EXHIBIT 13.1

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## MANAGEMENTS
DISCUSSION AND ANALYSIS

## General

The terms
Frontier and we refer to Frontier Oil Corporation and
its subsidiaries. Frontier operates refineries (the Refineries) in
Cheyenne, Wyoming and El Dorado, Kansas with a combined crude oil capacity of
156,000 barrels per day. The Company focuses its marketing efforts in the Rocky
Mountain and Plains States regions of the United States. The Company purchases
the crude oil to be refined and markets the refined petroleum products produced,
including various grades of gasoline, diesel fuel, jet fuel, asphalt and
chemicals.

## Result of
Operations

2002 Compared with 2001.We had net income for the year ended December 31, 2002 of $1.0 million, or
$.04 per diluted share, compared to net income of $107.7 million, or $4.00 per
diluted share, for 2001.

Operating income decreased
$136.2 million in 2002 versus 2001 due to decreases in the refined product
spread (revenues less material, freight and other costs) of $147.5 million, an
increase in depreciation of $2.3 million and a $.3 million impairment loss on
asset held for sale in 2002 offset by an increase in other income of $2.0
million and decreases in refinery operating expenses (excluding depreciation) of
$11.7 million and selling and general costs of $.3 million.

The refined product spread
was $4.11 per barrel for the year ended December 31, 2002 compared to $6.84 per
barrel in 2001 due to lower light product margins and a decrease in both the
light/heavy and WTI/WTS crude spreads offset by a positive inventory valuation
impact during the year ended December 31, 2002 from rising crude oil and product
prices during the period. The price of crude oil on the New York Mercantile
Exchange increased through 2002 from $19.84 per barrel to $31.20 per barrel. For
the year ended December 31, 2002, we realized an increase to the refined product
spread from inventory gains of approximately $30.7 million pretax ($19.0 million
after tax) because of the increasing crude oil prices. For the year ended
December 31, 2001, we realized a reduction to the refined product spread from
inventory losses of approximately $41.4 million pretax ($28.9 million after tax)
because of decreasing crude oil prices.

The Cheyenne Refinery
refined product spread was $4.73 per barrel in 2002 compared to $8.03 per barrel
in 2001. The reduced product spread was due to lower light product margins and a
decrease in the light/heavy spread offset by a positive inventory valuation
impact from increasing crude and product prices during the year ended December
31, 2002. The light/heavy spread decreased from an average $7.07 per barrel in
2001 to $4.24 per barrel in 2002. For the year ended December 31, 2002 at the
Cheyenne Refinery, we realized an increase to the refined product spread from
inventory profits of approximately $10.7 million pretax compared to a reduction
to the refined product spread from inventory losses of approximately $8.9
million pretax for the year ended December 31, 2001.

The El Dorado Refinery
refined product spread was $3.85 per barrel in 2002 compared to $6.39 per barrel
in 2001 due to lower light product margins and a decrease in the WTI/WTS crude
oil spread offset by a positive inventory valuation impact from rising crude and
product prices during the year ended December 31, 2002. For the year ended
December 31, 2002 at the El Dorado Refinery, we realized an increase to the
refined product spread from inventory gains of approximately $19.9 million
pretax compared to a reduction to the refined product spread from inventory
losses of approximately $32.5 million pretax for the year ended December 31,
2001.

Refined product revenues
decreased $76.6 million or 4% for the year ended December 31, 2002 compared to
2001 due to decreased sales prices. Average gasoline prices decreased $2.77 per
barrel and average diesel prices decreased $3.77 per barrel, but we experienced
a 5% overall increase in sales volumes. Yields of gasoline increased
approximately 8% while yields of diesel and jet fuel increased 4% in 2002
compared to the year ended December 31, 2001. El Dorado gasoline yields improved
in 2002 due to diverting feedstocks previously used in the phenol and cumene
units. The primary reason for the lower volumes in sales and yields in 2001 was
the major turnaround, or planned maintenance, at the El Dorado Refinery which
commenced in mid-March 2001 and was completed in mid-April 2001. Despite a major
turnaround at the Cheyenne Refinery during March and April 2002, refinery yields
and sales for the year ended December 31, 2002 increased from the same period in
2001 due to the benefit of the increased crude capacity from 41,000 barrels per
day to 46,000 barrels per day which was completed during latter 2001 and early
2002. The Cheyenne Refinery throughput and resulting yields in the early part of
2001 was constrained by asphalt inventory storage availability.

Other revenues increased
$2.0 million to income of $1.1 million for the year ended December 31, 2002
compared to a loss of $832,000 for the same period in 2001 due to $108,000 in
futures trading net gains in 2002 compared to $2.0 million futures trading net
losses in 2001 (see Price Risk Management Activities).

Refining operating costs
increased $59.2 million or 4% for the year ended December 31, 2002 compared to
2001 due to increases in raw material, freight and other costs offset by lower
refinery operating expenses.

Material, freight and other
costs per barrel increased $.02 per barrel from 2001 due to higher average crude
oil prices offset by inventory gains from rising prices during the year. The
Cheyenne refinery material, freight and other costs of $25.18 per barrel
increased from $24.85 per barrel in 2001 due to higher crude oil prices and a
reduced light/heavy spread. The heavy crude oil utilization rate at the Cheyenne
Refinery expressed as a percentage of the total crude oil charge decreased to
90% in the year ended December 31, 2002 from 91% in 2001 as we utilized slightly
more light crude oil due to the depressed light/heavy crude oil spread. The
light/heavy spread for the Cheyenne Refinery averaged $4.24 per barrel compared
to $7.07 per barrel in 2001. The El Dorado Refinery material, freight and other
costs of $25.93 per barrel decreased from $26.01 per barrel in 2001 due to
slightly higher average crude oil prices more than offset by the inventory gains
from rising prices during the year.

Refinery operating expense
(excluding depreciation) was $2.93 per sales barrel in 2002 compared to $3.27
per sales barrel in 2001. The Cheyenne Refinery operating expense (excluding
depreciation) per sales barrel decreased $.37 to $3.02 per sales barrel in 2002
due to more sales volumes. The El Dorado Refinery operating expense (excluding
depreciation) was $2.90 per sales barrel in 2002 decreasing from $3.22 per sales
barrel in 2001 due to lower natural gas costs and more sales volumes.

Selling and general
expenses decreased $.3 million or 2% for the year ended December 31, 2002
because of decreased salaries and benefits due to bonuses not being accrued this
year partially offset by increased engineering consulting services and travel
costs.

Depreciation increased $2.3
million or 9% for the year ended December 31, 2002 as compared to 2001 because
of increases in capital investment.

The interest expense
decrease of $3.5 million or 11% for the year ended December 31, 2002 was
attributable to repurchases of 9-1/8% Senior Notes and 113⁄4% Senior Notes
during 2001, less interest expense on the revolving credit facility due to lower
borrowing rates and capitalized interest in 2002. Interest income decreased by
$.9 million or 35% for the year ended December 31, 2002 compared to 2001 due to
lower available investing interest rates offset by more cash available to
invest. Average debt decreased to $246.1 million for the year ended December 31,
2002 from $255.3 million for the year ended December 31, 2001.

Our effective income tax
rate for the book provision of income taxes for the year ended December 31,
2002, of 50.8% is greater than our current estimated statutory rate of 38.25%
primarily due to one-time adjustments for permanent book versus tax differences
and an increase in the state deferred income tax provision due to a revised
estimate of state apportionment factors based on actual 2002 allocation factor
data. An $83,000 Canadian income tax payment for an audit settlement related to
our Canadian oil and gas operations (sold in June 1997) also increased our
income tax provision in 2002.

2001 Compared with 2000.We had net income for the year ended December 31, 2001 of $107.7 million, or
$4.00 per diluted share, compared to net income of $37.2 million, or $1.34 per
diluted share, for 2000.

Operating income increased
$93.4 million in 2001 versus 2000 due to increases in the refined product spread
(revenues less raw material, freight and other costs) of $119.9 million offset
by a decrease in other income of $8.2 million and increases in refinery
operating expenses (excluding depreciation) of $12.1 million, selling and
general costs of $4.2 million and depreciation of $2.0 million.

The refined product spread
was $6.84 per barrel for the year ended December 31, 2001 compared to $4.79 per
barrel in 2000 due to improved light product margins offset by a negative
inventory valuation impact from declining crude oil prices. The price of crude
oil on the New York Mercantile Exchange declined through 2001 from $26.80 per
barrel to $19.84 per barrel. For the year ended December 31, 2001, we realized a
reduction to the refined product spread from inventory losses of approximately
$41.4 million pretax ($28.9 million after tax) because of the decreasing crude
oil prices. For the year ended December 31, 2000, we realized an increase to the
refined product spread from inventory profits of approximately $19.2 million
pretax ($18.7 million after tax) from rising crude oil prices. Frontier records
inventories at the lower of cost on a first in, first out (FIFO) basis or
market.

The Cheyenne Refinery
refined product spread was $8.03 per barrel in 2001 compared to $5.68 per barrel
in 2000. The improved product spread was due to improved light product margins
and an increase in the light/heavy spread offset by a negative inventory
valuation impact. The light/heavy spread increased from an average $5.09 per
barrel in 2000 to $7.07 per barrel in 2001. For the year ended December 31, 2001
at the Cheyenne Refinery, we realized a reduction to the refined product spread
from inventory losses of approximately $8.9 million pretax compared to an
increase to the refined product spread from inventory profits of approximately
$2.3 million pretax from rising crude oil prices for the year ended December 31,
2000.

The El Dorado Refinery
refined product spread was $6.39 per barrel in 2001 compared to $4.42 per barrel
in 2000 due to improved light product margins and an increase in the WTI/WTS
crude oil spread offset by a negative inventory valuation impact. For the year
ended December 31, 2001 at the El Dorado Refinery, we realized a reduction to
the refined product spread from inventory losses of approximately $32.5 million
pretax compared to an increase to the refined product spread from inventory
profits of approximately $16.9 million pretax from rising crude oil prices for
the year ended December 31, 2000.

Refined product revenues
decreased $148.6 million or 7% for the year ended December 31, 2001 compared to
2000 due to decreased sales prices. Average gasoline prices decreased $2.24 per
barrel and average diesel prices decreased $3.07 per barrel. Yields of gasoline
increased approximately 2% while yields of diesel and jet fuel remained nearly
flat in 2001 compared to 2000.

Other revenues decreased
$8.2 million to a loss of $832,000 for the year ended December 31, 2001 compared
to the same period in 2000 due to a $1.9 million realized futures trading net
losses in 2001 compared to a $4.6 million futures trading net gain in 2000.
Other revenues in 2000 also included $1.1 million proceeds from the sale of
excess catalyst platinum from the El Dorado Refinery, insurance proceeds of
$300,000, which was related to a business interruption at the El Dorado Refinery
in 2000, and sulfur credit sales of $230,000.

Refining operating costs
decreased $256.4 million or 13% for the year ended December 31, 2001 compared to
2000 due to decreases in raw material, freight and other costs offset by higher
refinery operating expenses.

Raw material, freight and
other costs per barrel decreased 16% or $4.72 per barrel in 2001 primarily due
to lower crude oil prices. The Cheyenne Refinery raw material, freight and other
costs of $24.85 per barrel decreased from $28.51 per barrel in 2000 due to lower
crude oil prices and an increased light/heavy spread. The heavy crude oil
utilization rate at the Cheyenne Refinery expressed as a percentage of the total
crude oil charge decreased to 91% in the year ended December 31, 2001 from 94%
in 2000 due to fulfilling light crude oil purchase contracts while reducing spot
purchases of heavy crude oil during the fall 2001 crude unit turnaround. The
light/heavy spread for the Cheyenne Refinery averaged $7.07 per barrel compared
to $5.09 per barrel in 2000. The El Dorado Refinery raw material, freight and
other costs of $26.01 per barrel decreased from $31.20 per barrel in 2000 due to
lower crude oil prices.

Refinery operating expense
(excluding depreciation) was $3.27 per sales barrel in 2001 compared to $3.07
per sales barrel in 2000. The Cheyenne Refinery operating expense (excluding
depreciation) per sales barrel increased $.56 to $3.39 per sales barrel in 2001
due to higher maintenance and turnaround costs and reduced yields and sales
volumes due to the fall crude unit turnaround and higher natural gas costs early
in the year. The El Dorado Refinery operating expense (excluding depreciation)
was $3.22 per sales barrel in 2001 increasing from $3.17 per sales barrel in
2000 due to higher natural gas costs early in the year, electrical costs, and
chemical and additive costs offset by more yields and sales volumes.

Selling and general
expenses increased $4.2 million or 32% for the year ended December 31, 2001
because of increased compensation, mainly bonuses, personnel, and other costs,
particularly travel, relating to the operation of multiple locations.

Depreciation increased $2.0
million or 9% for the year ended December 31, 2001 as compared to 2000 because
of increases in capital investment.

The interest expense
decrease of $3.6 million or 10% for the year ended December 31, 2001 was
attributable to the reduction of debt including repurchases of 9-1/8% Senior
Notes and 113⁄4% Senior Notes during 2001 and 2000 and lower borrowing rates,
balances and fees on the revolving credit facility. Interest income decreased by
$.6 million or 18% for the year ended December 31, 2001 compared to 2000 due to
lower available investing interest rates offset by more available cash to
invest. Average debt decreased to $255.3 million for the year ended December 31,
2001 from $295.7 million for the year ended December 31, 2000.

Income tax expense of $28.1
million for the year ended December 31, 2001 increased as a result of the full
utilization in 2001 of our deferred tax assets (primarily net operating loss
carryforwards) for which we had previously provided a valuation allowance.

## Liquidity and
Capital Resources

Net cash provided by
operating activities was $50.8 million for the year ended December 31, 2002
while $138.6 million cash was provided by operating activities for the year
ended December 31, 2001. The most significant decrease from cash provided by
operating activities was the decrease in operating income due to the lower
product margins and decreases in the crude spreads discussed above. Working
capital changes provided $17.8 million of cash flows in 2002 while using $6.5
million of cash flows in 2001.

At December 31, 2002, we
had $112.4 million of cash and cash equivalents, and $88.2 million available
under the revolving credit facility line of credit. We had working capital of
$108.3 million at December 31, 2002.

On November 5, 1999, we
issued $190 million principal amount of 113⁄4% Senior Notes due 2009. The
Notes were issued at a price of 98.562%. Net proceeds of the offering were
approximately $181.0 million. We used the net proceeds to fund the $170 million
purchase price of the El Dorado Refinery and for general corporate purposes.
During 2001 and 2000, we purchased $6.5 million and $13.0 million principal
amount, respectively, of the 113⁄4% Senior Notes and are holding them as
treasury notes, the accounting for which reduced debt.

During 2002, 2001 and 2000,
we purchased $1.1 million, $24.4 million and $5.0 million principal amount,
respectively, of the 9-1/8% Senior Notes and are holding them as treasury notes.
The accounting for which reduced debt. The 9-1/8% Senior Notes were issued in
1998.

On September 1, 1998, we
announced that the Board of Directors had approved a stock repurchase program of
up to three million shares of common stock. In late 2000, the Board of Directors
increased this amount to a total of four million shares and in June 2001
authorized an additional two million shares to bring the total authorization to
six million shares, which may be purchased and held as treasury shares. In 1998,
469,700 shares of common stock were purchased for $2.3 million and in 1999,
627,700 shares of common stock were purchased for $3.4 million. In 2000,
1,393,696 shares of common stock were purchased for approximately $9.2 million,
of which 1,248,500 shares were purchased on the open market. In 2001, 1,850,970
shares were purchased for approximately $22.6 million, of which 1,774,400 were
purchased on the open market. In 2002, we completed the purchase, committed to
at December 31, 2001, of another 25,300 shares for $416,000. During the year
ended 2002, we did not initiate any additional purchases of common stock under
the stock repurchase programs, however we did acquire 19,041 shares of stock
from employees to cover their withholding taxes on shares of restricted stock
which vested during the year.

Capital expenditures for
2002 were $37.1 million which included the $7.5 million El Dorado earn-out
payment accrued as of December 31, 2001. We reduced our originally planned total
capital expenditures in 2002 due to reevaluating the economics of the previously
announced heavy crude oil expansion at the El Dorado Refinery. Due to
anticipated cost and market conditions, we reached a decision in the fourth
quarter of 2002 to cancel this project and $2.4 million previously recorded as
capital expenditures was expensed.

Capital expenditures for
2001 were $22.8 million. Capital expenditures of approximately $41.0 million are
planned for 2003, which includes nearly $14.0 million for the low sulfur
gasoline project at the Cheyenne Refinery and does not include any amount for an
El Dorado earn-out payment as none was earned in 2002. The planned capital
expenditures in excess of $35.0 million will be subject to bank approval under
our revolving credit facility or we have the option to lease a portion of the
equipment required for the low sulfur gasoline project.

Under the provisions of the
purchase agreement for our El Dorado Refinery, we have made, or may be required
to make, contingent earn-out payments for each of the years 2000 through 2007
equal to one-half of the excess over $60 million per year of the El Dorado
Refinerys revenues less its material costs and operating costs, other than
depreciation. The total amount of these contingent payments is capped at $40
million, with an annual cap of $7.5 million. Any contingency payment will be
recorded when determinable. Such contingency payments, if any, will be recorded
as additional acquisition cost. No contingent earn-out payment will be required
based on 2002 results. A contingent earn-out payment of $7.5 million was
required based on 2001 results and was accrued as of December 31, 2001 and paid
in early 2002. No contingent earn-out payment was required based on 2000
results.

As of December 31, 2002, we
have $208.0 million of total consolidated debt and shareholders equity of
$168.3 million. For 2003, we anticipate that cash generated from operating
activities may have to be supplemented with a portion of our current cash
balance to meet our 2003 capital investment plans and debt obligations.
Operating cash flows are affected by crude oil and refined product prices and
other risks as discussed in Market Risks below.

Under certain conditions,
the revolving credit facility, which is at the subsidiary level, restricts the
transfer of cash in the form of dividends, loans or advances from the operating
subsidiary to the parent holding company. We do not believe these restrictions
limit our current operating plans. Our refining revolving credit facility was
amended, effective September 23, 2002 to allow for capital expenditures of up to
$35.0 million cash in any calendar year, in addition to any El Dorado earn-out
payments required. We are in compliance with the financial covenants as of
December 31, 2002.

Our Board of Directors
declared quarterly cash dividends in December 2001, March 2002, June 2002 and
September 2002 of $.05 per share which were paid in January 2002, April 2002,
July 2002 and October 2002, respectively. The total paid out for dividends in
2002 was $5.2 million. In addition, our Board of Directors declared a quarterly
cash dividend of $.05 per share in December 2002, to be paid on January 13, 2003
to shareholders of record on December 27, 2002. The total cash required for this
dividend is approximately $1.3 million and was accrued at year end.

## Contractual
Cash Obligations

The table below lists the
contractual cash obligations we have by period. These items include our
long-term debt based on their maturity dates, our operating lease commitments
and our commitment for crude oil pipeline capacity. We have contracted for
pipeline capacity into 2012 on the Express Pipeline from Hardisty, Alberta to
Guernsey, Wyoming at which we then have pipeline access to take the crude oil to
our Cheyenne, Wyoming Refinery. Our 15-year contract, which began in 1997, is
for an average 13,800 barrels per day, however we were allowed to assign a
portion of our capacity in earlier years for additional capacity in later years,
thus our remaining commitments range from 16,600 barrels per day in 2003,
increasing to a high of 22,600 barrels per day in 2006 and then are reduced back
down to 13,800 barrels per day through the remainder of the contract. Our crude
oil supply agreement with Baytex Marketing Ltd. (Baytex) includes an
assignment of a portion of our pipeline capacity obligation to them. The amounts
shown below for pipeline capacity contractual obligations are net of $37.0
million, the approximate cost of the pipeline capacity assigned to Baytex for
the initial term of that agreement. Our operating leases include building,
equipment, aircraft and vehicle leases which expire from 2002 through 2008, as
well as an operating sublease for the use of the cogeneration facility at our El
Dorado Refinery. The noncancellable sublease, entered into in connection with
the acquisition of our El Dorado Refinery in 1999, expires in 2016 with an
option to allow us to renew the sublease for an additional eight years. At the
end of the renewal sublease term we have the option to purchase the cogeneration
facility for the greater of fair value or $22.3 million.

`---------------------------- ----------------------------------------------------------------------------------------
Contractual Obligation                                Payments due by Period (in thousands)
---------------------------- ----------------------------------------------------------------------------------------
                             Total        Within 1 year   Within 2 - 3 years   Within 4 - 5 years    After 5 years
---------------------------- ------------ --------------- -------------------- ------------------- ------------------
Long-term Debt               $  209,924   $           -   $           -        $      39,475           $  170,449
---------------------------- ------------ --------------- -------------------- ------------------- ------------------
Operating Leases                103,262          10,430          19,482               16,444               56,906
---------------------------- ------------ --------------- -------------------- ------------------- ------------------
Pipeline Capacity                28,923           1,560           1,111                  284               25,968
---------------------------- ------------ --------------- -------------------- ------------------- ------------------
  Total Contractual Cash     $  342,109   $      11,990   $      20,593        $      56,203           $  253,323
---------------------------- ------------ --------------- -------------------- ------------------- ------------------`

## Market Risks

Impact of Changing
Prices.Our revenues and cash flows, as well as estimates of future cash
flows, are very sensitive to changes in energy prices. Major shifts in the cost
of crude oil, and the prices of refined products and natural gas can result in
large changes in the operating margin from refining operations. These prices
also determine the carrying value of the Refineries inventories.

Price Risk Management
Activities. At times, we enter into commodity derivative contracts to manage
our price exposure to our inventory positions, our purchases of foreign crude
oil and consumption of natural gas in the refining process as well as fix
margins on certain future production. The commodity derivative contracts we use
may take the form of futures contracts or price swaps and are entered into with
reputable counterparties. We use futures transactions to price foreign crude oil
cargos at the time when the crude oil is processed by the El Dorado Refinery
instead of the price when purchased. Foreign crude oil delivery times can exceed
one month from when the purchase is made. In addition, we may engage in futures
transactions for the purchase of natural gas at fixed prices. The Refineries
consume natural gas for energy purposes. We account for our commodity derivative
contracts under 1) the hedge (or deferral) method of accounting when the
derivative contracts qualify and are designated as hedges for accounting
purposes, or 2) mark-to-market accounting if we elect not to designate
derivative contracts as accounting hedges or if such derivative contracts do not
qualify for hedge accounting. As such, gains or losses on commodity derivative
contracts accounted for as hedges are recognized in refining operating costs
when the associated transactions are consummated while gains and losses on
transactions accounted for using mark-to-market accounting are reflected in
other revenues at each period end.

Other revenues for the year
ended December 31, 2002 includes $878,000 realized net gains on the ineffective
portion of fair value hedges on crude oil cargos and $740,000 realized net
losses on derivative contracts accounted for using mark-to-market accounting.
The ineffective portion of foreign crude oil hedges arises primarily from
changes in the shape of the forward futures price curve.

During the year ended
December 31, 2002, we had the following derivative activities which were
appropriately designated and accounted for as hedges:

 
At December 31, 2002 we had no open derivative contracts to hedge against price
changes on foreign crude oil purchase commitments. During the year ended
December 31, 2002, we closed out contracts to hedge foreign crude purchases and
realized net losses of $9.8 million, of which $10.7 million increased crude
costs and $878,000 income was reflected in other revenues for the ineffective
portion of those hedges. These contracts were accounted for as fair value
hedges.

 
In March 2002, we entered into price swaps on natural gas for the purpose of
hedging approximately 50% of the Refineries anticipated usage against
natural gas price increases for April 2002 through December 2002. These
contracts were accounted for as cash flow hedges. One group of contracts to
hedge natural gas costs at our El Dorado Refinery averaged 300,000 MMBTU per
month at an average price of $3.34 per MMBTU (Panhandle). A second group of
contracts to hedge natural gas costs at our Cheyenne Refinery averaged 112,222
MMBTU per month at an average price of $2.84 per MMBTU (CIG). The April and May
contracts resulted in net realized gains totaling $41,000 and were recorded into
refining operating costs. Due to natural gas market conditions, we made a
decision in May to close out the remaining June through December contracts
resulting in a net gain of $393,000. The realized gains or losses were recorded
in other comprehensive income (equity account), net of tax. The pretax realized
gains or losses were reclassified into refining operating costs and out of other
comprehensive income based on the month when the corresponding natural gas was
purchased. As of December 31, 2002, all these gains and losses had been
reclassified into earnings.

During the year ended
December 31, 2002, we had the following derivative activities which, while
economic hedges, did not qualify for hedge accounting treatment and whose gains
or losses are reflected in other revenues:

 
We had derivative contracts on barrels of crude oil to hedge butane inventory
builds at the El Dorado Refinery and recorded $903,000 in realized losses on
these positions.

 
We had derivative contracts on barrels of crude oil to hedge excess gas oil
inventory at our Cheyenne Refinery and had realized losses of $202,000 on these
positions.

 
Derivative contracts on barrels of crude oil to hedge excess gas oil inventory
at our El Dorado Refinery resulted in gains of $896,000.

 
We also hedged excess naptha inventory at our El Dorado Refinery by having
derivative contracts on barrels of crude oil which resulted in losses of
$579,000.

  Contracts to hedge crude
oil resulted in a gain of $48,000.

Interest Rate Risk. Borrowings
under our revolving credit facility bear a current market rate of interest. Our
approximately $39.5 million of outstanding 9-1/8% Senior Notes, due 2006, have a
fixed interest rate. Our approximately $170.5 million principal of 113⁄4%
Senior Notes outstanding, due 2009, also have a fixed interest rate.
Accordingly, our long-term debt is not exposed to cash flow risk from interest
rate changes, however, our long-term debt is exposed to fair value risk. The
estimated fair value of the 9-1/8% Senior Notes at December 31, 2002 was $37.9
million and the estimated fair value of the 113⁄4% Senior Notes was $174.7
million.

## Environmental

Our refining and marketing
operations are subject to a variety of federal, state and local health and
environmental laws and regulations governing product specifications, the
discharge of pollutants into the air and water, and the generation, treatment,
storage, transportation and disposal of solid and hazardous waste and materials.
Permits are required for the operation of our Refineries, and these permits are
subject to revocation, modification and renewal. Governmental authorities have
the power to enforce compliance with these regulations and permits, and
violators are subject to injunctions, civil fines and even criminal penalties.
We believe that each of our Refineries is in substantial compliance with
existing environmental laws, regulations and permits.

Our operations and many of
the products we manufacture are specifically subject to certain requirements of
the Clean Air Act (CAA) and related state and local regulations. The
1990 amendments to the CAA contain provisions that will require capital
expenditures for the installation of certain air pollution control devices at
our refineries during the next several years. The EPA recently embarked on a Petroleum Refining Initiative
(Initiative) alleging industry-wide noncompliance with certain CAA
rules. The Initiative has resulted in many refiners entering into consent
decrees typically requiring substantial expenditures for penalties and
additional pollution control equipment. We have been contacted by the EPA and
invited to meet with them to hear more about the Initiative. At this time, we do
not know how or if the Initiative will affect the Company. We have, however,
recently determined that over the next three years, expenditures totaling
approximately $10 million may be necessary to further reduce emissions from our
Refineries flare systems. Because other refineries will be required to
make similar expenditures, we do not expect such expenditures to materially
adversely impact our competitive position.

On December 21, 1999, the
EPA promulgated national regulations limiting the amount of sulfur that is to be
allowed in gasoline. The total capital expenditures estimated, as of December
31, 2002, to achieve the final gasoline sulfur standard, are approximately $35
million at the Cheyenne Refinery and approximately $44 million at the El Dorado
Refinery. Approximately $7.2 million of the Cheyenne Refinery expenditures had
been incurred as of December 31, 2002, an additional $20.8 million is expected
to be incurred by early 2004 with the remaining $7 million in 2009 and 2010. The
expenditures for the El Dorado Refinery are expected to be incurred beginning in
2008 and completed in 2010.

The EPA recently
promulgated regulations that will limit the sulfur content of highway diesel
fuel beginning in 2006 to 15 parts-per-million from the current standard of 500
parts-per-million. As of December 31, 2002, capital costs for diesel
desulfurization are estimated to be approximately $5 million for Cheyenne and
$56 million for El Dorado. The Cheyenne Refinery expenditures are currently
expected to be committed beginning in 2005, with the majority to be committed in
2006. Approximately $6 million of the El Dorado Refinery expenditures are
currently expected to be committed in 2004 with the remaining $50 million in
2005 and 2006.

The EPA has recently stated
their intent to propose new regulations that will limit emissions from diesel
fuel powered engines used in off-road activities such as mining, construction
and agriculture. The EPA has also stated their intent to simultaneously limit
the sulfur content of diesel fuel used in these engines to facilitate compliance
with the new emission standards. The EPA expects to propose the new off-road
diesel engine emissions and related fuel sulfur standards early in 2003. It is
likely that the new rules will require the off-road diesel fuel sulfur content
to be reduced to 500 parts-per-million or less from the current limit of 5,000
parts-per-million by 2007. Since a minor portion of the diesel fuel we
manufacture at our El Dorado Refinery is sold to the off-road market, these
regulations, when promulgated, will likely require certain modifications to the
Refinery. The cost associated with such modifications cannot be estimated until
the final regulatory limits are known.

As is the case with all
companies engaged in similar industries, we face potential exposure from future
claims and lawsuits involving environmental matters. The matters include soil
and water contamination, air pollution, personal injury and property damage
allegedly caused by substances which we manufactured, handled, used, released or
disposed of.

Cheyenne Refinery.
We are party to an agreement with the State of Wyoming requiring the
investigation and possible eventual remediation of certain areas of the Cheyenne
Refinerys property which may have been impacted by past operational
activities. Among other things, this order required a technical investigation of
the Cheyenne Refinery to determine if certain areas have been adversely impacted
by past operational activities. Based upon the results of the investigation,
additional remedial action could be required by a subsequent administrative
order or permit. The ultimate cost of any environmental remediation projects
that may be identified by the site investigation required by the agreement
cannot be reasonably estimated at this time.

El Dorado Refinery.
The El Dorado Refinery is subject to a 1988 consent order with the Kansas
Department of Health and the Environment (KDHE). This order,
including various subsequent modifications, requires us to continue the
implementation of a groundwater management program with oversight provided by
the KDHE Bureau of Environmental Remediation. The order requires that
remediation activities continue until KDHE-established groundwater criteria or
other criteria agreed to by the KDHE and Frontier are met. Frontier acquired the
El Dorado refinery in 1999 from Equilon Enterprises LLC, now known as Shell Oil
Products US (Shell). Subject to the terms of the purchase and sale
agreement, Shell will be responsible for the costs of continued compliance with
this order.

The most recent National
Pollutant Discharge Elimination System permit issued to the El Dorado Refinery
requires, in part, the preparation and submittal of an engineering report
identifying certain refinery wastewater treatment plant upgrades necessary to
allow routine compliance with applicable discharge permit limits. In accordance
with the provisions of the purchase and sale agreement, Shell will be
responsible for the first $2 million of any required wastewater treatment system
upgrades. If required system upgrade costs exceed this amount, Shell and
Frontier will share, based on a sliding scale percentage, up to another $3
million in upgrade costs. Subject to the terms of the purchase and sale
agreement, Shell will be responsible for up to $5 million in costs, in addition
to Shells obligation for the wastewater treatment system upgrade, relating
to safety, health and environmental conditions after closing arising from
Shells operation of the El Dorado Refinery that are not covered under a
ten-year insurance policy. This insurance policy has $25 million coverage
through November 17, 2009 for environmental liabilities, with a $500,000
deductible, and will reimburse us for losses related to all known and some
unknown conditions existing prior to our acquisition of the El Dorado Refinery.
The first phase of wastewater treatment system upgrades was completed in 2001 at
a cost of $2.6 million with payment apportioned as described above.

On August 18, 2000, we
entered into a Consent Agreement and Final Order of the Secretary
(Agreement) with the KDHE that required the initiation of a
wastewater toxicity testing program to commence upon the completion of the
wastewater treatment upgrades described above. Good progress has since been made
toward satisfying the provisions of the Agreement and we expect to meet all
applicable requirements.

## Significant
Accounting Policies

Refined Product Revenues.  We recognize revenues from sales of refined products on transfer of title.

Property, Plant and
Equipment. We record property, plant and equipment at cost and depreciate
the asset or groups of assets using the straight-line method over the estimated
useful lives. The estimated useful lives are:

`Refinery plant and equipment................................    5 to 20 years
          Pipeline and pumps..........................................   10 to 20 years
          Furniture, fixtures and other...............................    3 to 10 years`

We review long-lived assets
for impairments whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable. If the undiscounted future
cash flows of an asset to be held and used in operations is less than the
carrying value, we would recognize a loss for the difference between the
carrying value and fair market value. We capitalize interest on debt incurred to
fund the construction of significant assets.

Turnarounds.  Normal maintenance and repairs are expensed as incurred.  The costs for turnarounds (scheduled and required
shutdown of refinery operating units for significant overhaul and refurbishment) are ratably accrued over the period from the prior
turnaround to the next scheduled turnaround.  These accruals are included in our consolidated balance sheet in the Accrued
turnaround cost and Long-term accrued turnaround cost.  The turnaround accrual expenses are included in Refining operating costs
in our consolidated statements of operations. Turnaround costs include contract services, materials and rental equipment.  Major
improvements are capitalized and the assets replaced are retired.

Inventories.  Inventories of crude oil, unfinished products and all finished products are recorded at the lower of cost on
a first in, first out (FIFO) basis or market.  Refined product exchange transactions are considered asset exchanges with deliveries
offset against receipts.  The net exchange balance is included in inventory.  Inventories of materials and supplies and process
chemicals are recorded at the lower of average cost or market.

Income Taxes.We account for income taxes under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 109, Accounting for Income
Taxes. SFAS No. 109 requires the asset and liability approach for accounting for
income taxes. Under this approach, deferred tax assets and liabilities are
recognized based on anticipated future tax consequences attributable to
differences between financial statement carrying amounts of assets and
liabilities and their respective tax bases.

Environmental
Expenditures. Environmental expenditures are expensed or capitalized based
upon their future economic benefit. Costs which improve a propertys
pre-existing condition and costs which prevent future environmental
contamination are capitalized. Remediation costs related to environmental damage
resulting from operating activities subsequent to acquisition are expensed.
Liabilities for these expenditures are recorded when it is probable that
obligations have been incurred and the amounts can be reasonably estimated.

## New Accounting
Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142, Goodwill and Other Intangible
Assets.  SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes
Accounting Principles Board (APB") Opinion No. 17, Intangible Assets.  SFAS No. 142 addresses how intangible assets that are
acquired should be accounted for in financial statements upon their acquisition and also addresses how goodwill and other intangible
assets should be accounted for after they have been initially recognized in the financial statements.  We adopted SFAS No. 142
effective January 1, 2002.  The adoption did not have any impact on our financial condition or results of operations.

In June 2001, the FASB
issued SFAS No. 143, Accounting for Asset Retirement Obligations.
This statement provides accounting and disclosure requirements for retirement
obligations associated with long-lived assets and is effective January 1, 2003.
SFAS No. 143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred with the
associated asset retirement costs being capitalized as a part of the carrying
amount of the long-lived asset. SFAS No. 143 also includes disclosure
requirements that provide a description of asset retirement obligations and
reconciliation of changes in the components of those obligations. We have
potential asset retirement obligation (ARO) liabilities related to
our Refineries as a result of environmental and other legal requirements. Any
ARO liability is not currently estimatable as to amount and timing, but we will
continue to monitor and evaluate our potential AROs. In the event that we decide
to cease the use of a particular refinery, an ARO liability would be recorded at
that time. We do not expect the adoption of SFAS No. 143 to have a material
impact on our current financial condition or results of operations.

In August 2001, the FASB
issued SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. SFAS No. 144 addresses the accounting and reporting for
the impairment or disposal of long-lived assets and supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of  and APB Opinion No. 30, Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. SFAS No. 144 establishes one accounting model for long-lived
assets to be disposed of by sale as well as resolve implementation issues
related to SFAS No. 121. We adopted SFAS No. 144 effective January 1, 2002. The
adoption did not have any impact on our financial condition or results of
operations.

The Accounting Standards
Executive Committee of the American Institute of Certified Public Accountants
has issued an exposure draft of a proposed Statement of Position
(SOP) entitled Accounting for Certain Costs and Activities
Related to Property, Plant and Equipment. If adopted as proposed, this SOP
would require companies to expense as incurred turnaround costs, defined as
the non-capital portion of major maintenance costs. Adoption of the
proposed SOP would also require that any existing turnaround accruals be
reversed to income immediately. If this proposed change were in effect at
December 31, 2002, we would have been required to reverse the turnaround
accruals and recognize pretax income totaling $26.9 million. The total accrued
turnaround costs will change throughout the year as turnarounds are incurred and
accruals are made for future turnarounds. If adopted in its present form, income
related to this proposed change would be reported as a cumulative effect of an
accounting change, net of tax, in the consolidated statements of operations.

In April 2002, the FASB
issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical Corrections. It is
probable that the rescission of SFAS No. 4 is the only portion of SFAS No. 145
that may have an impact on us in the future. Under SFAS No. 4, all gains and
losses from extinguishment of debt were required to be aggregated and, if
material, classified as an extraordinary item, net of related income tax effect.
SFAS No. 145 eliminates SFAS No. 4. As a result, gains and losses from
extinguishment of debt should be classified as extraordinary items only if they
meet the criteria in Opinion 30. We adopted SFAS No. 145 effective January 1,
2003 and it did not have any impact on our financial condition or results of
operations.

In June 2002, the FASB
issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities. SFAS No. 146 is effective for
exit or disposal activities that are initiated after December 31, 2002.

In December 2002, the FASB
issued SFAS No. 148, Accounting for Stock-Based Compensation 
Transition and Disclosure, an amendment of FASB Statement No. 123. SFAS
No. 148 amends SFAS No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. SFAS No. 148
is effective for the December 31, 2002 financial statements and all required
disclosures have been made in the notes to the 2002 financial statements.

SELECTED
QUARTERLY FINANCIAL AND OPERATING DATA
(Dollars in thousands except per share )

`2002                                          2001
                                                        ------------------------------------------  -------------------------------------------
(unaudited)                                               Fourth      Third     Second      First      Fourth      Third     Second      First
-----------------------------------------------------------------------------------------------------------------------------------------------
Revenues                                                 $531,558   $486,680   $459,162   $336,350    $365,560   $538,049   $553,649   $431,143
Operating income (loss)                                    11,110      8,487      1,631      6,671     (11,447)    62,473    100,916     12,158
Net income (loss)                                           2,965        809     (3,007)       261     (10,422)    34,662     78,901      4,512
Basic earnings (loss) per share:                            $0.11      $0.03     ($0.12)     $0.01      ($0.41)     $1.33      $2.99      $0.17
Diluted earnings (loss) per share:                          $0.11      $0.03     ($0.12)     $0.01      ($0.41)     $1.27      $2.86      $0.17
EBITDA (1)                                                 18,089     15,466      8,407     13,269      (5,056)    68,808    107,120     18,238
Net cash provided by (used in) operating activities        43,749     20,237     (3,120)   (10,044)    (10,827)    73,812    109,164    (33,574)
Refining operations
    Total charges (bpd)                                   162,361    170,391    165,074    157,310     153,649    169,878    161,854    146,632
    Gasoline yields (bpd)                                  94,564     79,779     82,050     82,104      82,310     83,506     77,283     69,201
    Diesel and jet fuel yields (bpd)                       55,140     53,101     54,190     51,273      49,313     54,578     52,653     48,247
    Total product sales (bpd)                             175,888    166,750    169,366    153,880     163,375    174,281    159,531    138,770
   Average light/heavy spread based on  delivered
       crude costs for the Cheyenne Refinery(per bbl)       $5.73      $3.95      $3.52      $3.75       $6.13      $6.42      $7.55      $8.20
   Average WTI/WTS crude oil spread (per bbl)               $1.73      $0.97      $1.22      $1.53       $2.22      $2.68      $3.77      $3.73

-----------------------------------------------------------------------------------------------------------------------------------------------`

|(1) | EBITDA represents income before interest expense, income tax and depreciation and amortization.
EBITDA is not a calculation based
upon generally accepted accounting principles; however, the amounts included in
the EBITDA calculation are derived from amounts included in the consolidated
financial statements. In addition, EBITDA should not be considered as an
alternative to net income or operating income, as an indication of operating
performance or as an alternative to operating cash flow as a measure of
liquidity.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

FIVE-YEAR
FINANCIAL DATA
(Dollars in thousands except per share)

`2002         2001         2000       1999 (1)       1998
-----------------------------------------------------------------------------------------------------------------------------
Revenues                                                       $1,813,750   $1,888,401   $2,045,157     $503,600     $299,368
Operating income (loss)                                            27,899      164,100       70,655       (5,249)      25,700
Income (loss) before extraordinary item                             1,028      107,653       37,206      (17,061)      18,818
Extraordinary loss, net of taxes                                        -            -            -            -        3,013
Net income (loss)                                                   1,028      107,653       37,206      (17,061)      15,805
Basic earnings (loss) per share:
    Before extraordinary item                                        0.04         4.12         1.36        (0.62)        0.67
    Net income (loss)                                                0.04         4.12         1.36        (0.62)        0.56
Diluted earnings (loss) per share:
    Before extraordinary item                                        0.04         4.00         1.34        (0.62)        0.65
    Net income (loss)                                                0.04         4.00         1.34        (0.62)        0.55
EBITDA (2)                                                         55,231      189,110       93,662        7,799       36,410
Net cash (used in) provided by operating activities                50,822      138,575       66,346      (11,332)      31,263
Working capital                                                   108,253      109,064       43,610       24,832       30,125
Total assets                                                      628,877      581,746      588,213      521,493      182,026
Long-term debt                                                    207,966      208,880      239,583      257,286       70,000
Shareholders' equity                                              168,258      169,204       81,424       50,681       70,353
Capital expenditures                                               37,117       22,824       12,688      181,703       16,763
Dividends declared per common share                                  0.20         0.15            -            -            -

-----------------------------------------------------------------------------------------------------------------------------`

|(1) | Includes El Dorado Refinery financial data from November 17, 1999.  Capital expenditures in 1999 included the purchase of the
       El Dorado Refinery.                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | EBITDA represents income before interest expense, income tax and depreciation and amortization. EBITDA
is not a calculaton based upon generally accepted accounting principles;
however, the amounts included in the EBITDA calculation are derived from amounts
included in the consolidated financial statements of the Company. In addition,
EBITDA should not be considered as an alternative to net income or operating
income, as an indication of operating performance of the Company or as an
alternative to operating cash flow as a measure of liquidity.

FIVE-YEAR OPERATING DATA

`2002         2001         2000       1999 (1)       1998
----------------------------------------------------------------------------------------------------------------------
Charges (bpd)
    Light crude                                             35,684       31,456       35,605       10,250        2,174
    Heavy crude (2)                                        110,372      111,061      105,529       39,315       32,303
    Other feed and blend stocks                             17,760       15,538       14,884        7,589        5,909
        Total charges                                      163,816      158,055      156,018       57,154       40,386
Manufactured product yields (bpd)
    Gasoline                                                84,645       78,126       76,795       24,923       15,738
    Diesel and jet fuel                                     53,436       51,210       50,924       17,340       13,097
    Chemicals (3)                                              369        1,370        1,804          232            -
    Asphalt and other                                       22,352       24,483       23,363       12,982       10,236
         Total manufactured product yields                 160,802      155,189      152,886       55,477       39,071
Product sales (bpd)
    Gasoline                                                91,989       83,737       83,070       29,728       21,421
    Diesel and jet fuel                                     53,378       51,539       51,568       17,156       12,484
    Chemicals (3)                                              439        1,413        1,964           44            -
    Asphalt and other                                       20,726       22,411       21,556       10,965        8,797
        Total product sales                                166,532      159,100      158,158       57,893       42,702
Average sales price (per bbl)
    Gasoline                                                $33.08       $35.85       $38.09       $26.61       $21.52
    Diesel and jet fuel                                      30.35        34.12        37.19        25.92        19.90
    Chemicals (3)                                            41.68        70.81        70.52        57.50            -
    Asphalt and other                                        13.72        14.07        16.14        12.36        12.07
Operating margin information (per sales bbl)
    Average sales price                                     $29.82       $32.53       $35.20       $23.73       $19.10
    Raw material, freight and other costs                    25.71        25.69        30.41        20.31        13.33
                                                            ------       ------       ------       ------       ------
      Product spread                                          4.11         6.84         4.79         3.42         5.77
    Operating expenses excluding depreciation                 2.93         3.27         3.07         2.71         3.02
    Depreciation                                              0.44         0.42         0.39         0.61         0.68
                                                            ------       ------       ------       ------       ------
      Operating margin                                      $ 0.74       $ 3.15       $ 1.33       $ 0.10       $ 2.07
                                                            ======       ======       ======       ======       ======
Average light/heavy spread based on delivered crude
       costs for the Cheyenne Refinery (per bbl)            $ 4.24       $ 7.07       $ 5.09       $ 2.17       $ 4.15
Average WTI/WTS crude oil spread (per bbl)                  $ 1.36       $ 3.10       $ 2.06          n/a          n/a

----------------------------------------------------------------------------------------------------------------------`

|(1) | Includes El Dorado Refinery operating data from November 17, 1999.                                                                                                                                               
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes intermediate varieties of crude oil used by the El Dorado Refinery.                                                                                                                                     
|(3) | During 2002, the process of shutting down the phenol and cumene units at El Dorado began and by year-end
      we had discontinued the production of phenol and acetone, and began producing and selling benzene.

---

`FRONTIER OIL CORPORATION AND SUBSIDIARIES
                                         CONSOLIDATED STATEMENTS OF OPERATIONS
                                        (In thousands except per share amounts)


For the years ended December 31,                                      2002           2001           2000
                                                                  -----------    -----------    -----------
Revenues:
     Refined products                                             $ 1,812,613    $ 1,889,233    $ 2,037,840
     Other                                                              1,137           (832)         7,317
                                                                  -----------    -----------    -----------
                                                                    1,813,750      1,888,401      2,045,157
                                                                  -----------    -----------    -----------
Costs and Expenses:
     Refining operating costs                                       1,740,908      1,681,720      1,938,162
     Selling and general expenses                                      17,248         17,571         13,333
     Impairment loss on asset held for sale                               363              -              -
     Depreciation                                                      27,332         25,010         23,007
                                                                  -----------    -----------    -----------
                                                                    1,785,851      1,724,301      1,974,502
                                                                  -----------    -----------    -----------
Operating income                                                       27,899        164,100         70,655
Interest expense and other financing costs                             27,613         31,146         34,738
Interest income                                                        (1,802)        (2,772)        (3,364)
                                                                  -----------    -----------    -----------
                                                                       25,811         28,374         31,374
                                                                  -----------    -----------    -----------

Income before income taxes                                              2,088        135,726         39,281
Provision for income taxes                                              1,060         28,073          2,075
                                                                  -----------    -----------    -----------
Net income                                                        $     1,028    $   107,653    $    37,206
                                                                  ===========    ===========    ===========



Basic earnings per share of common stock                          $       .04    $      4.12    $      1.36
                                                                  ===========    ===========    ===========

Diluted earnings per share of common stock                        $       .04    $      4.00    $      1.34
                                                                  ===========    ===========    ===========


                The accompanying notes are an integral part of these financial statements.`

`FRONTIER OIL CORPORATION AND SUBSIDIARIES
                                            CONSOLIDATED BALANCE SHEETS
                                         (In thousands except share data)


December 31,                                                                    2002             2001
                                                                           -------------     -------------
ASSETS
Current assets:
     Cash and cash equivalents (Note 2)                                    $     112,364     $     103,995
     Trade receivables, net of allowance of $500 in both years                    81,154            55,848
     Note receivable, net of allowance of $800                                     1,449                 -
     Other receivables                                                               987             6,469
     Inventory of crude oil, products and other                                  105,160            87,970
     Deferred tax assets                                                           5,346             4,845
     Other current assets                                                          2,510             2,243
                                                                           -------------     -------------
         Total current assets                                                    308,970           261,370
                                                                           -------------     -------------
Property, plant and equipment, at cost:
     Refineries and pipelines                                                    447,948           419,962
     Furniture, fixtures and other equipment                                       5,119             5,853
                                                                           -------------     -------------
                                                                                 453,067           425,815
     Less - accumulated depreciation                                             144,127           117,252
                                                                           -------------     -------------
                                                                                 308,940           308,563
Asset held for sale                                                                  472                 -
Other assets                                                                      10,495            11,813
                                                                           -------------     -------------
Total assets                                                               $     628,877     $     581,746
                                                                           =============     =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                      $     174,917     $     112,303
     Accrued turnaround cost                                                      12,849            10,394
     Accrued liabilities and other                                                 9,095            25,714
     Accrued interest                                                              3,856             3,895
                                                                           -------------     -------------
         Total current liabilities                                               200,717           152,306
                                                                           -------------     -------------

Long-term debt                                                                   207,966           208,880
Long-term accrued turnaround cost                                                 14,013            15,443
Postretirement employee liabilities                                               18,784            16,734
Deferred credits and other                                                         3,963             4,099
Deferred income taxes                                                             15,176            15,080

Commitments and contingencies (Note 7)

Shareholders' equity:
     Preferred stock, $100 par value, 500,000 shares authorized,
         no shares issued                                                              -                 -
     Common stock, no par, 50,000,000 shares authorized,
         30,290,324 and 30,059,574 shares
         issued in 2002 and 2001, respectively                                    57,469            57,446
     Paid-in capital                                                             102,557            98,046
     Retained earnings                                                            49,621            53,764
     Accumulated other comprehensive loss                                           (598)             (255)
     Treasury stock , at cost, 4,151,210 and 4,240,937
         shares at December 31, 2002 and 2001, respectively                      (37,959)          (38,163)
     Deferred employee compensation                                               (2,832)           (1,634)
                                                                           -------------     -------------
         Total shareholders' equity                                              168,258           169,204
                                                                           -------------     -------------
Total liabilities and shareholders' equity                                 $     628,877     $     581,746
                                                                           =============     =============

                  The accompanying notes are an integral part of these financial statements.`

`FRONTIER OIL CORPORATION AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (In thousands)


For the years ended December 31,                                         2002             2001             2000
                                                                     -----------      -----------      -----------
Cash flows from operating activities:
Net income                                                           $     1,028      $   107,653      $    37,206
Depreciation                                                              27,332           25,010           23,007
Deferred finance cost and bond discount amortization                       2,033            2,168            2,190
Deferred employee compensation amortization                                  907              380                -
Allowance for doubtful trade and note receivables                            800                -              533
Impairment loss on asset to be sold                                          363                -                -
Deferred income taxes                                                      1,149            9,463              130
Other                                                                       (562)             381             (285)
Changes in components of working capital from operations:
     Decrease (increase) in trade, note and other receivables            (22,178)          15,912          (25,583)
     Decrease (increase) in inventory                                    (17,190)          37,511          (25,122)
     Decrease (increase) in other current assets                            (267)           1,569           (2,927)
     (Decrease) increase in accounts payable                              64,004          (60,013)          49,551
     (Decrease) increase in accrued liabilities and other                 (6,597)          (1,459)           7,646
                                                                     -----------      -----------      -----------
Net cash provided by operating activities                                 50,822          138,575           66,346
                                                                     -----------      -----------      -----------
Cash flows from investing activities:
Additions to property, plant and equipment & other                       (29,617)         (22,824)         (12,688)
El Dorado Refinery acquisition-contingent earn-out payment                (7,500)               -                -
                                                                     ------------     -----------      -----------
     Net cash used in investing activities                               (37,117)         (22,824)         (12,688)
                                                                     -----------      -----------      -----------
Cash flows from financing activities:
Repurchase of debt:
     9-1/8% Senior Notes                                                  (1,090)         (24,410)          (5,025)
     11-3/4% Senior Notes                                                      -           (6,541)         (13,010)
Repayments of revolving credit facility, net                                   -          (23,000)          (3,000)
Proceeds from issuance of common stock                                     1,702            3,271            2,743
Purchase of treasury stock                                                  (787)         (22,600)          (9,215)
Dividends paid                                                            (5,161)          (2,629)               -
Other                                                                          -             (293)             (50)
                                                                     -----------      -----------      -----------
     Net cash used in financing activities                                (5,336)         (76,202)         (27,557)
                                                                     -----------      -----------      -----------
Increase in cash and cash equivalents                                      8,369           39,549           26,101
Cash and cash equivalents, beginning of period                           103,995           64,446           38,345
                                                                     -----------      -----------      -----------
Cash and cash equivalents, end of period                             $   112,364      $   103,995      $    64,446
                                                                     ===========      ===========      ===========

                   The accompanying notes are an integral part of these financial statements.`

`FRONTIER OIL CORPORATION AND SUBSIDIARIES
                                                      CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                                                    (In thousands except share data)

                                     Common Stock                                             Treasury Stock                                               Total
                               ------------------------                                   ----------------------                    Accumulated    --------------------
                                                                      Compre-   Retained                             Deferred          Other
                                  Number of               Paid-In     hensive   Earnings   Number of                 Employee      Comprehensive   Number of
                                Shares Issued   Amount    Capital     Income    (Deficit)    Shares     Amount     Compensation    Income (Loss)     Shares      Amount
                               -------------- ---------  ---------  ---------  ---------  -----------  ---------  ---------------  -------------  -----------   ---------

December 31, 1999                 28,542,330  $  57,294  $  87,028             $ (87,122) (1,230,900)  $  (6,519)    $      -         $       -    27,311,430   $  50,681
Net income                                 -          -          -  $  37,206     37,206           -           -            -                 -             -      37,206
                                                                    =========
Shares issued under:
   Stock option plan                 647,674         65      2,678                     -    (145,196)     (1,013)           -                 -       502,478       1,730
   Directors stock plan                    -          -          -                     -       2,000           9            -                 -         2,000           9
Shares repurchased under:
   Stock repurchase plans                  -          -          -                     -  (1,248,500)     (8,202)           -                 -    (1,248,500)     (8,202)
December 31, 2000                 29,190,004     57,359     89,706               (49,916) (2,622,596)    (15,725)           -                 -    26,567,408      81,424
Shares issued under:
   Stock option plan                 869,570         87      3,987                     -    (101,870)       (785)           -                 -       767,700       3,289
   Directors stock plan                    -          -          -                     -       3,000          13            -                 -         3,000          13
Other stock issuances                      -          -        663                     -     254,929       1,351       (2,014)                -       254,929           -
Shares repurchased under:
   Stock repurchase plans                  -          -          -                     -  (1,774,400)    (23,017)           -                 -    (1,774,400)    (23,017)
Comprehensive income:
   Net income                              -          -          -  $ 107,653    107,653           -           -            -                 -             -     107,653
   Other comprehensive income:
     Cumulative effect of accounting
       change on fair value of derivative
       instruments, net of tax                                          3,910
     Change in fair value of derivatives                               (1,626)
     Derivative value reclassed to income                              (2,284)
     Minimum pension liability                                           (255)
                                                                    ---------
   Other comprehensive income                                            (255)         -           -           -            -              (255)            -        (255)
                                                                    ---------
Comprehensive income                                                $ 107,398
                                                                    =========
Income tax benefits of stock options       -          -      3,690                     -           -           -            -                 -             -       3,690
Deferred employee compensation
   Amortization/vested shares              -          -          -                     -           -           -          380                 -             -         380
Dividends declared                         -          -          -                (3,973)          -           -            -                 -             -      (3,973)
December 31, 2001                 30,059,574     57,446     98,046                53,764  (4,240,937)    (38,163)      (1,634)             (255)   25,818,637     169,204
Shares issued under:
   Stock option plan                 230,750         23      1,543                     -           -           -            -                 -       230,750       1,566
   Directors stock plan                    -          -          -                     -       3,000          13            -                 -         3,000          13
Other stock issuances                      -          -      1,544                     -     105,768         561       (2,105)                -       105,768           -
Shares repurchased under:
   Restricted stock plan                   -          -          -                     -     (19,041)       (370)           -                 -       (19,041)       (370)
Comprehensive income:
   Net income                              -          -          -  $   1,028      1,028           -           -            -                 -             -       1,028
   Other comprehensive income:
     Deferred net loss on derivative
       contracts, net of tax                                              (33)
     Derivative value reclassed to income                                  33
     Minimum pension liability                                           (343)
                                                                    ---------
   Other comprehensive income                                            (343)                                                             (343)                     (343)
                                                                    ---------
Comprehensive income                                                $     685
                                                                    =========
Income tax benefits of
 stock compensation                        -          -      1,424                     -           -           -            -                 -             -       1,424
Deferred employee compensation
   Amortization/vested shares              -          -          -                     -           -           -          907                 -             -         907
Dividends declared                         -          -          -                (5,171)          -           -            -                 -             -      (5,171)
                                  ----------  ---------  ---------             ---------  ----------  ----------    ----------        ---------   -----------   ---------
December 31, 2002                 30,290,324  $  57,469  $ 102,557             $  49,621  (4,151,210) $  (37,959)   $  (2,832)        $    (598)   26,139,114   $ 168,258
                                  ==========  =========  =========             =========  ==========  ===========   ==========        =========   ===========   =========

                    The accompanying notes are an integral part of these financial statements.`

---

# FRONTIER OIL
CORPORATION AND SUBSIDIARIES

Notes to
Consolidated Financial Statements

For the
Years Ended December 31, 2002, 2001 and 2000

## 1. Nature of
Operations

The financial statements include
the accounts of Frontier Oil Corporation, a Wyoming corporation, and its wholly
owned subsidiaries, including Frontier Holdings Inc., collectively referred to
as Frontier or the Company. The Company is an energy company engaged in crude
oil refining and wholesale marketing of refined petroleum products (the
refining operations).

The Company operates
refineries (the Refineries) in Cheyenne, Wyoming and El Dorado,
Kansas with a combined crude oil capacity of 156,000 barrels per day. The
Company also owns a 34.72% undivided interest in a crude oil pipeline in Wyoming
and a 50% interest in one crude oil tank and another under construction in
Guernsey, Wyoming, both of which are accounted for on a pro rata consolidated
basis. The company also has a 50% interest in FGI, LLC, an asphalt terminal and
storage facility in Grand Island, Nebraska and a 25% interest in 8901 Hangar,
Inc., a company which leases and operates a private airplane hangar, both of
which are accounted for using the equity method of accounting. The Company
focuses its marketing efforts in the Rocky Mountain and Plains States regions of
the United States. The Company purchases crude oil to be refined and markets the
refined petroleum products produced, including various grades of gasoline,
diesel fuel, jet fuel, asphalt, chemicals and petroleum coke.

## 2. Significant
Accounting Policies

## Refined
Product Revenues

Revenues from sales of refined products are recognized on transfer of title.

## Property,
Plant and Equipment

Property, plant and
equipment additions are recorded at cost and depreciated using the straight-line
method over the estimated useful lives. The estimated useful lives are:

`Refinery plant and equipment................................    5 to 20 years
          Pipeline and pumps..........................................   10 to 20 years
          Furniture, fixtures and other...............................    3 to 10 years`

The Company reviews
long-lived assets for impairments whenever events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. If the
undiscounted future cash flows of an asset to be held and used in operations is
less than the carrying value, the Company would recognize a loss for the
difference between the carrying value and fair market value. The Company
capitalizes interest on debt incurred to fund the constructions of significant
assets. Interest capitalized for the year ended December 31, 2002 was $342,000.
There was no interest capitalized for the years 2001 and 2000.

## Turnarounds

Normal maintenance and
repairs are expensed as incurred. The costs for turnarounds (scheduled and
required shutdown of refinery operating units for significant overhaul and
refurbishment) are ratably accrued over the period from the prior turnaround to
the next scheduled turnaround. These accruals are included in the Companys
consolidated balance sheet in the Accrued turnaround cost and
Long-term accrued turnaround cost. The turnaround accrual expenses
are included in Refining operating costs in the Companys
consolidated statements of operations. Turnaround costs include contract
services, materials and rental equipment. Major improvements are capitalized,
and the assets replaced are retired.

## Inventories

Inventories of crude oil,
unfinished products and all finished products are recorded at the lower of cost
on a first in, first out (FIFO) basis or market. Refined product exchange
transactions are considered asset exchanges with deliveries offset against
receipts. The net exchange balance is included in inventory. Inventories of
materials and supplies and process chemicals are recorded at the lower of
average cost or market.

`Components of Inventory
                                 (In thousands)

                                                                  December 31,
                                                           ------------------------
                                                               2002         2001
                                                           -----------  -----------

    Crude Oil                                              $    33,765  $    24,787
    Unfinished products                                         24,806       24,406
    Finished products                                           29,836       21,607
    Process chemicals                                            3,308        4,103
    Repairs and maintenance supplies and other                  13,445       13,067
                                                           -----------  -----------
                                                           $   105,160  $    87,970
                                                           ===========  ===========`

## Income Taxes

The Company accounts for
income taxes under the provisions of Statement of Financial Accounting Standards
(SFAS) No. 109, Accounting for Income Taxes. SFAS No. 109 requires
the asset and liability approach for accounting for income taxes. Under this
approach, deferred tax assets and liabilities are recognized based on
anticipated future tax consequences attributable to differences between
financial statement carrying amounts of assets and liabilities and their
respective tax bases.

## Environmental
Expenditures

Environmental expenditures
are expensed or capitalized based upon their future economic benefit. Costs
which improve a propertys pre-existing condition and costs which prevent
future environmental contamination are capitalized. Remediation costs related to
environmental damage resulting from operating activities subsequent to
acquisition are expensed. Liabilities for these expenditures are recorded when
it is probable that obligations have been incurred and the amounts can be
reasonably estimated.

## Price Risk
Management Activities

The Company, at times, enters
into commodity derivative contracts to manage its price exposure to its
inventory positions, purchases of foreign crude oil and consumption of natural
gas in the refining process or to fix margins on certain future production. The
commodity derivative contracts used by the Company may take the form of futures
contracts, collars or price swaps and are entered into with credit-worthy
counterparties. The Company believes there is minimal credit risk with respect
to its counterparties. The Company accounts for its commodity derivative
contracts under the hedge (or deferral) method of accounting when the derivative
contracts are designated as hedges for accounting purposes, or mark-to-market
accounting if the Company elects not to designate derivative contracts as
accounting hedges or if such derivative contracts do not qualify for hedge
accounting. As such, gains or losses on commodity derivative contracts accounted
for as hedges are recognized in refining operating costs when the associated
transactions are consummated while gains and losses on transactions accounted
for using mark-to-market accounting are reflected in other revenues at each
period end.

## Stock-Based
Compensation

Stock-based compensation is
measured in accordance with Accounting Principles Board (APB) No.
25. Under this intrinsic value method, compensation cost is the excess, if any,
of the quoted market value of the Companys common stock at the grant date
over the amount the employee must pay to acquire the stock. Compensation costs
of $907,000 and $380,000 related to restricted stock awards was recognized for
the years ended December 31, 2002 and 2001, respectively. No compensation cost
was recognized for the year ended December 31, 2000.

## Intercompany
Transactions

Intercompany transactions are eliminated in consolidation.

## Use of
Estimates

The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

## New Accounting
Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142, Goodwill and Other
Intangible Assets.  SFAS No. 142 addresses financial accounting and reporting for acquired goodwill and other
intangible assets and supersedes APB Opinion No. 17, Intangible Assets.  SFAS No. 142 addresses how intangible
assets that are acquired should be accounted for in financial statements upon their acquisition and also
addresses how goodwill and other intangible assets should be accounted for after they have been initially
recognized in the financial statements.  The Company adopted SFAS No. 142 effective January 1, 2002.  The
adoption did not have any impact on the Companys financial condition or results of operations.

In June 2001, the FASB
issued SFAS No. 143, Accounting for Asset Retirement Obligations.
This statement provides accounting and disclosure requirements for retirement
obligations associated with long-lived assets and is effective January 1, 2003.
SFAS No. 143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred with the
associated asset retirement costs being capitalized as a part of the carrying
amount of the long-lived asset. SFAS No. 143 also includes disclosure
requirements that provide a description of asset retirement obligations and
reconciliation of changes in the components of those obligations. The Company
has potential asset retirement obligation (ARO) liabilities related
to its Refineries as a result of environmental and other legal requirements. Any
ARO liability is not currently estimatable as to amount and timing, but the
Company will continue to monitor and evaluate its potential AROs. In the event
that the Company decides to cease the use of a particular refinery, an ARO
liability would be recorded at that time. The Company does not expect the
adoption of SFAS No. 143 to have a material impact on the Companys current
financial condition or results of operations.

In August 2001, the FASB
issued SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. SFAS No. 144 addresses the accounting and reporting for
the impairment or disposal of long-lived assets and supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of  and APB Opinion No. 30, Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. SFAS No. 144 establishes one accounting model for long-lived
assets to be disposed of by sale as well as resolves implementation issues
related to SFAS No. 121. The Company adopted SFAS No. 144 effective January 1,
2002. The adoption did not have any impact on the Companys financial
condition or results of operations.

The Accounting Standards
Executive Committee of the American Institute of Certified Public Accountants
has issued an exposure draft of a proposed Statement of Position
(SOP) entitled Accounting for Certain Costs and Activities
Related to Property, Plant and Equipment. If adopted as proposed, this SOP
would require companies to expense as incurred turnaround costs, defined as
the non-capital portion of major maintenance costs. Adoption of the
proposed SOP would also require that any existing turnaround accruals be
reversed to income immediately. If this proposed change were in effect at
December 31, 2002, the Company would have been required to reverse the
turnaround accruals and recognize pretax income totaling $26.9 million. The
total accrued turnaround costs will change throughout the year as turnarounds
are incurred and accruals are made for future turnarounds. If adopted in its
present form, income related to this proposed change would be reported as a
cumulative effect of an accounting change, net of tax, in the consolidated
statements of operations.

In April 2002, the FASB
issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical Corrections. It is
probable that the rescission of SFAS No. 4 is the only portion of SFAS No. 145
that may have an impact on the Company in the future. Under SFAS No. 4, all
gains and losses from extinguishment of debt were required to be aggregated and,
if material, classified as an extraordinary item, net of related income tax
effect. SFAS No. 145 eliminates SFAS No. 4. As a result, gains and losses from
extinguishment of debt should be classified as extraordinary items only if they
meet the criteria in Opinion 30. The Company adopted SFAS No. 145 effective
January 1, 2003 and it did not expected have any impact on the Companys
financial condition or results of operations for the periods presented herein.

In June 2002, the FASB
issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities. SFAS No. 146 is effective for
exit or disposal activities that are initiated after December 31, 2002.

In December 2002, the FASB
issued SFAS No. 148, Accounting for Stock-Based Compensation 
Transition and Disclosure, an amendment of FASB Statement No. 123. SFAS
No. 148 amends SFAS No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. SFAS No. 148
is effective for the December 31, 2002 financial statements and all required
disclosures have been made in the notes to the 2002 financial statements.

## Cash
Equivalents

Highly liquid investments
with a maturity, when purchased, of three months or less are considered to be
cash equivalents. Cash equivalents were $109.8 million and $102.3 million at
December 31, 2002 and 2001, respectively.

## Supplemental
Cash Flow Information

Cash payments for interest,
excluding capitalized interest, during 2002, 2001 and 2000 were $24.5 million,
$27.8 million and $31.7 million, respectively. Cash payments for income taxes
during 2002, 2001 and 2000 were $83,000, $21.2 million and $2.4 million,
respectively.

## Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

## 3. Debt

`Schedule of Long-term Debt
                                         (in thousands)

                                                                        December 31,
                                                                ---------------------------
                                                                    2002            2001
                                                                ------------   ------------

      11-3/4% Senior Notes, net of unamortized discount         $    168,491   $    168,315
      9-1/8% Senior Notes                                             39,475         40,565
                                                                ------------   ------------
                                                                $    207,966   $    208,880
                                                                ============   ============`

## Senior Notes

On November 5, 1999, the
Company issued $190 million principal amount of 113⁄4% Senior Notes due 2009.
The 113⁄4% Notes were issued at a price of 98.562%. The net proceeds were
utilized to acquire the El Dorado Refinery. The 113⁄4% Notes are redeemable,
at the option of the Company, at 105.875% after November 15, 2004, declining to
100% in 2007. Prior to November 15, 2004, the Company may at its option redeem
the 113⁄4% Notes at a defined make-whole amount, plus accrued and unpaid
interest. During 2001 and 2000, the Company purchased and is holding as treasury
notes $6.5 million and $13.0 million, respectively, principal amount of the
113⁄4% Senior Notes, the accounting for which was a reduction of debt.
Interest is paid semiannually.

On February 9, 1998, the
Company issued $70 million of 9-1/8% Senior Notes due 2006. The 9-1/8% Notes are
redeemable, at the option of the Company, at 104.563% after February 15, 2002,
declining to 100% in 2005. Interest is paid semiannually. During 2002, 2001 and
2000, the Company purchased and is holding as treasury notes $1.1 million, $24.4
million and $5.0 million, respectively, principal amount of the 9-1/8% Senior
Notes, the accounting for which was a reduction of debt.

## Revolving
Credit Facility

The refining operations
have a working capital credit facility with a group of nine banks. The revolving
credit facility has a current expiration date of June 15, 2004. The facility is
a collateral-based facility with total capacity of up to $175 million, of which
maximum cash borrowings are $125 million, subject to borrowing base amounts. Any
unutilized capacity after cash borrowings is available for letters of credit. No
debt was outstanding at December 31, 2002 or 2001. Standby letters of credit
outstanding were $48.0 million and $175,000 at December 31, 2002 and 2001,
respectively.

The facility provides
working capital financing for operations, generally the financing of crude and
product supply. It is generally secured by the Refineries current assets.
The agreement provides for a quarterly commitment fee of 0.375 of 1% to 0.500 of
1% per annum. Interest rates are based, at the Companys option, on the
agent banks prime rate plus 0.25% to 1%, the prevailing Federal Funds Rate
plus 2% to 2.75%, or the reserve-adjusted LIBOR plus 1.5% to 2.25%. Standby
letters of credit issued bear a fee of 1.125% to 1.875% annually, plus standard
issuance and renewal fees. In all cases, the rate and fees discussed above
increase from the lower to higher levels as the ratio of funded debt to
earnings, as defined, increases. The average interest rate on funds borrowed
under the revolving credit facility during 2002 was 3.7%. The agreement includes
certain financial covenant requirements relating to the Refineries working
capital, cash earnings, tangible net worth and capital expenditure limits. The
Company was in compliance with these covenants at December 31, 2002.

## Restrictions
on Loans, Transfer of Funds and Payment of Dividends

The revolving credit
facility restricts the Refineries as to the distribution of capital assets and
the transfer of cash in the form of dividends, loans or advances when there are
any outstanding borrowings under the facility or when a default exists or would
occur. The Company is currently in compliance with the provisions of its credit
agreement.

## Five-year
Maturities

The 9-1/8% Senior Notes are
due 2006 and the 113⁄4% Notes are due 2009; until then there are no
maturities of long-term debt.

## 4. Income Taxes

The following is the
provision for income taxes for the three years ended December 31, 2002, 2001 and
2000.

`Provision (Befefit) for Income Taxes
                                            (In thousands)


                                                         2002             2001              2000
                                                    -------------     -------------    -------------

      Current:
         State                                      $          32     $       6,231    $         615
         Canadian                                              83                 -              751
         Federal                                             (204)           12,379              579
                                                    -------------     -------------    -------------
      Total current (benefit) provision                       (89)           18,610            1,945
                                                    -------------     -------------    -------------

      Deferred:
         State                                                303               457            1,277
          Federal                                             846             9,006           (1,147)
                                                    -------------     -------------    -------------
      Total deferred provision                              1,149             9,463              130
                                                    -------------     -------------    -------------

                                                    $       1,060     $      28,073    $       2,075
                                                    =============     =============    =============`

The following is a
reconciliation of the provision for income taxes computed at the statutory
United States income tax rates on pretax income and the provision for income
taxes as reported for the three years ended December 31, 2002, 2001 and 2000.

`Reconciliation of Tax Provision
                                                (In thousands)



                                                                    2002             2001              2000
                                                               -------------     -------------    -------------

      Provision based on statutory rates                       $         731     $      47,504    $      13,748
      Increase (decrease) resulting from:
          Release of valuation allowance                                   -           (24,603)         (13,574)
          Federal tax effect of state and other income taxes            (146)           (2,341)            (925)
          State and other income taxes                                   418             6,688            2,643
          Other                                                           57               825              183
                                                               -------------     -------------    -------------
      Provision as reported                                    $       1,060     $      28,073    $       2,075
                                                               =============     =============    =============`

Significant components of deferred tax assets and liabilities are shown below:

`Components of Deferred Taxes
                                          (In thousands)

                                                                            December 31,
                                                                   ------------------------------
                                                                       2002              2001
                                                                   -------------    -------------

Current deferred tax assets:
   State gross current assets                                      $         808    $         765
   State net operating losses                                                287                -
   State gross current liabilities                                          (132)            (149)
                                                                   -------------    -------------
Total state current net deferred tax assets                                  963              616
                                                                   -------------    -------------

   Federal gross current assets                                            5,651            5,304
   Federal gross current liabilities                                      (1,268)          (1,075)
                                                                   -------------    -------------
Total federal current net deferred tax assets                              4,383            4,229
                                                                   -------------    -------------

Total current deferred tax assets                                  $       5,346    $       4,845
                                                                   =============    =============

Long-term deferred tax liabilities:
   State gross long-term liabilities                               $       6,242    $       5,700
   State gross long-term assets                                           (1,767)          (1,660)
                                                                   -------------    -------------

Total state long-term net deferred tax liabilities                         4,475            4,040
                                                                   -------------    -------------

Federal gross long-term liabilities                                       39,460           41,071
Federal gross long-term assets:
   Accrued liabilities and other                                         (13,923)         (13,372)
   Federal alternative minimum tax credits                               (13,434)         (13,614)
   Federal net operating loss carryforwards and other                     (1,402)          (3,045)
                                                                   -------------    -------------
Total federal gross long-term assets                                     (28,759)         (30,031)
                                                                   -------------    -------------

Total federal long-term net deferred tax liabilities                      10,701           11,040
                                                                   -------------    -------------

Total long-term deferred tax liabilities                           $      15,176    $      15,080
                                                                   =============    =============`

The accrued liabilities and
other deferred tax assets primarily include turnaround and postretirement
employee benefit expenses. The major component of the deferred tax liabilities
is depreciation.

At December 31, 2002, the
Company had alternative minimum tax carryforwards of approximately $13.4 million
which are indefinitely available to reduce future United States income taxes
payable, of which $644,000 represents alternative minimum tax carryforwards
generated by the Cheyenne refining operations prior to its 1991 acquisition by
the Company which may be subject to certain limitations. The Company had an
estimated federal net operating loss carryforward of $6.7 million as of December
31, 2002, the majority of which will not expire until 2022.

The Company has estimated
state net operating losses generated during 2002 to reduce future state taxable
income of $3.3 million for Kansas, $690,000 for Colorado and $174,000 for
Nebraska. Carryforward periods for the state net operating losses are ten years
for Kansas, twenty years for Colorado and five years for Nebraska. State
deferred tax liabilities were $3.5 million and $3.4 million at December 31, 2002
and 2001, respectively, reflecting the estimated state tax effect of temporary
differences, primarily for differences in depreciation for property, plant and
equipment.

## 5. Common Stock

## Dividends

The Company declared
quarterly dividends of $.05 per share of common stock for each quarter during
2002 and quarterly dividends of $.05 per share for the second, third and fourth
quarters of 2001. No dividends were declared for the year ended December 31,
2000.

## Earnings per
Share

The following sets forth the
computation of diluted earnings per share (EPS) for the years ended
December 31, 2002, 2001 and 2000.

`2002                               2001                                 2000
                        ----------------------------------  ----------------------------------  ----------------------------------
                                                    Per                                 Per                                 Per
                          Income       Shares      Share      Income       Shares      Share      Income       Shares      Share
                        (Numerator) (Denominator)  Amount   (Numerator) (Denominator)  Amount   (Numerator) (Denominator)  Amount
                        ----------- ------------- --------  ----------- ------------- --------  ----------- ------------- --------
                                                         (In thousands except per share amounts)

Basic EPS:
Net income               $   1,028       25,780   $    .04    $ 107,653      26,113   $   4.12   $  37,206       27,374   $   1.36
Dilutive securities:
   Stock options and
       restricted stock          -        1,154                       -         772                      -          415
                        ----------- ------------- --------  ----------- ------------- --------  ----------- ------------- --------
Dilutive EPS:
Net income               $   1,028       26,934   $    .04    $ 107,653      26,885   $   4.00   $  37,206       27,789   $   1.34
                         =========  ============= ========  =========== ============= ========  =========== ============= ========`

Certain of the
Companys restricted stock that could potentially dilute basic EPS in the
future were not included in the computation of diluted EPS because to do so
would have been antidilutive for the periods presented.

---

## Non-employee
Directors Stock Grant Plan

During 1995, the Company established
a stock grant plan for non-employee directors. The purpose of the plan is to
provide a part of non-employee directors compensation in Company stock.
The plan will be beneficial to the Company and its stockholders by allowing
non-employee directors to have a personal financial stake in the Company through
an ownership interest in the Companys common stock. The plan may grant an
aggregate of 60,000 shares of the Companys common stock held in treasury.
The Company made aggregate grants to directors under this plan of 3,000 shares in
2002, 3,000 shares in 2001 and 2,000 shares in 2000 and expensed compensation in the amount
of $13,500, $13,500 and $9,000, respectively for each of these years. There were
42,000 shares available for grant as of December 31, 2002.

## Stock Option
Plan

The Company has a stock
option plan which authorizes the granting of options to employees to purchase
shares. The plans through December 31, 2002 have reserved for issuance a total
of 8,002,075 shares of common stock of which 4,435,175 shares were granted and
exercised, 2,581,250 shares were granted and were outstanding and 985,650 shares
were available to be granted. Options under the plan are granted at fair market
value on the date of grant. No entries are made in the accounts until the
options are exercised, at which time the proceeds are credited to common stock
and paid-in capital. Generally, the options vest ratably throughout their one-
to five-year terms.

Changes during 2002, 2001 and 2000 in outstanding options are presented below:

`2002                          2001                           2000
                                     ---------------------------   ---------------------------   ---------------------------
                                                    Weighted-                     Weighted-                      Weighted-
                                      Number of      Average        Number of      Average        Number of       Average
                                       Options    Exercise Price     Options    Exercise Price     Options    Exercise Price
                                     ----------   --------------   ----------   --------------   ----------   --------------

Outstanding at beginning of year      2,159,700       $   7.22      2,451,220       $   5.88      2,115,884       $   4.68
Granted                                 702,400          21.85        623,500           8.88      1,218,000           7.13
Exercised                              (230,750)          6.79       (869,570)          4.68       (647,674)          4.24
Expired                                 (50,100)         10.21        (45,450)          6.41       (234,990)          6.10
                                     ----------                    ----------                    ----------
Outstanding at end of year            2,581,250          11.18      2,159,700           7.22      2,451,220           5.88
                                     ==========                    ==========                    ==========
Exercisable at end of year            1,512,325           8.63      1,022,826           6.72      1,326,570           5.17
                                     ==========                    ==========                    ==========
Available for grant at end of year      985,650                       765,230                     1,343,280
                                     ==========                    ==========                    ==========
Weighted-average fair value of
   options granted during the year                        9.34                          4.39                          3.58`

The following table summarizes information about stock options outstanding at December 31, 2002:

`Options Outstanding                   Options Exercisable
                               -------------------------------------------    ---------------------------
                                                 Weighted-
                                                  Average        Weighted-                     Weighted-
                                   Number        Remaining        Average                       Average
                                 Outstanding    Contractual      Exercise      Exercisable     Exercise
Range of Exercise Prices         At 12/31/02    Life (Years)       Price       at 12/31/02       Price
--------------------------     --------------   ------------    ----------    -------------   -----------
$5.63 to $7.00                    1,263,550          1.86       $    6.48       1,039,650      $   6.37
$8.50 to $8.75                      595,000          3.04            8.58         284,500          8.57
$12.10                               20,000          3.33           10.10          10,000         12.10
$19.07 to 21.85                     702,700          4.29           21.81         178,175         21.77`

Had compensation costs been
determined based on the fair value at the grant dates for awards made in 2002,
2001, and prior years for the vested portions of the awards in each of the years
2002, 2001 and 2000, the Companys net income (loss) and EPS would have
been the pro forma amounts indicated in the following table for the years ended
December 31, 2002, 2001 and 2000:

`2002             2001              2000
                                                          -------------     -------------    -------------
                                                                (In thousands except per share amounts)

      Net income as reported                              $       1,028     $     107,653    $      37,206
        Pro forma compensation expense, net of tax               (4,002)           (1,670)          (2,156)
                                                          -------------     -------------    -------------
      Pro forma net income (loss)                                (2,974)          105,983           35,050
      Basic EPS:
          As reported                                     $         .04     $        4.12    $        1.36
          Pro forma                                                (.12)             4.06             1.28
      Diluted EPS:
          As reported                                     $         .04     $        4.00    $        1.34
          Pro forma                                                (.12)             3.94             1.26`

The fair value of grants
was estimated on the date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions used for 2002, 2001 and 2000,
respectively: risk-free interest rates of 2.76%, 4.80% and 6.58%, expected
volatilities of 55.6%, 50.20% and 47.40%, expected lives of 5.0 years, 5.0
years, and 3.50 years and 1.27% dividend yield in 2002, 0.5% dividend yield in
2001 and no dividend yield in 2000.

## Restricted
Stock Plan

On March 13, 2001, the Company
established the Frontier Oil Corporation Restricted Stock Plan (the
Plan) covering 1,000,000 shares of common stock held as
treasury stock by the Company. The Plans purpose is to permit grants
of shares, subject to restrictions, to key employees of the Company and is
intended to promote the interests of the Company by encouraging those employees
to acquire or increase their equity interest in the Company. The Plan is also
intended to enhance the ability of the Company to attract and retain the
services of key employees who are important to the growth and profitability of
the Company. The Plan is designed to work in conjunction with the
Companys annual bonus program for employees whereby all or a portion
of a bonus awarded shall be paid in the form of restricted stock granted under
the Plan. Shares awarded under the Plan entitle the shareholder to all rights of
common stock ownership except that the shares may not be sold, transferred or
pledged during the restriction period except as provided for in the Plan and any
dividends are held by the Company and paid to the employee when the stock vests.

As of December 31, 2002,
there are 294,697 shares of unvested restricted stock which represents the total
of both the 2001 and 2002 grants less the portion of the 2001 grant which has
now vested and reduced by shares forfeited from employee departures prior to
vesting. Of the remaining 181,638 shares from the 2001 grants, 60,540 shares
vest in March 2003 and the remaining 121,098 shares will vest in March 2004. The
Company granted an additional 113,059 restricted shares on March 13, 2002 and
recorded an additional $2.2 million to deferred employee compensation. These
restricted shares of common stock granted in 2002 vest 25% in March 2003, 25% in
March 2004 and 50% in March 2005. The shares for both the 2002 and 2001 grants
were recorded at the market value on the date of issuance (March 13, 2002 and
2001 respectively) as deferred employee compensation (equity account) and is
being amortized to compensation expense over the respective vesting periods of
the stock. Compensation expense for the years ended December 31, 2002 and 2001
was $907,000 and $380,000, respectively.

## 6. Employee
Benefit Plans

## Contribution
Plans

The Company sponsors
defined contribution plans for its employees. All employees may participate by
contributing a portion of their annual earnings to the plans. The Company makes
basic and/or matching contributions on behalf of participating employees. The
cost of the plans for the three years ended December 31, 2002, 2001 and 2000 was
$5.1 million, $4.6 million and $4.8 million, respectively.

## Defined
Benefit Plans

The Company established a
defined cash balance pension plan, effective January 1, 2000, for eligible El
Dorado employees to supplement retirement benefits those employees lost upon the
sale of the El Dorado Refinery to Frontier. No other current or future employees
will be eligible to participate in the plan. This plan has assets of $3.8
million at December 31, 2002 and its funding status is in compliance with ERISA.

The Company provides
postretirement healthcare and other benefits to certain employees of the El
Dorado Refinery. Eligible employees are employees hired by the Refinery before
certain defined dates and who satisfy certain age and service requirements.
Employees hired on or before November 16, 1999 qualify for retirement healthcare
insurance until eligible for Medicare. Employees hired on or before January 1, 1995
are also eligible for Medicare supplemental insurance. These plans have no
assets as of December 31, 2002 and 2001.

The following tables set
forth the change in benefit obligation, the change in plan assets, the funded
status of the pension plan and postretirement healthcare and other benefit
plans, amounts recognized in the Companys financial statements, and the
principal weighted-average assumptions used:

`Post-retirement
                                                                                 Healthcare and
                                                        Pension Benefits         Other Benefits
                                                      -------------------     -------------------
                                                          2002       2001         2002       2001
                                                      --------   --------     --------   --------
                                                                     (In thousands)
Change in benefit obligation
Benefit obligation at January 1                       $  8,816   $  8,409     $ 15,075   $ 12,015
Service cost                                                 -          -          691        599
Interest cost                                              582        563        1,071        901
Plan participant contributions                               -          -            3          1
Actuarial (gains) losses                                   449        (95)       2,547      1,566
Benefits paid                                              (53)       (61)          (7)        (7)
                                                      --------   --------     --------   --------
Benefit obligation at December 31                     $  9,794   $  8,816     $ 19,380   $ 15,075
                                                      ========   ========     ========   ========

Change in plan assets
Fair value of plan assets at January 1                $    925   $      -     $      -   $      -
Actual return on plan assets                                54         13            -          -
Employer contribution                                    2,851        973            4          6
Plan participant contributions                               -          -            3          1
Benefits paid                                              (53)       (61)          (7)        (7)
                                                      --------   --------     --------   --------
Fair value of plan assets at December 31              $  3,777   $    925     $      -   $      -
                                                      ========   ========     ========   ========

Funded status                                         $ (6,017)  $ (7,891)    $(19,380)  $(15,075)
Unrecognized net actuarial loss                            970        413        4,941      2,530
                                                      --------   --------     --------   --------
Net amount recognized                                 $ (5,047)  $ (7,478)    $(14,439)  $(12,545)
                                                      ========   ========     ========   ========

Amounts recognized in the balance sheets:
   Accrued benefit liability                          $ (6,017)  $ (7,891)    $(14,439)  $(12,545)
   Accumulated other comprehensive loss                    970        413            -          -
                                                      --------   --------     --------   --------
Net amount recognized                                 $ (5,047)  $ (7,478)    $(14,439)  $(12,545)
                                                      ========   ========     ========   ========

Weighted-average assumptions as of December 31
Discount rate                                            6.25%      6.82%        6.25%      6.82%
Expected return on plan assets                           8.00%      8.00%        8.00%      8.00%`

Components of net periodic
benefit cost are as follows:

`Post-retirement
                                                                                                Healthcare and
                                                                        Pension Benefits        Other Benefits
                                                                     -------------------     -------------------
                                                                         2002       2001         2002       2001
                                                                     --------   --------     --------   --------
                                                                                   (in thousands)
Components of net periodic benefit cost:
Service cost                                                         $      -   $      -     $    691   $    599
Interest cost                                                             582        563         1071        901
Expected return on plan assets                                           (162)       (25)           -          -
Amortization of prior service cost                                          -          -            -          -
Recognized net actuarial loss                                               -          -          136         11
                                                                     --------   --------     --------   --------
Net periodic benefit cost                                            $    420   $    538     $  1,898   $  1,511
                                                                     ========   ========     ========   ========

Healthcare cost trend rate:
                                                                                               15.00%     15.00%
                                                                                           ratable to ratable to
                                                                                            5.0% from  5.0% from
                                                                                                 2007       2007

Sensitivity Analysis:
Effect of 1% (-1%) change in healthcare cost-trend rate:
   Year-end benefit obligation                                                               $  4,258   $  3,322
                                                                                               (3,313)    (2,585)
   Total of service and interest cost                                                             394        338
                                                                                                 (307)      (263)`

## 7. Commitments and
Contingencies

## Lease and
Other Commitments

On November 16, 1999, Frontier
acquired the 110,000 barrels per day crude oil refinery located in El Dorado,
Kansas from Equilon Enterprises LLC, now known as Shell Oil Products US
(Shell). Under the provisions of the purchase and sale agreement,
the Company is required to make contingent earn-out payments for each of the
years 2000 through 2007 equal to one-half of the excess over $60 million per
year of the El Dorado Refinerys revenues less its material costs and
operating costs, other than depreciation. The total amount of these contingent
payments is capped at $40 million, with an annual cap of $7.5 million. Any
contingency payment will be recorded when determinable. Such contingency
payments, if any, will be recorded as additional acquisition cost. No contingent
earn-out payment will be required based on 2002 results. A contingent earn-out
payment of $7.5 million was required based on 2001 results and was accrued as of
December 31, 2001 and paid in early 2002. No contingent earn-out payment was
required based on 2000 results.

In connection with the
acquisition of the El Dorado Refinery, the Company entered into an operating
sublease agreement with Shell for the use of the cogeneration facility at the El
Dorado Refinery. The noncancellable operating sublease expires in 2016 with the
Company having the option to renew the sublease for an additional eight years.
At the end of the renewal sublease term, the Company has the option to purchase
the cogeneration facility for the greater of fair value or $22.3 million. The
Company also has building, equipment, aircraft and vehicle operating leases that
expire from 2003 through 2008. Operating lease rental expense was approximately
$11.3 million, $11.9 million and $11.1 million for the three years ended
December 31, 2002, 2001 and 2000, respectively. The approximate future minimum
lease payments as of December 31, 2002 are $10.4 million for 2003, $10.0 million
for 2004, $9.5 million for 2005, $9.0 million for 2006, $7.5 million for 2007
and $56.9 million thereafter.

The Company has a one-year
foreign crude oil supply agreement with Shell which expires April 2003. Under
this agreement, the Company may purchase crude oil for the El Dorado Refinery
from Shell, although the Company is not obligated to do so. The Company is
obligated to pay monthly installments towards an annualized commitment fee to
Shell for making foreign crude volumes available to the Company under this
agreement based on a per barrel fee for crude purchased under this agreement.
This agreement allows the Company to use Shells worldwide network to
acquire foreign crude oil.

In October 2002, the
Company entered into a five-year crude oil supply agreement with Baytex Energy
Ltd, a Canadian crude oil producer. On November 28, 2002, Baytex Energy Ltd.
assigned this agreement to its wholly-owned subsidiary, Baytex Marketing Ltd.
(Baytex). This agreement, which commences January 1, 2003, will
provide for the Company to purchase up to 20,000 barrels per day of a
Lloydminster crude oil blend, a heavy Canadian crude. Initially, the Company
will receive 9,000 barrels per day, increasing up to 20,000 barrels per day by
October 2003. The Company intends to process this crude oil at the Cheyenne
Refinery, which is near Guernsey, Wyoming, the delivery point of the crude oil
under this agreement. This type of crude oil typically sells at a discount to
lighter crude oils. The Companys price for the crude oil under the
agreement will be equal to 71% of the simple average of the near month
settlement prices of the NYMEX light sweet crude oil contracts during the month
of delivery, plus the cost of transportation based on the pipeline tariff from
Hardisty, Alberta to Guernsey, Wyoming, less $0.25 per barrel. The initial term
of the agreement is through December 31, 2007. This agreement provides a firm
source of heavy Canadian crude and also assigns most of the Companys
dedicated capacity through the Express Pipeline, a crude oil pipeline from
Canada to Guernsey, Wyoming.

The Company contracted for
pipeline capacity of approximately 13,800 bpd on the Express Pipeline from
Hardisty, Alberta to Guernsey, Wyoming in 1997 for a period of 15 years. The
agreement has allowed the Company to assign a portion of its capacity in early
years for additional capacity in later years. As discussed above, the Company
has assigned a portion of its contracted pipeline capacity to Baytex in
connection with the crude supply agreement. The Companys commitment for
pipeline capacity, based on the current tariff, and after reducing for the
commitment assigned to Baytex under the initial term of the agreement, is
approximately $1.6 million for 2003, $178,000 for 2004, $934,000 for 2005,
$284,000 for 2006, $0 for 2007, $6.1 million for each of the years 2008 though
2011, and $1.5 million for 2012. Should the Baytex agreement be extended, as
provided for in the agreement, beyond the initial term which is through December
31, 2007, a significant portion of the Companys commitment for pipeline
capacity will continue to be assigned to Baytex in the years 2008 through 2012.

The Company has a Resid
Processing Agreement, as amended, with Conoco Inc. (Conoco) which
expires no later than December 2006. Conoco is entitled to process in the
Cheyenne Refinery coker unit up to 3,300 barrels per day of resid. The Company
earns a processing fee ranging from $.80 to $2.05 per barrel depending on the
number of barrels of resid processed plus a pro rata share of the actual coker
operating costs.

The Company owns a 25,000
bpd interest in a crude oil pipeline from Guernsey, Wyoming to the Cheyenne
Refinery and a 50% interest in some crude oil tankage in Guernsey. The
Companys share of operating costs for the crude oil pipeline and the tanks
are recorded as refining operating costs.

The Company has commitments
to purchase crude oil from various suppliers on a one-month to one-year basis at
daily market posted prices to meet its refineries throughput requirements.

## Concentration
of Credit Risk

The Company has
concentrations of credit risk with respect to sales within the same or related
industry and within limited geographic areas. The Company sells its Cheyenne
products exclusively at wholesale, principally to independent retailers and
major oil companies located primarily in the Denver, western Nebraska and
eastern Wyoming regions. The Company sells a majority of its El Dorado gasoline,
diesel and jet fuel to Shell at market-based prices, under a 15-year offtake
agreement in conjunction with the purchase of the El Dorado Refinery previously
discussed. Beginning in 2000, the Company retained and marketed a portion of the
El Dorado Refinerys gasoline and diesel production. This portion will
increase 5,000 barrels per day each year for ten years. The amount of gasoline
and diesel production retained by the Company began at 5,000 barrels per day in
2000, and will rise to 50,000 barrels in 2009 and remain at that level through
the term of the agreement. Shell will purchase all jet fuel production from the
El Dorado Refinery through 2004. The Company retains and markets all of the
chemicals and heavy oils production from the El Dorado Refinery.

The Company extends credit
to its customers based on ongoing credit evaluations. An allowance for doubtful
accounts is provided based on the current evaluation of each customers
credit risk, past experience and other factors. During 2002, the Company
provided an allowance of $800,000 against a $2.2 million note receivable from a
customer which represents the estimated unsecured portion of the note. During
2000, doubtful accounts for two customers totaling $533,000 were written off.
The Company made sales to Shell during 2002, 2001 and 2000 of approximately $1.1
billion, $1.1 billion and $1.2 billion, respectively, which accounted for 58% of
consolidated sales revenues in 2002 and 59% of consolidated sales revenues in
2001 and 2000.

## Environmental

The Company accounts for
environmental costs as indicated in Note 2. The Companys refining and
marketing operations are subject to a variety of federal, state and local health
and environmental laws and regulations governing product specifications, the
discharge of pollutants into the air and water, and the generation, treatment,
storage, transportation and disposal of solid and hazardous waste and materials.
Permits are required for the operation of the Refineries, and these permits are
subject to revocation, modification and renewal. Governmental authorities have
the power to enforce compliance with these regulations and permits, and
violators are subject to injunctions, civil fines and even criminal penalties.
The Company believes that each of our Refineries is in substantial compliance
with existing environmental laws, regulations and permits.

The Companys
operations and many of the products manufactured are specifically subject to
certain requirements of the Clean Air Act (CAA) and related state
and local regulations. The 1990 amendments to the CAA contain provisions that
will require capital expenditures for the installation of certain air pollution
control devices at our refineries during the next several years. The EPA recently embarked on a
Petroleum Refining Initiative (Initiative) alleging industry-wide
noncompliance with certain CAA rules. The Initiative has resulted in many
refiners entering into consent decrees typically requiring substantial
expenditures for penalties and additional pollution control equipment. Frontier
has been contacted by the EPA and invited to meet with them to hear more about
the Initiative. At this time, the Company does not know how or if the Initiative
will affect Frontier. The Company has, however, recently determined that over
the next three years, expenditures totaling approximately $10 million may be
necessary to further reduce emissions from the Refineries flare systems.
Because other refineries will be required to make similar expenditures, Frontier
does not expect such expenditures to materially adversely impact the
Companys competitive position.

On December 21, 1999, the
EPA promulgated national regulations limiting the amount of sulfur that is to be
allowed in gasoline. The total capital expenditures estimated, as of December
31, 2002, to achieve the final gasoline sulfur standard, are approximately $35
million at the Cheyenne Refinery and approximately $44 million at the El Dorado
Refinery. Approximately $7.2 million of the Cheyenne Refinery expenditures had
been incurred as of December 31, 2002, an additional $20.8 million is expected
to be incurred by early 2004 with the remaining $7 million in 2009 and 2010. The
expenditures for the El Dorado Refinery are expected to be incurred beginning in
2008 and completed in 2010.

The EPA recently
promulgated regulations that will limit the sulfur content of highway diesel
fuel beginning in 2006 to 15 parts-per-million from the current standard of 500
parts-per-million. As of December 31, 2002, capital costs for diesel
desulfurization are estimated to be approximately $5 million for Cheyenne and
$56 million for El Dorado. The Cheyenne Refinery expenditures are currently
expected to be committed beginning in 2005, with the majority to be committed in
2006. Approximately $6 million of the El Dorado Refinery expenditures are
currently expected to be committed in 2004 with the remaining $50 million in
2005 and 2006.

The EPA has recently stated
their intent to propose new regulations that will limit emissions from diesel
fuel powered engines used in off-road activities such as mining, construction
and agriculture. The EPA has also stated their intent to simultaneously limit
the sulfur content of diesel fuel used in these engines to facilitate compliance
with the new emission standards. The EPA expects to propose the new off-road
diesel engine emissions and related fuel sulfur standards early in 2003. It is
likely that the new rules will require the off-road diesel fuel sulfur content
to be reduced to 500 parts-per-million or less from the current limit of 5,000
parts-per-million by 2007. Since a minor portion of the diesel fuel the Company
manufactures at the El Dorado Refinery is sold to the off-road market, these
regulations, when promulgated, will likely require certain modifications to the
Refinery. The cost associated with such modifications cannot be estimated until
the final regulatory limits are known.

As is the case with all
companies engaged in similar industries, the Company faces potential exposure
from future claims and lawsuits involving environmental matters. The matters
include soil and water contamination, air pollution, personal injury and
property damage allegedly caused by substances which the Company manufactured,
handled, used, released or disposed of.

Cheyenne Refinery.
The Company is party to an agreement with the State of Wyoming requiring the
investigation and possible eventual remediation of certain areas of the Cheyenne
Refinerys property which may have been impacted by past operational
activities. Among other things, this order required a technical investigation of
the Cheyenne Refinery to determine if certain areas have been adversely impacted
by past operational activities. Based upon the results of the investigation,
additional remedial action could be required by a subsequent administrative
order or permit. The ultimate cost of any environmental remediation projects
that may be identified by the site investigation required by the agreement
cannot be reasonably estimated at this time.

El Dorado Refinery.
The El Dorado Refinery is subject to a 1988 consent order with the Kansas
Department of Health and the Environment (KDHE). This order,
including various subsequent modifications, requires the Refinery to continue
the implementation of a groundwater management program with oversight provided
by the KDHE Bureau of Environmental Remediation. The order requires that
remediation activities continue until KDHE-established groundwater criteria or
other criteria agreed to by the KDHE and the Refinery are met. Subject to the
terms of the purchase and sale agreement, Shell will be responsible for the
costs of continued compliance with this order.

The most recent National
Pollutant Discharge Elimination System permit issued to the El Dorado Refinery
requires, in part, the preparation and submittal of an engineering report
identifying certain refinery wastewater treatment plant upgrades necessary to
allow routine compliance with applicable discharge permit limits. In accordance
with the provisions of the purchase and sale agreement, Shell will be
responsible for the first $2 million of any required wastewater treatment system
upgrades. If required system upgrade costs exceed this amount, Shell and
Frontier will share, based on a sliding scale percentage, up to another $3
million in upgrade costs. Subject to the terms of the purchase and sale
agreement, Shell will be responsible for up to $5 million in costs, in addition
to Shells obligation for the wastewater treatment system upgrade, relating
to safety, health and environmental conditions after closing arising from
Shells operation of the El Dorado Refinery that are not covered under a
ten-year insurance policy. This insurance policy has $25 million coverage
through November 17, 2009 for environmental liabilities, with a $500,000
deductible, and will reimburse the Company for losses related to all known and
some unknown conditions existing prior to our acquisition of the El Dorado
Refinery. The first phase of wastewater treatment system upgrades was completed
in 2001 at a cost of $2.6 million with payment apportioned as described above.

On August 18, 2000, the
Company entered into a Consent Agreement and Final Order of the Secretary
(Agreement) with the KDHE that required the initiation of a
wastewater toxicity testing program to commence upon the completion of the
wastewater treatment upgrades described above. Good progress has since been made
toward satisfying the provisions of the Agreement and Frontier expects to meet
all applicable requirements.

## Litigation

The Company is involved in
various lawsuits which are incidental to its business. In managements
opinion, the adverse determination of such lawsuits would not have a material
adverse effect on the Companys liquidity, financial position or results of
operations.

## Collective
Bargaining Agreement Expiration

The Companys refining
units hourly employees are represented by seven bargaining units, the largest
being the Paper, Allied-Industrial, Chemical and Energy Workers International
Union (PACE). Six AFL-CIO affiliated unions represent the Cheyenne
Refinery craft workers. At the Cheyenne Refinery, the current contract with PACE
expires in July 2006, while the current contract with the AFL-CIO affiliated
unions expires in June 2009. The El Dorado Refinerys hourly workers are
all represented by PACE and the current contract with PACE expires January 2006.
The union employees represent approximately 61% of the Companys work force
at December 31, 2002.

## 8. Fair Value
of Financial Instruments

The fair value of the
Companys Senior Notes was estimated based on quotations obtained from
broker-dealers who make markets in these and similar securities. At December 31,
2002 and 2001, the carrying amounts of long-term debt instruments were $208.0
million and $208.9 million, respectively, and the estimated fair values were
$212.6 million and $222.3 million.

## 9. Price Risk
Management Activities

The Company, at times,
enters into commodity derivative contracts for the purposes of managing price
risk on foreign crude purchases, crude and other inventories, and natural gas
purchases and to fix margins on certain future production.

## Trading
Activities

During
2002, 2001 and 2000, the Company had the following derivative activities which,
while economic hedges were not accounted for as hedges and whose gains or losses
are reflected in other revenues:

 
Derivative contracts on barrels of crude oil to hedge butane inventory builds at
the El Dorado Refinery. During the year ended December 31, 2002, the Company
recorded $903,000 in realized losses on these positions.

 
Derivative contracts during 2002 on barrels of crude oil to hedge excess gas oil
inventory at the Cheyenne Refinery had $202,000 in realized losses.

 
Derivative contracts during 2002 on barrels of crude oil to hedge excess gas oil
inventory at the El Dorado Refinery resulted in gains of $896,000.

 
Derivative contracts during 2002 on barrels of crude oil to hedge excess naptha
inventory at the El Dorado Refinery resulted in losses of $579,000.

  Derivative contracts
during 2002 to hedge crude oil resulted in a gain of $48,000.

 
Derivative contracts to fix margins on sales of gasoline and diesel. During
2001, the Company recorded net gains on these positions totaling $2.5 million
($394,000 realized gain plus the reversal of the $2.1 million unrealized loss
recorded in 2000). During 2000, the impact of these positions was $0 ($2.1
million realized gain and an unrealized loss of $2.1 million recorded at
December 31, 2000 on open positions).

 
Derivative contracts on unleaded gasoline to hedge butylene inventory builds at
the El Dorado Refinery which were drawn down in April and May 2001. During 2001,
the Company recorded a net loss of $1.3 million on these positions ($769,000
realized loss plus the reversal of the unrealized gain recorded in 2000.) During
2000, the Company recorded net gains of $564,000, consisting of an unrealized
gain recorded at December 31, 2000 on open positions.

 
Derivative contracts on barrels of crude oil to hedge excess inventory against
price declines. During 2001, the Company recorded net losses of $1.5 million on
these positions ($763,000 net realized losses plus the reversal of the
unrealized gain recorded in 2000). During 2000, the Company recorded net gains
of $115,000 on these positions ($622,000 realized losses plus an unrealized gain
of $737,000 recorded on open positions at December 31, 2000).

 
Derivative contracts on barrels of crude oil to protect against price declines
on foreign crude oil purchases. During 2001, the Company recorded a net loss of
$2.2 million on these positions ($1.8 million realized gain less the unrealized
gain recorded in 2000.) During 2000, the Company recorded net gains of $4.0
million, consisting of an unrealized gain recorded at December 31, 2000 on open
positions.

 
Derivative contracts on natural gas to hedge natural gas costs. During 2001, the
Company realized a $472,000 gain on positions to hedge natural gas.

 
Derivative contracts on barrels of unleaded gasoline and barrels of heating oil
to hedge gas oil inventory builds at the Cheyenne Refinery. During 2001, the
Company realized a $144,000 loss on these positions.

As of December 31, 2002,
the Company had no open derivative contracts.

## Hedging
Activities

During 2002, 2001 and 2000,
the Company had the following derivatives which were appropriately designated
and accounted for as hedges:

 
Crude Purchases. At December 31, 2002, the Company had no open derivative
contracts to hedge against price declines on foreign crude oil purchases. During
the year ended December 31, 2002, the Company closed out contracts to hedge
foreign crude purchases and realized net losses of $9.8 million, of which $10.7
million increased crude costs and $878,000 income was reflected in other
revenues for the ineffective portion of those hedges. These contracts were
accounted for as fair value hedges. At December 31, 2001, the Company had open
derivative contracts on 422,000 barrels of crude oil to hedge against price
declines on foreign crude oil purchases which were accounted for as fair value
hedges under SFAS No. 133. The unrealized ineffective portion of this hedge
recorded in other revenues during 2001 was a $30,000 gain. During 2001, the
Company realized gains of $7.1 million on crude fair value hedges of which
$229,000 was the ineffective portions recorded in other revenues and $6.8
million was recorded as a reduction of crude oil costs. During 2000, the Company
recognized losses of $6.0 million on crude oil hedging derivative contracts.

 
Natural Gas Collars. In March 2002, the Company entered into price swaps on
natural gas for the purpose of hedging approximately 50% of the Refineries
anticipated usage against natural gas price increases for April 2002 through
December 2002. These contracts were accounted for as cash flow hedges. One group
of contracts to hedge natural gas costs at the El Dorado Refinery averaged
300,000 MMBTU per month at an average price of $3.34 per MMBTU (Panhandle). A
second group of contracts to hedge natural gas costs at the Cheyenne Refinery
averaged 112,222 MMBTU per month at an average price of $2.84 per MMBTU (CIG).
The April and May contracts resulted in net realized gains totaling $41,000 and
were recorded into refining operating costs. Due to natural gas market
conditions, a decision was made in May to close out the remaining June through
December contracts resulting in a net gain of $393,000. The realized gains or
losses were recorded in other comprehensive income (equity account), net of tax.
The pretax realized gains or losses were reclassified into refining operating
costs and out of other comprehensive income based on the month when the
corresponding natural gas was purchased. As of December 31, 2002, all these
gains and losses and been reclassified into earnings.

During
September 2000, the Company purchased two costless collars for the purpose of
hedging against natural gas price increases for the November 2000 through March
2001 period. The first collar covered an aggregate of 38,000 MMBTU with ceiling and
floor prices of $6.50 and $4.29, respectively. The second collar covered an
aggregate of 9,000 MMBTU with ceiling and floor prices of $6.50 and $4.00,
respectively. Through December 31, 2000, no gains or losses had been recorded
related to the collars. At December 31, 2000, these collars had a fair value of
$4.1 million. In the first quarter of 2001, these positions were closed and the
Company realized a $2.4 million gain. Beginning January 1, 2001, the Company
began accounting for these contracts as cash flow hedges under the provisions of
SFAS No. 133.

 
Natural Gas Purchases.  During 2000, the Company recognized natural gas hedging gains of $195,000.

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INDEPENDENT AUDITORS REPORT

To the Board of Directors and Shareholders of Frontier Oil Corporation:

We have audited the
accompanying consolidated balance sheet of Frontier Oil Corporation and
subsidiaries as of December 31, 2002, and the related consolidated statements of
operations, changes in shareholders equity and cash flows for the year
then ended. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audit. The consolidated financial statements
of Frontier Oil Corporation as of December 31, 2001, and for the years ended
December 31, 2001 and 2000 were audited by other auditors who have ceased
operations. Those auditors expressed an unqualified opinion on those
consolidated financial statements in their report dated February 8, 2002.

We conducted our audit in
accordance with auditing standards generally accepted in the United States of
America. 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 audit provides a reasonable basis for our opinion.

In our opinion, such
consolidated financial statements present fairly, in all material respects, the
financial position of Frontier Oil Corporation and subsidiaries as of December
31, 2002 and the results of their operations and their cash flows for the year
ended December 31, 2002, in conformity with accounting principles generally
accepted in the United States of America.

DELOITTE & TOUCHE LLP

Houston, Texas
February 7, 2003

Frontier Oil Corporation
dismissed Arthur Andersen LLP on March 28, 2002 and subsequently engaged
Deloitte & Touche LLP as its independent auditors. The predecessor
auditors report appearing below is a copy of Arthur Andersen
LLPs previously issued opinion dated February 8, 2002. Since Frontier Oil
Corporation is unable to obtain a manually signed audit report, a copy of Arthur
Andersen LLPs most recent signed and dated report has been included to
satisfy filing requirements, as permitted under Rule 2-02(e) of Regulation S-X.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

## To the
Shareholders of Frontier Oil Corporation:

We have audited the
accompanying consolidated balance sheets of Frontier Oil Corporation (a Wyoming
corporation) and subsidiaries as of December 31, 2001 and 2000, and the related
consolidated statements of operations, changes in shareholders equity and
cash flows for each of the three years in the period ended December 31, 2001.
These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in
accordance with auditing standards generally accepted in the United States.
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, the
financial statements referred to above present fairly, in all material respects,
the financial position of Frontier Oil Corporation and subsidiaries as of
December 31, 2001 and 2000, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.

ARTHUR
ANDERSEN LLP

Houston, Texas
February 8, 2002

# REPORT OF
MANAGEMENT

The information contained
in this Annual Report, as well as all the financial and operational data we
present concerning Frontier Oil Corporation, is prepared by management. Our
financial statements are fairly presented in all material respects in conformity
with generally accepted accounting principles.

It has always been our
intent to apply proper and prudent accounting guidelines in the presentation of
our financial statements; and, we are committed to full and accurate
representation of our condition through complete and clear disclosures. We stand
behind this pledge as a matter of honor and integrity.

James R. Gibbs

Chairman of the Board, President and
Chief Executive Officer

Julie H. Edwards


Executive Vice President - Finance and Administration,
Chief Financial Officer

Nancy J. Zupan

Vice President - Controller

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