  Kinder Morgan  Operating LP "A"'s
25% indirect ownership interest and EPCO's 0.5% indirect ownership interest in a
210,000  barrel  per day  ("BPD")  NGL  fractionation  facility  located in Mont
Belvieu,  Texas for  approximately  $42  million in cash and the  assumption  of
approximately  $ 4 million of debt.  The $42  million  in cash was  funded  with
borrowings under the Company's $350 million bank credit facility.

The  acquisition  was accounted for under the purchase method of accounting and,
accordingly,  the purchase price has been allocated to the assets  purchased and
liabilities  assumed  based on their  estimated  fair  value at July 1,  1999 as
follows (in millions):

         Property                               $ 36.2
         Intangible asset                          8.7
         Liabilities                              (3.7)
                                             ----------
         Total purchase price                   $ 41.2
                                             ==========

The intangible  asset represents the excess cost of purchase price over the fair
market value of the net assets  acquired and is being  amortized  over 20 years.
For the year  ended  December  31,  1999,  approximately  $0.2  million  of such
amortization was charged to expense.


PRO FORMA EFFECT OF ACQUISITIONS

The balances included in the consolidated  balance sheets related to the current
year  acquisitions  are based upon  preliminary  information  and are subject to
change  as  additional   information  is  obtained.   Material  changes  in  the
preliminary allocations are not anticipated by management.

The following table presents unaudited pro forma information for the years ended
December 31, 1997, 1998 and 1999 as if the  acquisitions of TNGL and of the Mont
Belvieu  fractionator  facility  from Kinder Morgan and EPCO had been made as of
the beginning of the periods presented:

                                   1997          1998           1999
                              --------------------------------------------
Revenues                         $ 1,867,200   $ 1,354,400    $ 1,714,222
                              ============================================
Net income                         $  94,699     $  14,680     $  136,598
                              ============================================
Allocation of net income to
     Limited partners              $  93,742     $  14,532      $ 135,218
                              ============================================
     General Partner                $    957      $    148      $   1,380
                              ============================================


                                       F-10
<PAGE>
3.  PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment and accumulated depreciation are as follows:

                                            ESTIMATED
                                           USEFUL LIFE
                                             IN YEARS       1998         1999
                                          --------------------------------------

Plants and pipelines                           5-35      $  613,264   $  875,773
Underground and other storage facilities       5-35          89,064      103,578
Transportation equipment                       3-35           1,773        2,117
Land                                                         12,362       14,748
Construction in progress                                      3,879       32,810
                                                      --------------------------
     Total                                                  720,342    1,029,026
Less accumulated depreciation                               220,549      261,957
                                                      --------------------------
Property, plant and equipment, net                       $  499,793   $  767,069
                                                      ==========================

Depreciation  expense for the years ended  December 31, 1997,  1998 and 1999 was
$17.7 million, $18.6 million and $22.4 million, respectively.


4.  INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

At December  31,  1999,  the  Company's  significant  unconsolidated  affiliates
accounted for by the equity method included the following:

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

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

Baton Rouge Propylene Concentrator,  LLC ("BRPC") - a 30.0% economic interest in
a propylene  concentration unit located in southeastern Louisiana which is under
construction and scheduled to become operational in the third quarter of 2000.

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

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

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

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

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

The Company's  investments  in and advances to  unconsolidated  affiliates  also
includes  Venice Energy  Services  Company,  LLC  ("VESCO")  and Dixie  Pipeline
Company ("Dixie"). The VESCO investment consists of a 13.1% economic interest in
a LLC owning a natural gas processing plant, fractionation facilities,  storage,


                                      F-11
<PAGE>

and gas gathering  pipelines in Louisiana.  The Dixie investment  consists of an
11.5%  interest in a corporation  owning a 1,301-mile  propane  pipeline and the
associated  facilities  extending  from Mont Belvieu,  Texas to North  Carolina.
These investments are accounted for using the cost method.

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

Investments in and advances to unconsolidated affiliates at:



                                                   AT DECEMBER 31,
                                          -----------------------------------
                                                1998              1999
                                          -----------------------------------

Accounted for on equity basis:
     BEF                                          $  50,079        $  63,004
     Promix                                                           50,496
     BRF                                             17,896           36,789
     Tri-States                                          55           28,887
     EPIK                                             5,667           15,258
     Belle Rose                                                       12,064
     BRPC                                                             11,825
     Wilprise                                         4,873            9,283
     MBA                                             12,551
Accounted for on cost basis:
     VESCO                                                            33,000
     Dixie                                                            20,000
                                          -----------------------------------
Total                                             $  91,121        $ 280,606
                                          ===================================


      Equity in income (loss) of  unconsolidated  affiliates  for the year ended
December 31:

                          1997              1998               1999
                   --------------------------------------------------------
BEF                         $   9,305         $   9,801          $   8,183
MBA                             6,377             5,213              1,256
BRF                                                 (91)              (336)
BRPC                                                                    16
EPIK                                                748              1,173
Wilprise                                                               160
Tri-States                                                           1,035
Promix                                                                 630
Belle Rose                                                            (29)
Other                                                                1,389
                   --------------------------------------------------------
      Total                $   15,682        $   15,671         $   13,477
                   ========================================================

At  December  31,  1999,  the  Company's   share  of  accumulated   earnings  of
unconsolidated  affiliates  that  had  not  been  remitted  to the  Company  was
approximately $39.9 million.

                                       F-12
<PAGE>

Following is selected financial data for the most significant investments of the
Company:

BEF

BEF is owned  equally  (33.33%) by Mitchell  Gas  Services,  L.P.  ("Mitchell"),
Sunoco and the  Company.  Mitchell  Energy &  Development  Corp.  is  Mitchell's
ultimate  parent company,  and Sun Company,  Inc.  ("Sun") is Sunoco's  ultimate
parent company.

Following is condensed financial data for BEF:

                                                         AT DECEMBER 31,
                                                --------------------------------
                                                  1998              1999
                                                --------------------------------
BALANCE SHEET DATA:
Current assets                                     $   34,268        $   44,261
Property, plant, and equipment, net                   172,281           161,390
Other assets                                           13,684             8,313
                                                --------------------------------
     Total assets                                  $  220,233        $  213,964
                                                ================================

Current liabilities                                $   54,326        $   41,317
Long-term debt                                         19,556
Other liabilities                                       1,798             4,323
Partners' equity                                      144,553           168,324
                                                --------------------------------
     Total liabilities and partners' equity        $  220,233        $  213,964
                                                ================================

                                        YEARS ENDED DECEMBER 31,
                         -------------------------------------------------------
                               1997               1998              1999
                         -------------------------------------------------------
INCOME STATEMENT DATA:
Revenues                        $  233,218         $  182,001        $  193,219
Expenses                            205,300           152,600           168,669
                         -------------------------------------------------------
     Net income                 $   27,918         $   29,401        $   24,550
                         =======================================================


BEF's owners are required under isobutane  supply contracts to provide their pro
rata  share  of  BEF's  monthly  isobutane  requirements.  If the  MTBE  plant's
isobutane  requirements  exceed 450,000 barrels for any given month, each of the
owners retains the right,  but not the obligation,  to supply at least one-third
of the additional  isobutane needed. The purchase price for the isobutane (which
generally  approximates  the  established  market  price) is based on  contracts
between the owners.

BEF has a ten-year off-take  agreement through September 2004 under which Sun is
required to purchase all of the plant's MTBE  production.  Through May 31, 2000,
Sun pays the higher of a  contractual  floor  price or market  price (as defined
within the agreement) for floor  production  (193,450,000  gallons per year) and
the market  price for  production  in excess of  193,450,000  gallons  per year,
subject to quarterly  adjustments on certain excess volumes. At floor production
levels,  the contractual  floor price is a price sufficient to cover essentially
all of BEF's  operating  costs plus principal and interest  payments on its bank
term  loan.  Market  price  is (a)  toll  fee  price  (cost  of  feedstock  plus
approximately  $0.484 per gallon  during the first two contract  years ended May
31, 1997) and (b) at Sun's  option,  the toll fee price (cost of feedstock  plus
approximately  $0.534 per gallon) or the U.S. Gulf Coast Posted  Contract  Price
for the period from June 1, 1997 through May 31, 2000. For purposes of computing
the toll fee price, the feedstock component is based on the Normal Butane Posted
Price for the month  plus the  average  purchase  price  paid by BEF to  acquire
methanol  consumed by the facility during the month.  In addition,  the floor or
market price determined above will be increased by $0.03 per gallon in the third
and fourth  contract  years and by about $0.04 per gallon in the fifth  contract
year. Beginning June 1, 2000, through the remainder of the agreement,  the price
for all production will be based on a market-related negotiated price.

                                       F-13
<PAGE>

The  contracted  floor price paid by Sun for  production in 1997,  1998 and 1999
exceeded the spot market price for MTBE.  At December 31, 1999,  the floor price
paid for MTBE by Sun was $1.11 per  gallon.  The  average  Gulf  Coast MTBE spot
market price was $.94 per gallon for  December  1999 and $.72 per gallon for all
of 1999.

Substantially  all revenues  earned by BEF are from the production of MTBE which
is sold to Sun. This  concentration  could impact BEF's exposure to credit risk;
however,  such  risk  is  reduced  since  Sun  has an  equity  interest  in BEF.
Management  believes BEF is exposed to minimal credit risk. BEF does not require
collateral for its receivables from Sun.

Long-term  debt of BEF consists of a five-year,  floating  interest rate (London
Interbank  Offered Rate  ["LIBOR"]  plus  .0875%) bank term note payable  ($19.6
million in current maturities  outstanding at December 31, 1999) which is due in
equal  quarterly  installments  of  $9.8  million  through  May  31,  2000.  The
weighted-average interest rate on this debt for the year ended December 31, 1999
was 6.20%. The debt is non-recourse debt to the partners.

The bank term loan  agreement  contains  restrictive  covenants  prohibiting  or
limiting certain actions of BEF, including partner distributions,  and requiring
certain  actions  by BEF,  including  the  maintenance  of  specified  levels of
leverage,   as  defined,  and  approval  by  the  banks  of  certain  contracts.
Distributions  to partners in the amount of $0.8  million were made for the year
ended  December  31,  1999.  In  addition,  the loan  agreement  requires BEF to
restrict a certain portion of cash to pay for the plant's turnaround maintenance
and long-term debt service. At December 31, 1998 and 1999, cash of $11.1 million
and  $6.7  million,  respectively,  was  restricted  under  terms  of  the  loan
agreement.  BEF was in compliance with the restrictive covenants at December 31,
1999. The long-term debt is collateralized by substantially all of BEF's assets.

RECENT REGULATORY DEVELOPMENTS

In November 1998, U.S.  Environmental  Protection  Agency ("EPA")  Administrator
Carol M. Browner  appointed a Blue Ribbon Panel (the "Panel") to investigate the
air quality  benefits and water quality  concerns  associated with oxygenates in
gasoline,  and to  provide  independent  advice and  recommendations  on ways to
maintain air quality while protecting  water quality.  The Panel issued a report
on their  findings  and  recommendations  in July  1999.  The  Panel  urged  the
widespread  reduction  in the use of MTBE due to the growing  threat to drinking
water  sources  despite  that  fact  that  use of  reformulated  gasolines  have
contributed  to  significant  air  quality  improvements.   The  Panel  credited
reformulated  gasoline with  "substantial  reductions"  in toxic  emissions from
vehicles and  recommended  that those  reductions  be  maintained  by the use of
cleaner-burning fuels that rely on additives other than MTBE and improvements in
refining processes.  The Panel stated that the problems associated with MTBE can
be  characterized  as a low-level,  widespread  problem that had not reached the
state of being a public health threat.  The Panel's  recommendations  are geared
towards  confronting  the problems  associated with MTBE now rather than letting
the issue  grow into a larger and worse  problem.  The Panel did not call for an
outright ban on MTBE but stated that its use should be curtailed  significantly.
The Panel also  encouraged a public  educational  campaign on the potential harm
posed by gasoline when it leaks into ground water from storage tanks or while in
use.  Based on the  Panel's  recommendations,  the EPA is  expected to support a
revision  of the Clean  Air Act of 1990 that  maintains  air  quality  gains and
allows for the removal of the requirement for oxygenates in gasoline.

Several public advocacy and protest groups active in California and other states
have asserted that MTBE contaminates water supplies,  causes health problems and
has not been as beneficial as originally contemplated in reducing air pollution.
In  California,  state  authorities  negotiated  an  agreement  with  the EPA to
implement a program  requiring  oxygenated  motor gasoline at 2.0% for the whole
state,  rather than 2.7% only in selected areas. On March 25, 1999, the Governor
of  California  ordered the  phase-out of MTBE in that state by the end of 2002.
The order also seeks to obtain a waiver of the  oxygenate  requirement  from the
EPA in order to facilitate the phase-out;  however,  due to increasing  concerns
about the viability of alternative fuels, the California  legislature on October
10,  1999  passed the Sher Bill (SB 989)  stating  that MTBE should be banned as
soon as feasible rather than by the end of 2002.

                                       F-14
<PAGE>

Legislation  to amend the federal  Clean Air Act of 1990 has been  introduced in
the  U.S.  House  of  Representatives;  it  would  ban the use of MTBE as a fuel
additive  within three years.  Legislation  introduced in the U.S.  Senate would
eliminate  the Clean  Air Act's  oxygenate  requirement  in order to assist  the
elimination  of MTBE in fuel.  No  assurance  can be given as to whether this or
similar federal  legislation  ultimately will be adopted or whether  Congress or
the EPA might takes steps to override the MTBE ban in California.

ALTERNATIVE USES OF THE BEF FACILITY

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

PROMIX

Promix  is a  limited  liability  company  whose  owners  are  Koch  Hydrocarbon
Southeast  ("KHSE"),  a  subsidiary  of  Koch  Industries,   Inc.  ("KII"),  Dow
Hydrocarbons and Resources, Inc. ("DHRI"), a subsidiary of Dow Chemical Company,
and  the  Company.   Promix  is  engaged  in  the   business  of   transporting,
fractionating, storing and exchanging natural gas liquids in southern Louisiana.
KHSE is the managing member  responsible for the daily operations and management
of Promix.

The  following is  condensed  unaudited  financial  data for Promix for the year
ended and as of December  31, 1999.  The Company has  included in equity  income
from  unconsolidated  affiliates that portion of earnings  related to the period
from August 1, 1999 through  December 31, 1999 in  proportion  to its  ownership
interest.


BALANCE SHEET DATA:
Current assets                                                     $   28,890
Property, plant, and equipment, net                                   117,885
                                                            ------------------
     Total assets                                                  $  146,775
                                                            ==================

Current liabilities                                                $   18,121
Members' equity                                                       128,654
                                                            ------------------
     Total liabilities and members' equity                         $  146,775
                                                            ==================

INCOME STATEMENT DATA:
Revenues                                                           $   36,098
Expenses                                                               26,975
                                                            ------------------
     Net income                                                     $   9,123
                                                            ==================


BRF

BRF is a joint  venture among Amoco  Louisiana  Fractionator  Company,  Williams
Mid-Stream Natural Gas Liquids, Inc., Exxon Chemical Louisiana LLC ("Exxon") and
the Company.  The ownership interests in BRF are based on amounts contributed by
each member to fund certain capital  expenditures.  Exxon funded a small portion
of the construction  costs but has contributed other NGL assets. At December 31,
1999, the Company owned an approximate 31.25% economic interest in BRF.

                                       F-15
<PAGE>

BRF is a NGL  fractionation  facility near Baton Rouge,  Louisiana,  which has a
60,000  barrel per day  capacity.  The Company is the operator of the  facility,
which will  service NGL  production  from the  Mobile/Pascagoula  and  Louisiana
areas.  Operations  commenced  in  July  1999.  Operating  losses  prior  to the
commencement of operations are the result of certain start-up  expenses incurred
during the development stage.

Following is the condensed financial data for BRF:

                                                   AT DECEMBER 31,
                                             ---------------------------------
                                                1998              1999
                                             ---------------------------------
BALANCE SHEET DATA:
Current assets                                    $   2,386        $   12,617
Property, plant, and equipment, net                  58,618            89,035
Other assets                                              3               854
                                             ---------------------------------
     Total assets                                $   61,007        $  102,506
                                             =================================

Current liabilities                               $   8,222         $   6,799
Members' equity                                      52,785            95,707
                                             ---------------------------------
     Total liabilities and members' equity       $   61,007        $  102,506
                                             =================================


                                               YEAR ENDED DECEMBER 31,
                                             ---------------------------------
                                                1998              1999
                                             ---------------------------------
INCOME STATEMENT DATA:
Revenues                                                            $   6,746
Expenses                                          $     330             7,820
                                             ---------------------------------
     Net income                                  $    (330)        $  (1,074)
                                             =================================


                                       F-16
<PAGE>
TRI-STATES

Tri-States  is a  limited  liability  company  owning  a 80,000  barrel  per day
161-mile   common-carrier  pipeline  that  will  deliver  NGLs  from  three  gas
processing plants in Alabama and Mississippi to fractionators in Louisiana.  The
owners of Tri-States are Amoco  Tri-States NGL Pipeline Company  (16.67%),  Koch
Pipeline  Southeast,  Inc.  (16.67%),  Gulf Coast NGL Pipeline,  L.L.C.(16.67%),
WSF-NGL Pipeline Company,  Inc.  ("Williams")(16.67%)  and the Company (33.33%).
Williams is the operator of the Tri-States pipeline.

The following is condensed unaudited financial data for Tri-States:
                                                   AT DECEMBER 31,
                                              --------------------------------
                                                     1998              1999
                                              --------------------------------
BALANCE SHEET DATA:
Current assets                                     $     63         $   8,056
Property, plant, and equipment, net                                    84,854
                                              --------------------------------
     Total assets                                  $     63        $   92,910
                                              ================================

Current liabilities                                $     68         $   1,430
Members' equity                                         (5)            91,480
                                              --------------------------------
     Total liabilities and members' equity         $     63        $   92,910
                                              ================================

                                                               YEAR ENDED
                                                              DECEMBER 31,
                                                                  1999
                                                            ------------------
INCOME STATEMENT DATA:
Revenues                                                            $   8,101
Expenses                                                                4,954
                                                            ------------------
     Net income                                                     $   3,147
                                                            ==================

                                       F-17
<PAGE>

The following table represents the aggregated unaudited condensed financial data
for the Company's other equity investments in unconsolidated  affiliates for the
periods ending:


                                                 As of December 31,
                                        -------------------------------------
                                              1998               1999
                                        -------------------------------------
BALANCE SHEET DATA:
Current assets                                 $   11,355         $   12,937
Property, plant and equipment, net                 69,281            116,030
Other assets                                        1,687
                                        -------------------------------------
      Total assets                             $   82,323         $  128,967
                                        =====================================

Current liabilities                            $    5,413         $    6,525
Long-term debt                                     11,790
Other liabilities                                     130
Members' and partners' equity                      64,990            122,442
                                        -------------------------------------
      Total liabilities and equity             $   82,323         $  128,967
                                        =====================================

                                     Year Ended December 31,
                         ----------------------------------------------------
                            1997               1998              1999
                         ----------------------------------------------------
INCOME STATEMENT DATA:
Revenues                     $   33,646        $   35,843         $   27,897
Expenses                         23,034            24,480             21,932
                         ----------------------------------------------------
Net income                   $   10,612        $   11,363         $    5,965
                         ====================================================



5.  NOTES RECEIVABLE FROM UNCONSOLIDATED  AFFILIATES

At December 31, 1999,  the Company  holds a  participation  interest in the bank
loan of BEF for  $6.5  million.  The BEF note  receivable  bears  interest  at a
floating  rate per annum at LIBOR plus 0.0875% and matures on May 31, 2000.  The
Company will receive quarterly  principal payments of approximately $3.3 million
plus interest from BEF during the term of the loan.

6.    LONG-TERM DEBT

In December  1999,  the Company and Operating  Partnership  filed a $800 million
universal  shelf  registration  (the  "Registration   Statement")  covering  the
issuance of an unspecified  amount of equity or debt securities or a combination
thereof.  The Company expects to issue public debt under the shelf  registration
statement during fiscal 2000.  Management  intends to use the proceeds from such
debt  offering to repay all  outstanding  bank credit  facilities  and for other
general corporate purposes.

$200 MILLION BANK CREDIT FACILITY. In July 1998, the Company entered into a $200
million  bank  credit  facility  that  includes a $50  million  working  capital
facility  and a $150  million  revolving  term loan  facility.  The $150 million
revolving  term loan facility  includes a sublimit of $30 million for letters of
credit. As of December 31, 1999, the Company has borrowed $129 million under the
bank credit facility which is due in July 2000.

The Company's  obligations under this bank credit facility are unsecured general
obligations and are non-recourse to the General  Partner.  Borrowings under this
bank credit  facility  will bear interest at either the bank's prime rate or the
Eurodollar rate plus the applicable margin as defined in the facility. This bank
credit  facility  will expire in July 2000 and all amounts  borrowed  thereunder
shall be due and payable at that time. There must be no amount outstanding under


                                       F-18
<PAGE>

the working capital facility for at least 15 consecutive days during each fiscal
year.  The Company  elects the basis for the  interest  rate at the time of each
borrowing.  Interest  rates  ranged  from 5.94% to 8.75%  during  1999,  and the
weighted-average interest rate at December 31, 1999 was 6.74%.

As amended on July 28,  1999,  the credit  agreement  relating to this  facility
contains a prohibition  on  distributions  on, or purchases or  redemptions  of,
Units of the Limited Partner if any event of default is continuing. In addition,
this bank credit facility  contains various  affirmative and negative  covenants
applicable  to the  ability of the Company to,  among  other  things,  (i) incur
certain additional indebtedness,  (ii) grant certain liens, (iii) sell assets in
excess of certain limitations, (iv) make investments, (v) engage in transactions
with affiliates and (vi) enter into a merger,  consolidation  or sale of assets.
The bank  credit  facility  requires  that the  Company  satisfy  the  following
financial covenants at the end of each fiscal quarter: (i) maintain Consolidated
Tangible  Net Worth (as  defined in the bank credit  facility)  of at least $250
million,  (ii)  maintain  a ratio of  EBITDA  (as  defined  in the  bank  credit
facility)  to  Consolidated  Interest  Expense  (as  defined in the bank  credit
facility)  for the  previous  12-month  period  of at least 3.5 to 1.0 and (iii)
maintain a ratio of Total  Indebtedness (as defined in the bank credit facility)
to EBITDA of no more than 3.0 to 1.0. The Company was in  compliance  with these
restrictive covenants at December 31, 1999.

A "Change of  Control"  constitutes  an Event of Default  under this bank credit
facility.  A Change of Control includes any of the following events:  (i) Dan L.
Duncan  (and/or  certain  affiliates)  cease to own (a) at least 51% (on a fully
converted, fully diluted basis) of the economic interest in the capital stock of
EPCO or (b) an aggregate number of shares of capital stock of EPCO sufficient to
elect a majority  of the board of  directors  of EPCO;  (ii) EPCO ceases to own,
through a wholly owned  subsidiary,  at least 65% of the outstanding  membership
interest  in the  General  Partner  and at least a majority  of the  outstanding
Common Units of the Limited Partner; (iii) any person or group beneficially owns
more than 20% of the outstanding  Common Units of the Limited Partner (excluding
certain affiliates of EPCO or Shell);  (iv) the General Partner ceases to be the
general  partner  of the  Company or the  Limited  Partner;  or (v) the  Limited
Partner ceases to be the sole limited partner of the Company.

$350 MILLION BANK CREDIT FACILITY. Also in July 1999, the Company entered into a
$350 million bank credit  facility that includes a $50 million  working  capital
facility  and a $300  million  revolving  term loan  facility.  The $300 million
revolving  term loan facility  includes a sublimit of $10 million for letters of
credit.  The initial  proceeds of this loan were used to finance the acquisition
of TNGL and MBA.

Borrowings  under the bank  credit  facility  will bear  interest  at either the
bank's prime rate or the Eurodollar  rate plus the applicable  margin as defined
in the  facility.  The bank  credit  facility  will  expire in July 2001 and all
amounts borrowed thereunder shall be due and payable at that time. There must be
no  amount  outstanding  under  the  working  capital  facility  for at least 15
consecutive  days during each fiscal year.  The Company elects the basis for the
interest rate at the time of each borrowing. Interest rates ranged from 6.88% to
7.31% during 1999, and the  weighted-average  interest rate at December 31, 1999
was 7.10%.

Limitations   on  certain   actions  by  the  Company  and  financial   covenant
requirements  of this bank credit  facility are  substantially  consistent  with
those existing for the $200 Million Bank Credit Facility as described above. The
Company was in compliance with the restrictive covenants at December 31, 1999.

                                       F-19
<PAGE>

Long-term debt consisted of the following:

                                                     AT DECEMBER 31,
                                                 1998              1999
                                          --------------------------------
Borrowings under:
    $200 Million Bank Credit Facility        $   90,000        $  129,000
    $350 Million Bank Credit Facility                             166,000
                                          --------------------------------
     Total                                        90,000          295,000
Less current maturities of long-term debt                         129,000
                                          --------------------------------
     Long-term debt                          $   90,000        $  166,000
                                          ================================

At December 31, 1999,  the Company had $40 million of standby  letters of credit
available of which  approximately $24.3 million were outstanding under letter of
credit agreements with the banks.


Extraordinary Item - Early Extinguishment of Debt

On July 31, 1998,  the Company  used $243.3  million in  contributions  from the
Limited  Partner and $13.3  million of  borrowings  from the $200  Million  Bank
Credit  Facility to retire $256.6 million of debt that was assumed from EPCO. In
connection  with the  repayment  of the debt,  the Company was required to pay a
"make-whole  payment" of $26.3  million to the lenders.  The $26.3 million (plus
$0.9  million  of  unamortized  debt  costs)  is  included  in the  consolidated
statement of operations for the year ended  December 31, 1998 as  "Extraordinary
item--early extinguishment of debt."


7.       CAPITAL STRUCTURE AND DISTRIBUTIONS

The Limited Partner owns 98.9899% of the Company with the General Partner owning
the remaining 1.0101%. For purposes of maintaining partner capital accounts, the
partnership  agreement generally specifies that items of income or loss shall be
allocated  among the  partners in  accordance  with their  respective  ownership
percentages.  Net losses are first  allocated to the partners in accordance with
their respective percentages to the extent that the allocations do not cause the
Limited Partner to have a deficit balance in its capital  account.  Any net loss
not allocated to the Limited Partner is allocated to the General Partner. Normal
allocations  of net income  according  to  percentage  interests  are done only,
however,  after giving effect to any priority income  allocations to the General
Partner in an amount equal to any aggregate  net losses  incurred by the General
Partner for all previous years.  For the years ended December 31, 1999, 1998 and
1997,  the  allocation  of  earnings  has been  based  solely on the  respective
ownership  interests of the partners with no priority income  allocations  being
necessary.

The  partnership  agreement  requires  the  Company  to  distribute  100% of the
"Available  Cash" (as defined in the  partnership  agreements)  to the  partners
within 45 days  following  the end of each calendar  quarter in accordance  with
their respective ownership  interests.  Available Cash consists generally of all
cash receipts of the Company, less all of its cash disbursements, net of changes
in reserves.  The Company's  distributions to its partners were $21.9 million in
1998 and $112.9 million in 1999.

LIMITED  PARTNER UNITS ACQUIRED BY TRUST.  During the first quarter of 1999, the
Company  established  a  revocable  grantor  trust (the  "Trust") to fund future
liabilities of a long-term  incentive  plan. At December 31, 1999, the Trust had
purchased a total of 267,200  Common  Units of the Limited  Partner  (the "Trust
Units") which are accounted for in a manner  similar to treasury stock under the
cost method of  accounting.  The Trust Units receive  dividends from the Limited
Partner.

                                       F-20
<PAGE>

8.  MAJOR CUSTOMERS

Montell  owns a 45.4%  undivided  interest in a plant and the  related  pipeline
system and it leases such undivided interest in these facilities to the Company.
The agreement with Montell expires in 2004. There are two successive  options to
extend  the term for 12 years  each  remaining  under  the  original  agreement.
Revenues  from sales to Montell  were  approximately  $147.6  million and $102.2
million in 1997 and 1998,  respectively.  In  addition,  the Company had supply,
transportation,  and storage contracts with Texas  Petrochemicals that generated
$107.3 million in revenues in 1997. No single  customer  accounted for more than
10% of consolidated revenues during 1999.


9. RELATED PARTY TRANSACTIONS

The Company has no  employees.  All  management,  administrative  and  operating
functions  are  performed  by employees  of EPCO.  Operating  costs and expenses
include  charges  for  EPCO's  employees  who  operate  the  Company's   various
facilities.  Such  charges are based on EPCO's  actual  salary costs and related
fringe  benefits.   Because  the  Company's   operations   constitute  the  most
significant  portion of EPCO's  consolidated  operations,  selling,  general and
administrative  expenses reported in the accompanying statements of consolidated
operations for all periods before the public offering  include all such expenses
incurred  by EPCO  less  amounts  directly  incurred  by other  subsidiaries  or
operating divisions of EPCO.

In connection  with the initial public  offering,  EPCO, the General Partner and
the Company entered into the EPCO Agreement pursuant to which (i) EPCO agreed to
manage the  business  and affairs of the Company and the Limited  Partner;  (ii)
EPCO agreed to employ the operating personnel involved in the Company's business
for which EPCO is reimbursed  by the Company at cost;  (iii) the Company and the
Limited  Partner  agreed to  participate  as named  insureds  in EPCO's  current
insurance  program,  and costs are  allocated  among the parties on the basis of
formulas set forth in the agreement;  (iv) EPCO agreed to grant an  irrevocable,
nonexclusive  worldwide license to all of the trademarks and trade names used in
its business to the Company;  (v) EPCO agreed to indemnify  the Company  against
any losses resulting from certain lawsuits; and (vi) EPCO agreed to sublease all
of the  equipment  which it holds  pursuant to operating  leases  relating to an
isomerization   unit,  a  deisobutanizer   tower,  two  cogeneration  units  and
approximately  100 rail cars to the  Company  for $1 per year and  assigned  its
purchase  options  under such  leases to the Company  (hereafter  referred to as
"Retained Leases".)

Pursuant to the EPCO Agreement, EPCO is reimbursed at cost for all expenses that
it incurs in  connection  with managing the business and affairs of the Company,
except that EPCO is not entitled to be reimbursed  for any selling,  general and
administrative  expenses. In lieu of reimbursement for such selling, general and
administrative  expenses,  EPCO receives an annual  administrative  services fee
which initially  equaled $12.0 million.  The General Partner,  with the approval
and consent of its Audit and Conflicts Committee, can agree to increases in such
administrative  services fee of up to 10% each year during the ten-year  term of
the EPCO Agreement and may agree to further  increases in such fee in connection
with  expansions of the Company's  operations  through the  construction  of new
facilities or the completion of acquisitions that require additional  management
personnel.  On July 7, 1999,  the Audit and  Conflicts  Committee of the General
Partner  authorized  an  increase  in the  administrative  services  fee to $1.1
million per month from the initial $1.0 million per month.  The  increased  fees
were effective  August 1, 1999.  Beginning in January 2000,  the  administrative
services  fee will  increase to $1.55  million per month plus  accrued  employee
incentive plan costs to compensate EPCO for the additional selling, general, and
administrative  charges  related  to  the  additional  administrative  employees
acquired in the TNGL acquisition.

EPCO also operates most of the plants owned by the unconsolidated affiliates and
charges them for actual salary costs and related fringe  benefits.  In addition,
EPCO charged the  unconsolidated  affiliates for management  services  provided;
such charges  aggregated  $1.1 million for 1997,  $1.7 million for 1998 and $0.8
million for 1999.  Since EPCO pays the rental  charges for the Retained  Leases,
such  payments  are  considered a  contribution  by EPCO for the benefit of each
partnership  interest  and  are  included  as such in  Partners'  Equity,  and a
corresponding  charge for the rental  expense is  included  in the  consolidated


                                       F-21
<PAGE>

statements  of  operations.  Rental  expense,  included in  operating  costs and
expenses,  for the Retained  Leases was $13.3  million,  $11.3 million (of which
$4.0 million  occurred  after the public  offering)  and $10.6 million for 1997,
1998 and 1999, respectively.

The Company  also has  transactions  in the normal  course of business  with the
unconsolidated  affiliates and other  subsidiaries  and divisions of EPCO.  Such
transactions  include  the buying and  selling of NGL  products,  loading of NGL
products and transportation of NGL products by truck.

As a result of the TNGL acquisition, Shell acquired an ownership interest in the
Limited  Partner and its General  Partner.  At December  31,  1999,  Shell owned
approximately 17.6% of the Limited Partner and 30.0% of the General Partner. The
Company's major customer related to the TNGL assets is Shell. Under the terms of
the  Shell  Processing   Agreement,   the  Company  has  the  right  to  process
substantially  all of Shell's current and future natural gas production from the
Gulf of Mexico.  This  includes  natural gas  production  from the  developments
currently referred to as deepwater.  Generally,  the Shell Processing  Agreement
grants the Company the exclusive right to process any and all of Shell's Gulf of
Mexico natural gas production from existing and future  dedicated  leases;  plus
the right to all title, interest, and ownership in the raw make extracted by the
Company's gas processing  facilities  from Shell's  natural gas production  from
such  leases;  with the  obligation  to deliver to Shell the  natural gas stream
after the raw make is extracted.  In addition to the Shell Processing Agreement,
the  Company  acquired  a  short-term  lease for 425 rail  cars  from  Shell for
servicing the gas processing business activities.

Following is a summary of significant transactions with related parties:

                                                   FOR THE YEARS ENDED
                                                       DECEMBER 31,
                                             -----------------------------------
                                              1997         1998        1999
                                             -----------------------------------
Revenues from NGL products sold to:
   Unconsolidated affiliates                   $44,392      $36,474     $40,439
   Shell                                                                 56,301
   EPCO and its subsidiaries                    19,029       19,531       9,148
Cost of NGL products purchased from:
   Unconsolidated affiliates                     8,453        9,270      14,212
   Shell                                                                188,570
   EPCO and its subsidiaries                     6,495        5,293      29,365
Operating expenses charged for trucking
   of NGL products                               7,606        4,704       6,282
Administrative service fee charged by EPCO                    5,129      12,500



10. COMMITMENTS AND CONTINGENCIES

STORAGE COMMITMENTS

The Company  stores NGL products for EPCO and various third  parties.  Under the
terms of the storage agreements,  the Company is generally required to redeliver
to the owner its NGL  products  upon  demand.  The  Company is  insured  for any
physical loss of such NGL products due to catastrophic  events.  At December 31,
1999, NGL products aggregating 230 million gallons were due to be redelivered to
the owners under various storage agreements.


                                       F-22
<PAGE>

LEASE COMMITMENTS

The  Company  leases  certain   equipment  and   processing   facilities   under
noncancelable  operating  leases.  Minimum future rental payments on such leases
with terms in excess of one year at December 31, 1999 are as follows:

          2000                           $ 5,629
          2001                             4,609
          2002                             4,606
          2003                             4,606
          2004                             4,607
          Thereafter                       4,607
                                     ------------
          Total minimum obligations     $ 28,664
                                     ============

Lease expense charged to operations  (including  Retained  Leases) for the years
ended December 31, 1997, 1998 and 1999 was  approximately  $29.6 million , $18.5
million and $20.2 million, respectively.

GAS PURCHASE COMMITMENTS

The Company has annual renewable gas purchase contracts with four suppliers.  As
of  December  31,  1999,  the Company is  required  to make daily  purchases  as
follows: 8,000 million British Thermal Units ("MMBTU") per day through March 31,
2000,  5,000 MMBTU per day through July 31, 2000 and 5,000 MMBTU per day through
October 31, 2000. The cost of these natural gas purchase commitments approximate
market value at the time of delivery.

CAPITAL EXPENDITURE COMMITMENTS

As of  December  31,  1999,  the Company  had  capital  expenditure  commitments
totaling  approximately  $9.5  million,  of which  $1.7  million  relates to the
construction of projects of unconsolidated affiliates.

LITIGATION

EPCO has indemnified  the Company against any litigation  pending as of the date
of its  formation.  The Company is sometimes  named as a defendant in litigation
relating to its normal business operations.  Although the Company insures itself
against various business risks, to the extent management believes it is prudent,
there is no  assurance  that the  nature and  amount of such  insurance  will be
adequate,  in every case, to indemnify the Company against  liabilities  arising
from future legal  proceedings  as a result of its ordinary  business  activity.
Management is aware of no significant  litigation,  pending or threatened,  that
would have a significantly adverse effect on the Company's financial position or
results of operations.


11.  FAIR VALUE OF FINANCIAL INSTRUMENTS

The following  disclosure of estimated fair value was determined by the Company,
using available  market  information and  appropriate  valuation  methodologies.
Considerable  judgment,  however,  is  necessary  to  interpret  market data and
develop  the  related  estimates  of  fair  value.  Accordingly,  the  estimates
presented herein are not necessarily  indicative of the amounts that the Company
could  realize  upon  disposition  of  the  financial  instruments.  The  use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.

The  Company  enters  into swaps and other  contracts  to hedge the price  risks
associated with inventories,  commitments and certain anticipated  transactions.
The Company does not currently hold or issue  financial  instruments for trading
purposes.  The swaps and other contracts are with  established  energy companies
and major  financial  institutions.  The  Company  believes  its credit  risk is


                                       F-23
<PAGE>

minimal  on these  transactions,  as the  counterparties  are  required  to meet
stringent credit standards. There is continuous day-to-day involvement by senior
management in the hedging decisions,  operating under resolutions adopted by the
board of directors of the General Partner.

At December 31, 1999, the Company had open positions covering 24.0 billion cubic
feet of natural gas extending into December 2000 related to the swaps  described
above. The fair value of these swap contracts at December 31, 1999 was estimated
at $0.5  million  payable  by the  Company  based on  quoted  market  prices  of
comparable  contracts  and  approximate  the gain or loss that  would  have been
realized if the contracts had been settled at the balance sheet date.

Cash  and  Cash  Equivalents,   Accounts  Receivable,   Participation  in  Notes
Receivable from Unconsolidated Affiliates, Accounts Payable and Accrued Expenses
are carried at amounts which reasonably approximate their fair value at year end
due to their short-term nature.

Long-term  debt is carried at an amount that  reasonably  approximates  its fair
value at year end due to its variable interest rates.


12.  SUPPLEMENTAL CASH FLOWS DISCLOSURE

The net effect of changes in operating assets and liabilities is as follows:
<TABLE>
<CAPTION>

                                                                        YEAR ENDED DECEMBER 31,
                                                               1997               1998              1999
                                                         -------------------------------------------------------
<S>                                                             <C>                 <C>            <C>
(Increase) decrease in:
      Accounts receivable                                       $   29,024          $   3,699      $  (152,335)
      Inventories                                                    7,329              1,361            7,471
      Prepaid and other current assets                                 917               (342)          (7,524)
      Other assets                                                     127                 46           (1,971)
Increase (decrease) in:
      Accounts payable                                              (3,320)           (40,005)          (6,277)
      Accrued gas payable                                          (26,955)           (18,485          189,165
      Accrued expenses                                              (5,526)            (1,098)         (11,137)
      Other current liabilities                                      1,352            (10,082)           6,745
      Other liabilities                                                                                    296
                                                         -------------------------------------------------------
Net effect of changes in operating accounts                     $    2,948         $  (64,906)     $    24,433
                                                         =======================================================

Cash payments for interest, net of $2,005,
      $180 and $153 capitalized in 1997,
      1998 and 1999, respectively                               $   28,352         $    6,971       $   15,780
                                                         =======================================================
</TABLE>


During 1998, the Company  contributed  $1.9 million (at net book value) of plant
equipment to an unconsolidated  affiliate as part of its investment  therein. On
August 1, 1999,  the Company paid $166  million in cash and the Limited  Partner
issued 14.5  million  non-distribution  bearing,  convertible  special  Units in
exchange  for the equity  interest in TNGL.  On July 1, 1999,  the Company  paid
approximately  $42.1  million  in cash to  Kinder  Morgan  and EPCO and  assumed
approximately  $4  million  of  debt  in  connection  with  the  acquisition  of
additional interest in MBA.

13.  CONCENTRATION OF CREDIT RISK

A  substantial  portion of the  Company's  revenues are derived from natural gas
processing  and  the   fractionation,   isomerization,   propylene   production,
marketing,  storage and  transportation  of NGLs to various companies in the NGL
industry, located in the United States. Although this concentration could affect
the Company's  overall  exposure to credit risk since these  customers  might be
affected  by similar  economic  or other  conditions,  management  believes  the
Company is exposed to minimal credit risk, since the majority of its business is


                                       F-24
<PAGE>

conducted with major  companies  within the industry and much of the business is
conducted with companies with whom the Company has joint operations. The Company
generally does not require collateral for its accounts  receivable.  The Company
is subject to a number of risks  inherent in the  industry in which it operates,
primarily  fluctuating  gas and  liquids  prices and gas supply.  The  Company's
financial  condition and results of operations will depend  significantly on the
prices  received  for  NGLs  and the  price  paid  for gas  consumed  in the NGL
extraction  process.  These  prices are subject to  fluctuations  in response to
changes in supply,  market  uncertainty and a variety of additional factors that
are beyond the control of the Company. In addition, the Company must continually
connect new wells  through  third-party  gathering  systems  which serve the gas
plants in order to  maintain  or increase  throughput  levels to offset  natural
declines in dedicated volumes. The number of wells drilled by third parties will
depend on, among other  factors,  the price of gas and oil, the energy policy of
the federal  government,  and the  availability  of foreign oil and gas, none of
which is in the Company's control.


14.  SEGMENT  INFORMATION

Historically,  the Company has had only one  reportable  business  segment:  NGL
Operations.  Due to the  broadened  scope of the Company's  operations  with the
third  quarter of 1999  acquisition  of TNGL,  effective  for fiscal  1999,  the
Company's  operations are being managed using five reportable business segments.
The  five  new  segments  are:  Fractionation,   Pipeline,   Processing,  Octane
Enhancement, and Other.

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

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

Segment  gross  operating  margin is inclusive of  intersegment  revenues.  Such
revenues,  which have been eliminated from the consolidated totals, are recorded
at arms-length  prices which are intended to  approximate  the prices charged to
external customers.

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

                                      F-25
<PAGE>

Information  by  operating  segment,   together  with   reconciliations  to  the
consolidated totals, is presented in the following table:
<TABLE>
<CAPTION>
                                                      Operating Segments                              Adjustments
                          ---------------------------------------------------------------------------
                                                                           Octane                         and        Consolidated
                          Fractionation    Pipelines      Processing    Enhancement       Other       Eliminations      Totals
                          ---------------------------------------------------------------------------------------------------------
Revenues from
    external customers
<S> <C>                       <C>            <C>           <C>             <C>             <C>         <C>             <C>
    1999                      $  275,646     $   16,180    $ 1,081,487     $    8,183      $     731   $   (35,771)    $ 1,346,456
    1998                         273,781         19,344        506,630          9,801                      (54,983)        754,573
    1997                         339,721         15,924        729,376          9,305                      (58,363)      1,035,963

Intersegment revenues
    1999                         118,103         43,688        216,720                           444      (378,955)              -
    1998                         162,379         37,574             90                           383                             -
    1997                         129,230         40,202            164                           360                             -

Total revenues
    1999                         393,749         59,868      1,298,207          8,183          1,175      (414,726)      1,346,456
    1998                         436,160         56,918        506,720          9,801            383      (255,409)        754,573
    1997                         468,951         56,126        729,540          9,305            360      (228,319)      1,035,963

Gross operating margin by segment
    1999                         106,267         27,038         36,799          8,183            908                       179,195
    1998                          66,627         27,334           (652)         9,801         (3,483)                       99,627
    1997                         100,770         23,909         (3,778)         9,305         (1,496)                      128,710

Segment assets
    1999                         362,198        249,453        122,495                           113        32,810         767,069
    1998                         288,159        207,432            181                           142                       499,793

Investments in and advances to
    Unconsolidated affiliates
    1999                          99,110         85,492         33,000         63,004                                      280,606
    1998                          30,447         10,595                        50,079                                       91,121
</TABLE>

Two  customers  provided  more than 10% of revenues in 1997.  Only one  customer
provided  more than 10% of revenues in 1998.  No single  customer  provided more
than 10% of revenues in 1999.

All consolidated revenues were earned in the United States.


                                       F-26
<PAGE>

A reconciliation of segment gross operating margin to consolidated income before
extraordinary item and minority interest follows:
<TABLE>
<CAPTION>

                                                                 1997             1998             1999
                                                           ---------------------------------------------------
<S>                                                              <C>               <C>             <C>
Total segment gross operating margin                             $  128,710        $  99,627       $  179,195
      Depreciation and amortization                                 (17,684)         (18,579)         (23,664)
      Retained lease expense, net                                   (13,300)         (12,635)         (10,557)
      Gain (loss) on sale of assets                                   (155)              276            (123)
      Selling, general and administrative                          (21,891)         (18,216)         (12,500)
                                                           ---------------------------------------------------
Consolidated operating income                                        75,680           50,473          132,351
      Interest expense                                              (25,717)         (15,057)         (16,439)
      Interest income from unconsolidated affiliates                                     809            1,625
      Dividend income from unconsolidated affiliates                                                    3,435
      Interest income - other                                         1,934              772            1,247
      Other, net                                                        793              358             (379)
                                                           ---------------------------------------------------
Consolidated income before extraordinary item
  and minority interest                                           $  52,690        $  37,355       $  121,840
                                                           ===================================================
</TABLE>


15.  SUBSEQUENT EVENTS


Effective  January 1, 2000, the Company's  General Partner and Limited  Partner,
adopted  the 1999  Long-Term  Incentive  Plan  (the  "Plan").  Under  the  Plan,
non-qualified  incentive  options to purchase a fixed  number of Common Units of
the  Limited  Partner  may be  granted  to key  employees  of EPCO  who  perform
management,  administrative  or operational  functions for the Company under the
EPCO Agreement.  The exercise price per Unit,  vesting and expiration terms, and
rights to receive  distributions  on Units granted are determined by the Company
for each grant  agreement.  Upon the  exercise  of an option,  the  Company  may
deliver the Units of the  Limited  Partner or pay an amount in cash equal to the
excess of the fair market value of a Unit and the exercise  price of the option.
On January 1, 2000,  225,000 options were granted at a weighted average price of
$17.50 per Unit of which none had been  exercised at March 27, 2000. The Plan is
primarily funded by the Units purchased by the Trust.

On February 25, 2000,  the Company  announced  the closing,  effective  March 1,
2000, of its  acquisition of certain  Louisiana and Texas  pipeline  assets from
Concha  Chemical  Pipeline  Company  ("Concha"),  an  affiliate  of  Shell,  for
approximately $100 million in cash. The principal asset acquired was the Lou-Tex
Propylene  Pipeline which is 263 miles of 10" pipeline from Sorrento,  Louisiana
to Mont Belvieu, Texas. The Lou-Tex Propylene Pipeline is currently dedicated to
the transportation of chemical grade propylene from Sorrento to the Mont Belvieu
area.  Also acquired in this  transaction  was 27.5 miles of 6" ethane  pipeline
between Sorrento and Norco,  Louisiana,  and a 0.5 million barrel storage cavern
at Sorrento, Louisiana. The acquisition of the Lou-Tex Propylene Pipeline is the
first  step in the  Company's  development  of an  approximately  $180  million,
160,000  barrel per day  Louisiana-to-Texas  gas liquids  pipeline  system.  The
second step involves the  construction of the 263-mile Lou-Tex NGL Pipeline from
Sorrento,  Louisiana to Mont Belvieu,  Texas,  scheduled  for  completion in the
third quarter of 2000 at an estimated cost of $82.5 million.  This larger system
will link growing  supplies of NGLs produced in Louisiana and  Mississippi  with
the principal NGL markets on the United States Gulf Coast.

On March 13, 2000, in connection with the  Registration  Statement,  the Company
issued $350 million of 5-year public debt  securities.  The notes are unsecured;
rank equally with all of the  Company's  existing  and future  senior debt;  are
senior  to any  future  subordinated  debt;  and are  effectively  junior to the
Company's  secured  indebtedness and other  liabilities.  The Company issued the
notes under an indenture  containing certain restrictive  covenants  restricting
its ability, with certain exceptions,  to incur debt secured by liens and engage
in sale/leaseback  transactions.  The Limited Partner is guarantor of the notes.
Management  used the  proceeds of  approximately  $347.8  million from such debt
offering to repay the entire $169  million  outstanding  under the $200  Million


                                       F-27
<PAGE>

Bank Credit  Facility (at the time of the  offering)  and applied the  remaining
proceeds of $178.8  million to the balance  outstanding  under the $350  Million
Bank Credit Facility.

On March 23,  2000,  the  Company  borrowed  $54  million  from the  Mississippi
Business  Finance  Corporation  ("MBFC") to reimburse the  Company's  portion of
construction  costs of the Pascagoula gas processing  plant. MBFC will issue $54
million in taxable  industrial  development  bonds  underwritten  by First Union
Securities,  Inc. and Banc of America Securities,  LLC. The Limited Partner will
act as guarantor of the MBFC bonds with the Company making payments of principal
and interest to MBFC. Interest on the bonds will be paid semiannually with final
maturity of the bonds in March 2010.





                                       F-28
<PAGE>
                                                                     SCHEDULE II

ENTERPRISE PRODUCTS OPERATING L.P.
VALUATION AND QUALIFYING ACCOUNTS

(AMOUNTS IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
                                                                       Additions
                                                          -------------------------------------
                        Balance at Charged to Charged to
                                          beginning of   Costs and       other                     Balance at end
              Description                    period       expenses     accounts    Deductions        of period
------------------------------------------------------------------------------------------------------------------
<S>                                            <C>          <C>        <C>           <C>                <C>
Year ended December 31, 1997:
      Reserve for inventory losses             $ 1.2        $  5.0                   $ (5.4)(a)         $  0.8

Year ended December 31, 1998:
      Reserve for inventory losses               0.8          10.0                    (10.1)(a)            0.8
Year ended December 31, 1999:
      Allowance for doubtful
          Accounts receivable - trade                          3.0     12.9(b)                            15.9
      Reserve for inventory losses               0.8           7.3                     (5.2) (a)           2.9

------------------------------------------------------------------------------------------------------------------
</TABLE>
 (a)  Generally denotes net underground NGL storage well product losses
 (b)  As a result of the TNGL acquisition,  the Company acquired a $12.9 million
      allowance for doubtful accounts from TNGL.  Historically,  the Company did
      not experience any significant losses from bad debts and therefore did not
      require an allowance account.

<PAGE>

                                   SIGNATURES



         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized, in the City of Houston,
State of Texas, on the 27th day of March, 2000.

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

                                    By:      ENTERPRISE PRODUCTS GP, LLC,
                                             as General Partner

                                    By:      /s/  O.S. Andras
                                             ___________________________________
                                    Name:    O.S. Andras
                                    Title: President and Chief Executive Officer
                                           of Enterprise Products GP, LLC

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in their capacities as directors and principal executive officers
of the General Partner as indicated below on the 27th day of March, 2000.

    Signature                                       Title
    ---------                                       -----

/s/  Dan L. Duncan                    Chairman of the Board and Director
_________________________
Dan L. Duncan

/s/  O.S. Andras                      President, Chief Executive Officer and
_________________________             Director
O.S. Andras

/s/  Randa L. Duncan                  Group Executive Vice President and
_________________________             Director
Randa L. Duncan

/s/ Gary L. Miller                    Executive Vice President, Chief Financial
_________________________             Officer, Treasurer and Director (Principal
Gary L. Miller                        Financial and Accounting Officer)

/s/ Charles R. Crisp                  Director
_________________________
Charles R. Crisp

/s/ Dr. Ralph S. Cunningham           Director
_________________________
Dr. Ralph S. Cunningham

/s/ Curtis R. Frasier                 Director
_________________________
Curtis R. Frasier

/s/ Lee W. Marshall, Sr.              Director
_________________________
Lee W. Marshall, Sr.

/s/ Stephen H. McVeigh                Director
_________________________
Stephen H. McVeigh