EOTT ENERGY LLC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002 Commission File Number: 000-50195

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

EOTT ENERGY LLC
(Exact name of registrant as specified in its charter)

Delaware 48-1285117
---------------------------------------- -------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

2000 West Sam Houston Parkway South,
Suite 400
Houston, Texas 77042
---------------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)

(713) 993-5200
----------------------------------------------------
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None.

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Units

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
--- ---

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

Indicate by check mark whether the registrant is an accelerated filer
(as defined by Exchange Act Rule 12b-2). Yes No X
--- ---

Aggregate market value of the common units held by non-affiliates of
the registrant, based on a closing price of $4.66 in the daily composite list
for transactions on the New York Stock Exchange on June 28, 2002, was
approximately $70,828,272.*

Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13, 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
--- ---

*This trading price pertains to units of EOTT Energy Partners, L.P. which are
extinguished and not the new equity units of EOTT Energy LLC
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EOTT ENERGY LLC
TABLE OF CONTENTS

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PART I

ITEM 1. BUSINESS

GENERAL

We are a Delaware limited liability company that was formed on November 14,
2002 as EOTT Energy LLC ("EOTT LLC") in anticipation of assuming and continuing
the business formerly directly owned by EOTT Energy Partners, L.P. (the "MLP"),
which, as described below, filed for Chapter 11 reorganization with its
wholly-owned subsidiaries on October 8, 2002. We became the successor registrant
to the MLP on March 1, 2003, upon the effective date of the Third Amended Joint
Chapter 11 Plan of Reorganization, as supplemented (the "Restructuring Plan").
For details concerning our bankruptcy and Restructuring Plan, see "Bankruptcy
Proceedings and Restructuring Plan" below and Item 7. "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Bankruptcy
Proceedings and Restructuring Plan" below. Until EOTT LLC became the successor
to the MLP's business, the MLP operated principally through four affiliated
operating limited partnerships, EOTT Energy Operating Limited Partnership, EOTT
Energy Canada Limited Partnership, EOTT Energy Pipeline Limited Partnership, and
EOTT Energy Liquids L.P., each of which is a Delaware limited partnership. In
1999, EOTT Energy Finance Corp. was formed in connection with a debt offering to
facilitate certain investors' ability to purchase our senior notes, more fully
described in Note 8 to the Consolidated Financial Statements. In 2001, we formed
EOTT Energy General Partner, L.L.C., which serves as the general partner for our
four affiliated operating limited partnerships. Until our emergence from
bankruptcy, EOTT Energy Corp. (the "General Partner"), a Delaware corporation
and a wholly owned subsidiary of Enron Corp. ("Enron"), served as the general
partner of the MLP and owned an approximate 1.98% general partner interest in
the MLP. The General Partner filed for bankruptcy on October 21, 2002. Prior to
March 1, 2003, based upon information provided by Enron, Enron beneficially
owned approximately 18% of the MLP's outstanding common units, 78% of the MLP's
outstanding subordinated units and 37% of the MLP's total units outstanding
because it retained voting power and shared investment power over the
securities. For details concerning Enron and its bankruptcy filing, see "Impact
of Enron Bankruptcy on Our Business" below and Item 7. "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Impact of the
Bankruptcy of Enron and Certain of Its Subsidiaries, and Related Events" below.
Unless the context otherwise requires, the terms "we" and "EOTT" refer to EOTT
LLC and our four affiliated limited operating partnerships, EOTT Energy Finance
Corp., and EOTT Energy General Partner, L.L.C. (the "Subsidiary Entities"), and
for periods prior to our emergence from bankruptcy in March 2003, "we" and
"EOTT" refer to EOTT Energy Partners, L.P. and its sole general partner, EOTT
Energy Corp., as well as the Subsidiary Entities.

BANKRUPTCY PROCEEDINGS AND RESTRUCTURING PLAN

On October 8, 2002, the MLP and the Subsidiary Entities filed pre-negotiated
voluntary petitions for reorganization under Chapter 11 of the United States
Bankruptcy Code (the "EOTT Bankruptcy"). The filing was made in the United
States Bankruptcy Court for the Southern District of Texas, Corpus Christi
Division (the "EOTT Bankruptcy Court"). Additionally, the General Partner filed
a voluntary petition for reorganization under Chapter 11 on October 21, 2002 in
the EOTT Bankruptcy Court in order to join in the voluntary, pre-negotiated
Restructuring Plan. On October 24, 2002, the EOTT Bankruptcy Court
administratively consolidated for distribution purposes the General Partner's
bankruptcy filing with the previously filed cases. Until our emergence from
bankruptcy, we operated as debtors-in-possession under the Bankruptcy Code,
which means we continued to remain in possession of our assets and properties
and continued our day-to-day operations.

The EOTT Bankruptcy Court confirmed our Restructuring Plan on February 18,
2003, and it became effective on March 1, 2003. While this report covers the
fiscal year ended December 31, 2002, this report should be read in light of our
bankruptcy proceeding and Restructuring Plan. The Restructuring Plan and related
disclosure statement were filed with the Securities and Exchange Commission
("SEC") on December 17, 2002 as part of a Form 8-K/A filing concerning the
filing of the Restructuring Plan with the

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EOTT Bankruptcy Court, and supplemented as part of a Form 8-K filed on March 4,
2003 concerning the confirmation of the Restructuring Plan (which filings are
incorporated herein by reference). The outcome of our emergence from bankruptcy,
the consummation of our Restructuring Plan and the level of success of our
Restructuring Plan will materially affect many of the matters described in this
report.

Restructuring Plan

We entered into an agreement, dated October 7, 2002, with Enron, Standard
Chartered Bank ("Standard Chartered"), Standard Chartered Trade Services
Corporation ("SCTS"), Lehman Commercial Paper Inc. ("Lehman Commercial") and
holders of approximately 66% of the outstanding principal amount of our senior
notes (the "Restructuring Agreement"). Under this Restructuring Agreement,
Enron, Standard Chartered, SCTS, Lehman Commercial and approximately 66% of our
senior noteholders agreed to vote in favor of the Restructuring Plan, and to
refrain from taking actions not in support of the Restructuring Plan.

The Restructuring Plan, however, was subject to the approval of the EOTT
Bankruptcy Court, and the proposed settlement agreement with Enron, discussed
further below, was subject to the additional approval of the United States
Bankruptcy Court for the Southern District of New York (the "Enron Bankruptcy
Court"), where Enron and certain of its affiliates filed for Chapter 11
bankruptcy protection. The EOTT Bankruptcy Court approved the settlement
agreement with Enron on November 22, 2002, and the Enron Bankruptcy Court
approved the settlement agreement on December 5, 2002. The major provisions of
the Restructuring Plan, which became effective March 1, 2003, are as follows:

o Enron has no further affiliation with us or the General Partner. The
General Partner will be liquidated as soon as practicable.

o We consummated the settlement agreement with Enron, described further
below.

o EOTT was converted to a limited liability company structure and EOTT
LLC became the successor registrant to the MLP. The MLP was merged into
EOTT Energy Operating Limited Partnership. EOTT LLC owns and manages
the current operating limited partnerships.

o We are now managed by a seven-member Board of Directors. One of the
directors is the chief executive officer of EOTT LLC, and the remaining
six directors were selected by the former senior noteholders who signed
the Restructuring Agreement at the confirmation hearing for our
Restructuring Plan. The new board members are Thomas M. Matthews, who
serves as Chairman, J. Robert Chambers, Julie H. Edwards, Robert E.
Ogle, James M. Tidwell, S. Wil VanLoh, Jr., and Daniel J. Zaloudek. For
further details on our new board members, see Item 10. "Directors and
Executive Officers of the Registrant" below.

o We cancelled our outstanding $235 million of 11% senior unsecured
notes. Our former senior unsecured noteholders and holders of allowed
general unsecured claims will receive a pro rata share of $104 million
of 9% senior unsecured notes and a pro rata share of 11,947,820 limited
liability company units of EOTT LLC representing 97% of the newly
issued units. See Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Working Capital and
Credit Resources" and Note 8 to the Consolidated Financial Statements.

o We cancelled the MLP's publicly traded common units, and the former
holders of the MLP's common units received a pro rata share of 369,520
limited liability company units of EOTT LLC representing 3% of newly
issued units and a pro rata share of 957,981 warrants to purchase an
additional 7% of the new units. We cancelled the subordinated units and
additional partnership interests. See Item 7. "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Working
Capital and Credit Resources" and Note 6 to the Consolidated Financial
Statements.

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o We are authorized and intend to implement a management incentive plan
for certain of our key employees and our directors. The incentive plan,
once implemented, may reserve up to approximately 10% of EOTT LLC's
authorized units for issuance to certain key employees and directors.

o We will issue various notes for payment for certain classes of
creditors in accordance with the Restructuring Plan.

o We closed an exit credit facility with Standard Chartered, Lehman
Brothers Inc. ("Lehman") and other lenders on February 28, 2003. The
Term Loan Agreement and Letter of Credit Agreement under this facility
have a term of 18 months post-bankruptcy under substantially the same
terms as the debtor in possession facilities, with the inclusion of
certain additional financial covenants. The inventory repurchase and
trade receivables financing arrangements with SCTS under this exit
credit facility each have an initial term of 6 months. We have the
option to extend these arrangements for an additional 12 months subject
to the payment of extension fees in the amount of 1% per annum of the
maximum commitment under these arrangements and an increase in the
interest rate from LIBOR plus 3% to LIBOR plus 7%.

The following chart illustrates the new corporate structure of EOTT LLC
after complete implementation of the Restructuring Plan described above:

(100%)
------------------------
EOTT Energy LLC ---------------
(Employer Entity -------- EOTT Energy
and Finance Corp.
Publicly Traded Entity) ---------------
------------------------
| 100% |
| | L.P. Interest
| | (99.99%)
------------------- |
|-- EOTT Energy General |
| Partner L.L.C. |
| ------------------- |
| |
| | G.P. Interest |
| | (.01%) |
| | |
| ------------------------
| EOTT Energy Operating
| Limited Partnership
| ------------------------
| |
| | L.P. Interest (99.99%)
| --------------------------------------------------
| | | |
| | | |
| ------------- -------------------- -------------------
| EOTT Energy EOTT Energy Pipeline EOTT Energy Canada
| Liquids, L.P. Limited Partnership Limited Partnership
| ------------- -------------------- -------------------
| | | | |
- ----------------------------------------------------- | (100%)
|
G.P. Interest ------------------
(.01%) EOTT Energy Canada
Management Ltd.
------------------

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Enron Settlement Agreement

On October 8, 2002, we entered into a settlement agreement (the "Enron
Settlement Agreement") with Enron, Enron North America Corp., Enron Energy
Services, Inc., Enron Pipeline Services Company ("EPSC"), EGP Fuels Company
("EGP Fuels") and Enron Gas Liquids, Inc. ("EGLI") (collectively, the "Enron
Parties"). As part of the Enron Settlement Agreement, Enron consented to the
filing of our bankruptcy in the Southern District of Texas. The Enron Settlement
Agreement provides for the following (among other things) in connection with the
settlement of outstanding claims between the Enron Parties and us:

o We entered into an Employee Transition Agreement with EPSC that
provided for the transfer to us of certain employees of subsidiaries of
Enron that perform pipeline operations services for us, effective
January 1, 2003.

o We entered into various agreements which terminated the agreements the
General Partner had with Enron or an Enron affiliate to provide various
management or operation services to us, which agreements included the
Corporate Services Agreement with EPSC, the Corporate Services
Agreement with Enron, and the Transition Services Agreement with EGP
Fuels.

o At December 31, 2002, we executed a promissory note payable to Enron in
the initial principal amount of $6.2 million that is guaranteed by our
subsidiaries (the "EOTT Note"). The EOTT Note is secured by an
irrevocable letter of credit.

o The employees, former employees and their covered spouses and
dependents of the General Partner continued to participate in the Enron
retirement and welfare benefit plans until December 31, 2002.

o As additional consideration and as a compromise of certain claims, we
paid Enron $1,250,000 on the effective date of our Restructuring Plan.

o We agreed, among other things, to assume obligations in our bankruptcy
cases and cure defaults under the Operation and Service Agreement with
EPSC under which EPSC provided certain pipeline operation services to
us. We also agreed to indemnify EPSC against claims arising from the
General Partner's failure to perform its duties under this agreement or
refusal to approve EPSC recommended items or modifications in the
budgets.

o In addition, we and the Enron Parties released each other from any and
all claims except those expressly reserved in the Enron Settlement
Agreement.

For further information regarding the Enron Settlement Agreement, see
"Management's Discussion and Analysis - Bankruptcy Proceedings and Restructuring
Plan - Enron Settlement Agreement".

PRIOR YEAR UNAUDITED FINANCIAL INFORMATION

In connection with a proxy filing submitted to the SEC in the fall of 2001
concerning our planned recapitalization, which was subsequently terminated due
to the Enron bankruptcy, the SEC has been reviewing our 1934 Act filings. We
have received a series of comments from the SEC to which we either have
responded or are in the process of responding. In response to the SEC's comments
regarding unauthorized trading activities, disclosed in our previous SEC
filings, we restated prior year financial results in connection with our 2001
Form 10-K to reflect the fair value impact of these transactions over the
periods during which the contracts were outstanding. The restatement resulted in
a decrease in net income for the year 1998 of $1.0 million and a corresponding
increase in net income for the year 1999 of $1.0 million. The effect of the
restatement in 2000 only related to the quarterly periods. See "Management
Discussion and Analysis - Results of Operations" and Note 3 to the Consolidated
Financial Statements.

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On February 5, 2002, Arthur Andersen LLP ("Andersen") withdrew as our
independent accountants. We were informed that Andersen's withdrawal related to
Andersen's professional standard concerns, including auditor independence
issues, related to events involving Enron. The restatement of our financial
statements for the years 1998 and 1999, and the quarterly periods in 1999 and
2000, requires the issuance of a new audit opinion covering the years 1999 and
2000. PricewaterhouseCoopers LLP ("PwC"), our current independent accountants,
has verbally agreed to perform re-audits of our financial statements for the
years 1999 and 2000. In connection with our Restructuring Plan, a new Board of
Directors and Audit Committee have been formed; however, the new Board of
Directors and Audit Committee have not yet completed their review of this matter
or formally engaged PwC to conduct the re-audits. Because the re-audits have not
been performed, we are filing unaudited financial statements for the year 2000
with this Annual Report. See Note 3 to the Consolidated Financial Statements.

IMPACT OF ENRON BANKRUPTCY ON OUR BUSINESS

Enron and certain of its subsidiaries filed voluntary petitions for relief
under Chapter 11 of Title 11 of the United States Code (the "Enron Bankruptcy")
with the Enron Bankruptcy Court beginning on December 2, 2001. Although the
General Partner is a wholly-owned subsidiary of Enron, neither the General
Partner nor we were a party to the Enron Bankruptcy.

Enron's bankruptcy filing, nevertheless, adversely impacted us in numerous
ways. At the time of the filing of the Enron Bankruptcy, we had a number of
contractual relationships with Enron and its subsidiaries. The most significant
of these relationships included ten-year toll conversion and storage agreements
(the "Toll Conversion Agreement" and the "Storage Agreement") with EGLI, a
wholly-owned subsidiary of Enron that was included in Enron's bankruptcy
filings; Enron's guaranty of payments under the Toll Conversion and Storage
Agreements (limited to $50 million under the Toll Conversion Agreement and $25
million under the Storage Agreement); an obligation of Enron to provide cash
distribution support up to $29 million to us for any shortfall in available cash
below our minimum quarterly distribution amount to the MLP unitholders through
the fourth quarter of 2001; an Enron credit facility in the amount of $1.0
billion to provide us credit support in the form of guarantees, letters of
credit and working capital loans with sublimits of $100 million for working
capital loans and $900 million for guarantees and letters of credit that expired
December 31, 2001; and Enron indemnity obligations entered into in connection
with the purchase of the liquids processing, storage and transportation assets
in June 2001. Enron's financial deterioration and related bankruptcy
significantly and adversely affected the arrangements described above and had a
number of other material effects on our business and Board of Directors. For
further details regarding our relationships with Enron and its subsidiaries and
the impact of the Enron's Bankruptcy, see Item 7. "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Impact of the
Bankruptcy of Enron and Certain of Its Subsidiaries, and Related Events," and
Item 13. "Certain Relationships and Related Transactions."

BUSINESS ACTIVITIES

We are engaged in the purchasing, gathering, transporting, trading, storage
and resale of crude oil, natural gas liquids ("NGL") and related activities. We
are one of the largest independent crude oil gathering and marketing companies
in North America. As of January 2003, we have approximately 973 full-time
employees. We currently gather and market from approximately 29,000 field
gathering points in 17 states and Canada, averaging 243,000 barrels per day at
the end of 2002. In addition, we are engaged in interstate and intrastate crude
oil transportation and crude oil terminaling and storage activities. We purchase
crude oil from various producers and operators and market the crude oil to
refiners and other customers nationwide. We transport crude oil through
pipelines, including approximately 8,000 miles of active gathering and
transmission pipelines that we own, as well as through our trucking operation,
which includes a fleet of 238 owned or leased trucks. We have approximately 9.9
million barrels of active storage capacity associated with field tanks. We own
and operate a hydrocarbon processing plant that produces methyl tertiary butyl
ether ("MTBE") and isobutylene and own and operate a Gulf Coast natural gas
liquids storage facility and related transportation assets. Through our West
Coast Operations, we fractionate and transport natural gas liquids and process
natural gas. Our principal business segments are our North American - East of
Rockies crude oil gathering and

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marketing operations, our Pipeline Operations, our Liquids Operations and our
West Coast Operations. See Note 15 to the Consolidated Financial Statements for
certain financial information by business segment.

We engage in the following business activities:

o GATHERING AND MARKETING. We gather, store and transport crude oil in
the United States and Canada. This involves purchasing and gathering
crude oil from over 1700 producers, operators and other sellers for
subsequent sale to refiners and other customers. We also provide
certain accounting and administrative services to some producers and
operators. We believe that our ability to offer reliable and reasonably
priced services to producers and operators is a key factor in
maintaining lease crude oil volumes. After the sale of our West Coast
crude oil gathering and marketing operations in June 2001, all of these
operations are included in our North American Crude Oil - East of
Rockies business segment.

o PIPELINE OPERATIONS. Through our common carrier pipeline systems, we
transport crude oil for our gathering and marketing operations and for
third parties pursuant to published tariff rates regulated by the
Federal Energy Regulatory Commission ("FERC") and state regulatory
authorities. We transported an average of approximately 391,000 barrels
per day at the end of 2002, a significant portion of which was
transported for our own gathering and marketing operations. We conduct
these operations in our Pipeline Operations business segment.
Approximately 74% of the revenues from our Pipeline Operations business
segment for the twelve months ended December 31, 2002 were generated
from tariffs charged to our North American Crude Oil - East of Rockies
business segment and sales of crude oil inventory to our North American
Crude Oil - East of Rockies business segment.

o LIQUIDS OPERATIONS. We own and operate liquids processing, storage and
transportation assets purchased in June 2001, which are located in the
Texas Gulf Coast region. Our hydrocarbon processing complex at Morgan's
Point, Texas (the "Morgan's Point Facility") produces approximately
16,000 barrels per day of MTBE or MTBE equivalents and other end
products. Our natural gas liquids storage facility located in Mont
Belvieu, Texas (the "Mont Belvieu Facility") consists of 10 active
storage wells and, through that facility, we provide capacity of
approximately ten million barrels. Through a 120-mile liquids
transportation grid system and related loading, unloading and
transportation facilities, we transport natural gas liquids and other
products to and from the Mont Belvieu Facility, the Morgan's Point
Facility and other distribution points.

o WEST COAST OPERATIONS. We own and operate natural gas liquids
fractionation and natural gas processing facilities, refrigerated
propane storage and a related truck and rail distribution facility in
the San Joaquin Valley, California. Through our West Coast Operations,
we process mixed natural gas liquids and various refinery liquids
streams into specific natural gas liquids products, and extract natural
gas liquids from natural gas production located in an area near
Bakersfield, California. On June 1, 2002, we sold our refined petroleum
products marketing operations, and effective June 30, 2001, we sold our
West Coast crude oil gathering and blending operations.

NORTH AMERICAN CRUDE OIL - EAST OF ROCKIES OPERATIONS

Our crude oil gathering and marketing operations consist of purchasing and
gathering crude oil from producers and operators in 17 states and Canada for
subsequent sale to refiners and other customers. Gathering and marketing of
crude oil consists of:

o purchasing lease crude oil from producers and operators at field
gathering points and in bulk from aggregators at major pipeline
interconnections and marketing locations;

o transporting crude oil through our own proprietary or common carrier
pipelines, through our fleet of trucks or on assets owned and operated
by third parties;

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o buying and selling crude oil or exchanging it for either another grade
of crude oil or for crude oil at a different geographic location or
delivery time in order to increase margins or meet contract delivery
requirements; and

o marketing crude oil to refiners, large integrated oil companies and
other customers.

As a gatherer and marketer, we seek to earn profits primarily by buying
crude oil at competitive prices, efficiently transporting and handling the
purchased crude oil and marketing the crude oil to refinery customers or other
trade partners. We purchase and sell crude oil primarily under contracts with
30-day renewable terms, with some contracts having terms from two months to one
year. In connection with the acquisition of assets from Koch Oil Company, now
Koch Supply & Trading, L.P. ("Koch") in December 1998, we entered into a 15-year
supply contract at market-based prices with Koch, which currently accounts for
approximately 30% of our lease crude oil volumes. For further details, see Item
7. "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Other."

Crude Oil Gathering

In a typical producer's operation, crude oil flows from the oil well to a
separator where the petroleum gases are removed. After separation, the crude oil
is treated to remove water, sand and other contaminants and is then moved into
the producer's on-site storage tanks. When the tank is full, the producer
contacts field personnel to purchase and transport the crude oil to market. We
use our pipelines and trucks to transport to market most of the crude oil we
purchase.

We engage in several types of purchases, sales and exchanges of crude oil.
Most transactions we enter into are at market responsive prices, with a large
number of transactions on a 30-day renewable basis. Such purchases are
automatically renewable on a month-to-month basis until terminated by either
party. The purchases are typically based on our daily posted prices, other
quoted market related prices plus a bonus or market adjustment. The bonus is
determined based on grade of oil, transportation costs and other competitive
factors. Both the posted price and the bonus change in response to market
conditions. Posted prices can change daily, and bonuses, in general, can change
every 30 days as contracts renew. Conducting business under these short-term
contracts with multiple producers helps us reduce our overall basis risk (i.e.,
the risk that price relationships between delivery points, grades of crude oil
or delivery periods will change). See "Risk Management/Derivatives."

Crude Oil Marketing

The marketing of crude oil is complex and requires detailed knowledge of the
crude oil market and a familiarity with a number of factors including: types of
crude oil, individual refinery demand for specific grades of crude oil, area
market price structures for the different grades of crude oil, location of
customers, availability of transportation facilities, and timing and costs
(including storage) involved in delivering crude oil to the appropriate
customer. We market crude oil through our extensive gathering and marketing
asset base, which allows us to select among several transportation, storage and
delivery alternatives.

Generally, as we purchase lease crude oil, we enter into corresponding sale
transactions involving physical deliveries of crude oil to third party users,
such as independent refineries, or corresponding sales of futures contracts on
the New York Mercantile Exchange ("NYMEX"). This process enables us to minimize
our exposure related to price risk until we make physical delivery of the crude
oil. After the initial purchase of a lease barrel, we may re-market that barrel
both in the futures and physical markets in order to maximize the value of the
lease crude oil volumes. Throughout the process, we seek to maintain a
substantially balanced position with respect to the price and volume of crude
oil purchases and sales; however, we have certain risks that cannot be
completely hedged, including, among other things, basis risks and the risk that
the estimated lease volumes to be purchased could vary from what is actually
purchased.

Market conditions significantly impact our sales and marketing strategies.
During periods when the demand for crude oil is weak, the market for crude oil
is often in "contango," meaning that the price of crude

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oil in a given month is less than the price of crude oil in a subsequent month.
In a contango market, storing crude oil is favorable, because storage owners at
major trading locations can simultaneously purchase production at lower current
prices for storage and sell at higher prices for future delivery. When there is
a higher demand than supply of crude oil in the near term, the market is
"backwardated," meaning that the price of crude oil in the prompt month exceeds
the price of crude oil in a subsequent month. A backwardated market has a
positive impact on marketing margins because crude oil gatherers can capture a
premium for prompt deliveries.

Producer Services

Purchasing crude oil from producers and operators is done on the basis of
competitive pricing and reliable and responsive customer service. We believe
that our ability to offer services to producers and operators is an important
factor in maintaining lease crude oil volumes and in obtaining new volumes. Our
gathering and marketing assets and related service capabilities allow us to
provide timely pickup of crude oil from producers' tanks at the lease or
production point, accurate measurement of crude oil volumes delivered, and
certain accounting and administrative services. Accounting and administrative
services include processing division orders (dividing payments among the owners
of interests in a lease), providing statements of the crude oil purchased by us
each month, disbursing production proceeds to interest owners and calculation
and payment of severance and production taxes on behalf of interest owners. In
order to compete effectively, we must efficiently handle title and division
order issues and payment and regulatory reporting of all severance and
production taxes. We must do this in a professional and timely manner, thereby
ensuring the prompt and correct processing or payment of crude oil production
proceeds and taxes. These producer services will continue to be a key component
in our strategy as the smaller producers find it difficult to maintain these
services internally.

Competition

Competitive factors in the crude oil gathering and marketing business
include price, quality of service, transportation facilities, financial strength
and knowledge of products and markets. There are a number of structural and
economic factors impacting all of our market segments that drive new customer
needs, change competitor dynamics and, consequently, create new challenges and
opportunities for responsive market participants. The general decline in
domestic lease crude oil production has made competition among gatherers and
marketers even more intense.

In our crude oil gathering and marketing business, we compete with major oil
companies, large independent crude gatherers and a large number of small
regional independent gatherers. Our principal competitors in the purchase of
leasehold crude oil production include BP Amoco PLC, Shell, Plains All American,
Sun Refining & Marketing, and various regional competitors.

PIPELINE OPERATIONS

Through our common carrier pipeline systems, we transport crude oil for our
North American Crude Oil - East of Rockies business segment and third party
customers pursuant to published tariff rates regulated by the FERC and state
regulatory authorities. Accordingly, we offer transportation services to any
shipper of crude oil, provided that the crude oil meets the conditions and
specifications contained in the applicable pipeline tariff. Our Pipeline
Operations business segment transported an average of approximately 391,000
barrels per day through our regulated pipeline systems as of the end of 2002.
Pipeline revenues are primarily a function of the amount of crude oil
transported through the pipeline, known as throughput, and the applicable
pipeline tariffs. Approximately 74% of the revenues from our Pipeline Operations
business segment for the twelve months ended December 31, 2002 were generated
from tariffs charged to our North American Crude Oil - East of Rockies business
segment and sales of crude oil inventory to our North American Crude Oil - East
of Rockies business segment. Our operating income from our Pipeline Operations
business segment is primarily generated by the difference between the published
tariff and the fixed and variable costs of operating the pipelines.

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The General Partner entered into an agreement with EPSC, a wholly-owned
subsidiary of Enron that is not in bankruptcy, to provide certain operating and
administrative services to the General Partner, effective October 1, 2000. EOTT
LLC took over these services effective January 1, 2003. See also Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Bankruptcy Proceedings and Restructuring Plan."

We believe that pipelines provide the lowest-cost method of transportation,
and accordingly, in the past we focused on increasing the percentage of barrels
transported via pipelines through acquisitions of pipeline assets. Our extensive
pipeline network allows us to be the low-cost operator in many of the regions in
which we operate. In addition, with an increase in volume, we have the
opportunity to add incremental cash flow at marginal additional cost given that
our pipeline system operates at approximately two-thirds of capacity.

LIQUIDS OPERATIONS

In June 2001, we paid $117 million in cash to Enron and State Street Bank
and Trust Company of Connecticut, National Association, Trustee for the Morgan's
Point Facility and Mont Belvieu Facility through our wholly-owned subsidiary,
EOTT Energy Liquids, L.P. and concurrently entered into ten-year Toll Conversion
and Storage Agreements. These agreements are no longer in place as a result of
the Enron Bankruptcy. We financed the purchase price for these facilities
through borrowings from SCTS under short-term inventory and receivables
financing facilities.

Through our Liquids Operations, we process, store and transport gasoline
blendstocks, petrochemical feedstocks and natural gas liquids in the Gulf Coast
region. We purchase natural gas liquids feedstocks, upgrade natural gas liquids
to higher value petrochemicals, manufacture MTBE by chemically combining a
portion of our petrochemical production with purchased methanol, transport our
products to markets, and sell our products to refiners, motor gasoline blenders,
petrochemical companies and other participants in the market for our hydrocarbon
products. In addition, we store and transport natural gas liquids and
petrochemicals using our 10 million barrels of underground storage capacity at
Mont Belvieu and our 120-mile transportation grid interconnecting a number of
refineries, fractionators and petrochemical plants located in the Houston Ship
Channel area.

Morgan's Point Production and Sales

Our Morgan's Point Facility is comprised of three separate units or
processes:

1. Our Butamer Unit isomerizes normal butane to isobutane. The
isobutane produced by the Butamer Unit is treated for the removal of sulfur
and the treated isobutane is used in the Oleflex Unit or is marketed to
third party customers through existing pipeline connections.

2. Our Oleflex Unit uses a dehydrogenation process to remove hydrogen
from isobutane molecules to form isobutylene. Isobutylene is used in the
MTBE Plant but is also marketed to nearby customers via pipeline
connections.

3. Our MTBE Plant reacts isobutylene with methanol to produce MTBE. We
market our MTBE production to refiners, motor gasoline blenders and other
area companies via our Morgan's Point barge dock adjacent to the Houston
Ship Channel.

In the process of producing isobutane, isobutylene and MTBE, we utilize
licenses from UOP LLC.

MTBE is a component used by refiners and blenders as an octane enhancer and
oxygenate for gasoline. The market for MTBE as an octane enhancer grew rapidly
in the 1980s as a result of the phasing out of lead gasoline additives for
environmental reasons. The passage of additional environmental legislation,
particularly the Clean Air Act Amendments of 1990, to reduce carbon monoxide and
ozone pollution in a large number of

11

U.S. cities furthered the growth in demand for MTBE as an oxygenate to enhance
the clean burning properties of gasoline. The Oxygenated Fuel Program, effective
November 1992, mandated oxygenate content for gasoline in winter months in
carbon monoxide non-attainment areas and the Reformulated Fuel Program,
effective January 1, 1995, required the sale of reformulated gasoline year-round
in cities having severe ozone depletion. Approximately 70% of U.S. reformulated
gasoline contains MTBE as an oxygenate.

Product Distribution System

Our Morgan's Point Facility is strategically located at the entrance to the
Houston Ship Channel, with existing pipeline connections to draw upon the vast
supplies of feedstock available at Mont Belvieu, Texas, which is the world's
largest aggregation point for natural gas liquids and other hydrocarbons. Our
facility has excellent access to a large number of major refining and
petrochemical complexes in the area through our own transportation grid, and
through facilities provided by third parties. Our principal feedstocks are
methanol, normal butane and natural gas, which we purchase from various
suppliers on both a short-term contract and spot basis at prices linked to
prevailing market prices. We sell MTBE to refiners, motor gasoline blenders,
petrochemical companies and other participants in the market for our hydrocarbon
products on both a short-term contract and spot basis at prices linked to
prevailing market prices. The MTBE we produce leaves our Morgan's Point Facility
by way of our barge dock located at the entrance of the Houston Ship Channel.

Market and Competition

The growth in the market for MTBE has historically been driven by the
requirements of the Clean Air Act ("CAA"). Although oxygen requirements under
the CAA can be attained using other oxygenates such as ethanol, MTBE gained
acceptance due to its availability and the fact that gasoline containing MTBE
can be transported through pipelines, which is a significant competitive
advantage over ethanol which is typically transported via rail and truck.
Substantially all of the MTBE produced in the United States is used in the
production of oxygenated and reformulated gasoline. Demand for MTBE is therefore
dependent on the demand for oxygenated and reformulated gasoline, which accounts
for approximately 38% of the gasoline consumed in the United States. Gasoline
usage is affected by many factors, including its price, which is dependent on
the price of crude oil, seasonal demand patterns and the economy. Future MTBE
demand is also highly dependent on environmental regulation and federal and
state legislation.

We compete with MTBE producers in the United States including refiners who
produce MTBE for internal consumption in the blending of oxygenated and
reformulated gasoline. Competitive factors affecting the MTBE market include the
cost of feedstocks and other productions costs, the availability of long term
contracts for feedstocks and end products, the availability of commercial
capacity, the availability and cost of shipping and federal and state
regulations regarding the oxygen content of gasoline.

Restrictions on MTBE Production or Use

The presence of MTBE in some water supplies in California and other states
due to gasoline leakage from underground and aboveground storage tanks and other
sources has led to public concern that MTBE has contaminated drinking water
supplies, and thereby resulted in a possible health risk. Accordingly,
California and New York have ordered the ban of the use of MTBE as a gasoline
component by December 31, 2003. Several major refiners in California replaced
MTBE with ethanol beginning January 1, 2003. Heightened public awareness has
also resulted in other states and the U.S. Environmental Protection Agency
("EPA") either passing or proposing restrictions on, or banning the use of,
MTBE. A total of 19 states have enacted laws to phase out or limit MTBE over the
next five years. If MTBE were to be restricted or banned in Texas or throughout
the United States, we could modify the Morgan's Point Facility to produce other
products by a conversion of the Morgan's Point Facility. However, modifying our
existing Morgan's Point Facility to produce other gasoline blendstocks such as
alkylates would require a substantial capital investment. As a result of our
restructuring, we may not have enough resources available to effect such a
conversion. For further details, see "Environmental Matters" below, Item 7.
"Management's Discussion and Analysis of

12

Financial Condition and Results of Operations - Environmental Matters," and Note
12 to our Consolidated Financial Statements.

Mont Belvieu Facility

In connection with our acquisition of the processing facility at Morgan's
Point described above, we also purchased natural gas liquids storage and
transportation facilities located at Mont Belvieu, Texas and our transportation
grid which interconnects a number of refineries, fractionators, and
petrochemical plants located in the Houston Ship Channel area. The Mont Belvieu
area is considered to be the hub of the natural gas liquids industry in the
United States because its geologic structure is conducive to the operation of
natural gas liquids storage facilities and because of its close proximity to
numerous refineries and petrochemical plants. While the area is filled with
potential customers, it is also filled with many of our principal competitors,
such as Enterprise and Lyondell, each of which has substantial storage
facilities in or near Mont Belvieu. The presence of competitors means that our
product, pricing and profit margins are subject to significant competition.
Natural gas liquids and petrochemical feedstocks are the primary products stored
at Mont Belvieu. Although we do use some of our storage capacity to store our
own feedstocks and natural gas liquids, we currently market the bulk of our
storage capacity to third parties.

Our costs of providing storage space and transportation services are largely
fixed, with the only major exception being the cost of power. Therefore, for the
most part, our prices and profit margins are affected primarily by the
utilization of our storage and delivery capacity by our customers. Higher levels
of utilization are driven by the flexibility of our delivery system, access to
end-use markets via our transportation grid, and supply and demand in the
markets for natural gas liquids and petrochemicals.

Toll Conversion and Storage Agreements

Concurrent with acquiring the liquids processing, storage and transportation
assets described above, we entered into a ten-year Toll Conversion Agreement
with EGLI pursuant to which we were to receive fees for converting feedstocks,
consisting of various types of natural gas liquids, into liquid petroleum
products, and a ten-year Storage Agreement for the use of a significant portion
of our storage and transportation grid system and the provision of certain
related transportation, handling, maintenance and other operational services,
both agreements being with EGLI. Under both agreements, EGLI retained all
existing third party commodity, transportation and storage contracts associated
with these facilities.

As a result of these contractual arrangements with EGLI, we expected that
the future performance of the acquired assets would differ substantially from
the historical financial and operating performance of the assets. On December 3,
2001, EGLI was included in Enron's Chapter 11 filings. As a result of EGLI's
non-performance under these agreements, we recorded a $29.1 million impairment
in the fourth quarter of 2001, representing our total remaining investment in
the agreements. See Note 7 to our Consolidated Financial Statements for
information regarding this impairment charge.

Following non-performance by EGLI under these agreements and EGLI's
bankruptcy, we took over commercial operation of the Morgan's Point Facility. We
could not, however, enter into any long-term contracts until the Toll Conversion
Agreement was rejected. In addition, until the Storage Agreement was rejected,
we could not enter into any third party storage contracts.

On April 2, 2002, the Enron Bankruptcy Court entered a stipulation and
agreed order rejecting the Toll Conversion and Storage Agreements (the
"Stipulation"), which order became final and non-appealable on April 12, 2002.
Rejection of our Storage Agreement with EGLI resulted in the loss of the buyer
of the fixed throughput and storage capacity at the Mont Belvieu Facility.
However, the rejection allowed us to directly seek new customers and pursue
long-term contracts for the Mont Belvieu Facility to replace the long-term and
continuous stream of revenue we expected under the Storage Agreement with EGLI.
Although we are using some of our storage capacity in our operations and
marketing activities related to the Morgan's Point Facility,

13

we are marketing the majority of the storage capacity to third parties, usually
those with a presence in Mont Belvieu, Texas.

As a result of the rejection of our Toll Conversion Agreement by EGLI, our
operation of the Morgan's Point Facility was converted to a merchant operation,
which means that we take title to feedstocks and sell products directly to third
parties, as opposed to providing tolling services to EGLI. This means that we
bear the risk of physical loss associated with storing these feedstocks and
products. We are also exposed to fluctuations in the commodities market. We are
subject to a significant increase in commodity price risk for feedstocks and
marketing and commodity price risk associated with owning and selling MTBE and
other end products, which may vary based on factors beyond our control. We are
continuing to operate the assets and are examining long-term options for their
operation, which could include a sale of the facilities.

Also as a result of the rejection of these agreements, we filed a claim for
rejection damages in the Enron Bankruptcy Court. However, we withdrew this claim
pursuant to the terms of the Enron Settlement Agreement. For further details
regarding our Settlement Agreement with Enron, see Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Bankruptcy Proceedings and Restructuring Plan - Enron Settlement Agreement."

WEST COAST OPERATIONS

Through our West Coast Liquids operation, we provide a number of services to
West Coast natural gas liquids and natural gas markets, including gathering and
processing of natural gas, delivery of natural gas to local gas distribution
systems, rail and truck terminaling of natural gas liquids feedstocks,
throughput and processing of mixed natural gas liquids streams, fractionation of
mixed natural gas liquids into discrete ("purity") natural gas liquids products
such as propane, normal butane, isobutane, and natural gasoline, storage and
railroad/truck terminaling of natural gas liquids products, bulk storage of
propane, and truck and rail transportation of propane and other natural gas
liquids through the California market. We have the capacity to process up to 20
million cubic feet per day of natural gas, 8,000 barrels per day of mixed
natural gas liquids fractionation, and can store up to five million gallons of
propane.

Prior to June 30, 2001, we were engaged in crude oil gathering and
marketing, natural gas liquids and refined products marketing on the West Coast.
Effective June 30, 2001, we sold our crude oil gathering and marketing
operations to Pacific Marketing and Transportation LLC for $14.3 million. On
July 1, 2002, we sold our refined products marketing operations to Trammo
Petroleum, Inc. The sales price was not significant.

RISK MANAGEMENT/DERIVATIVES

We attempt to minimize our exposure to commodity prices. Generally, as we
purchase lease crude oil at prevailing market prices, we enter into
corresponding sales transactions involving physical deliveries of crude oil to
third party users, such as refiners or other trade partners, or a sale of
futures contracts on the NYMEX. This process gives us the opportunity to profit
on the transaction at the time of purchase and to minimize our exposure to
commodity price fluctuations.

Price risk management strategies, including those involving price hedges
using NYMEX futures contracts, are very important in maintaining or increasing
our gross margins. Such hedging techniques require resources which manage both
futures positions and physical inventories. Another important element of the
hedging techniques is the accurate estimation of lease crude oil volumes that
will actually be purchased when we pick them up from the producers. We effect
transactions both in the futures and physical markets in order to deliver the
crude oil to its highest value location or otherwise to maximize the value of
the crude oil we control. Throughout the process, we seek to maintain a
substantially balanced risk position at all times. We do have certain risks that
cannot be completely hedged such as basis risks (the risk that price
relationships between delivery points, grades of crude oil or delivery periods
will change) and the risk that transportation costs will change, and from time
to time we enter into transactions providing for purchases and sales in future
periods in which the volumes of crude oil are balanced, but where either the
purchase or sale prices are not fixed at the

14

time at which the transactions are consummated. In such cases, we are subject to
the risk that prices may change or that price changes will not occur as
anticipated.

We are also subject to commodity price risk associated with the Morgan's
Point Facility. Our ability to maintain or increase gross profit and to protect
ourselves from adverse price changes is dependent on the success of our
marketing and price risk management strategies. We can make no assurance that
our marketing and price risk management strategies will be successful in
protecting us from risks or in maintaining our gross margins at desirable
levels.

CREDIT

Credit review and analysis are integral to our marketing activities. Payment
for all or substantially all of the monthly lease crude oil gathered is, in many
instances, made to the operator of the lease. The operator, in turn, is
responsible for the correct payment and distribution of such production proceeds
to the proper parties. In these situations, we determine whether the operator
has sufficient financial resources to make such payments and distributions and
to indemnify and defend us in the event any third party should bring a protest,
action or complaint in connection with the ultimate distribution of production
proceeds by the operator.

In our marketing activities, we use a credit rating system and independent
analysis to determine the amount, if any, of the open credit to be extended to
any given customer. We then monitor the exposure to the customer in comparison
to the line of credit extended and pursue any variances. Certain customers post
letters of credit enabling them to transact business with us. Since typical
sales transactions can involve tens of thousands of barrels of crude oil or
other products, the risk of non-payment and non-performance by customers is a
major consideration in our business. We, however, can make no assurances that
our credit system, policies and procedures will be successful in preventing a
significant loss from customer default.

The amount and profitability of our business is also dependent on our own
credit standing and the willingness of third parties to engage in transactions
with us without requiring us to furnish third party credit support. As discussed
in Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Impact of the Bankruptcy of Enron and Certain of Its
Subsidiaries, and Related Events" and primarily as a result of our bankruptcy
and the Enron bankruptcy, our trade creditors have been less willing than before
the Enron bankruptcy to extend credit to us on an unsecured basis, and the
amount of letters of credit we have been required to post for our business
increased significantly. Letters of credit were approximately $196 million in
December 2001, increasing to $274.0 million in December 2002.

ENVIRONMENTAL MATTERS

We are subject to federal, state and local laws and regulations governing
the discharge of materials into the environment or otherwise relating to
environmental protection. At the federal level, such laws include, among others,
the CAA, the Clean Water Act, the Oil Pollution Act, the Federal Resources
Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), and the National
Environmental Policy Act ("NEPA"), as each may be amended from time to time.
Failure to comply with these laws and regulations may result in the assessment
of administrative, civil, and criminal penalties or the imposition of injunctive
relief. Moreover, compliance with such laws and regulations in the future could
prove to be costly, and there can be no assurance that we will not incur such
costs in material amounts. Environmental laws and regulations have changed
substantially and rapidly over the last 20 years, and we anticipate that there
will be continuing changes. The clear trend in environmental regulation is to
place more restrictions and limitations on activities that may impact the
environment, such as emissions of pollutants, generation and disposal of wastes
and use and handling of chemical substances. Increasingly strict environmental
restrictions and limitations have resulted in increased operating costs for us
and other businesses throughout the United States, and it is possible that the
costs of compliance with environmental laws and regulations will continue to
increase. We will attempt to anticipate future regulatory requirements that
might be imposed and to plan accordingly in order to remain in compliance with
changing environmental laws and regulations and to minimize the costs of such
compliance.

15

The CAA controls, among other things, the emission of volatile organic
compounds, nitrogen oxides, and all other ozone-producing compounds in order to
protect national ambient air quality in accordance with standards established
for ozone and other pollutants. Such emissions may occur from the handling or
storage of petroleum or natural gas liquids. The sources of emissions that are
subject to control and the types of controls required are a matter of individual
state air quality control implementation plans that set forth emission
limitations. Both federal and state laws impose substantial administrative,
civil and even criminal penalties for violation of applicable requirements. As
part of our regular overall evaluation of current operations, we assess the need
for new, or amendment of existing, air permits at our properties. We believe
that our overall operations are in substantial compliance with applicable air
quality requirements.

We generate wastes, including hazardous wastes, that are subject to the RCRA
and comparable state statutes. The EPA and various state agencies have limited
the approved methods of disposal for certain hazardous and nonhazardous wastes.
Furthermore, certain oil and gas exploration and production wastes handled by us
that are currently exempt from treatment as "hazardous wastes" may in the future
be designated as "hazardous wastes" and therefore be subject to more rigorous
and costly operating and disposal requirements.

The CERCLA, also known as the "Superfund" law, imposes liability, without
regard to fault or the legality of the original conduct, on certain classes of
persons that are considered to have contributed to the release of a "hazardous
substance" into the environment. These persons include the generator of a
"hazardous substance," the owner or operator of the disposal site or sites where
the release occurred and companies that transported or disposed or arranged for
the transport or disposal of the hazardous substances that have been released at
the site. Persons who are or were responsible for releases of hazardous
substances under CERCLA may be subject to joint and several liability for the
costs of cleaning up the hazardous substances that have been released into the
environment and for damages to natural resources, and it is not uncommon for
neighboring landowners and other third parties to file claims for personal
injury and property damage allegedly caused by the hazardous substances released
into the environment. In the ordinary course of our operations, substances may
be generated that fall within the definition of "hazardous substances." Our
operations are also impacted by regulations governing the disposal of naturally
occurring radioactive materials ("NORMs"). Although we have utilized operating
and disposal practices that were standard in the industry at the time,
hydrocarbons or other wastes may have been disposed of or released on or under
the properties owned or leased by us or under other locations where such wastes
have been taken for disposal, whether by us or by other operators or owners of
property acquired by us. Moreover, we may own or operate properties that in the
past were operated by third parties whose operations were not under our control.
Those properties and any wastes that may have been disposed or released on them
may be subject to CERCLA, RCRA and analogous state laws, and we potentially
could be required to remediate such properties.

The Clean Water Act, as amended by the Oil Pollution Act of 1990 ("OPA"),
controls, among other things, the discharge of oil and other petroleum products
into waters of the United States. The Clean Water Act provides penalties for any
unauthorized discharges of pollutants (including petroleum products) into waters
of the United States and imposes substantial potential liability for the costs
of responding to an unauthorized discharge of pollutants, such as an oil spill.
State laws governing the control of water pollution also provide varying
administrative, civil and criminal penalties and liabilities in the event of a
release of petroleum or other related products into surface waters or onto the
ground. Federal and state permits for such water discharges may be required.

OPA also imposes a variety of requirements on "responsible parties" for oil
and gas facilities related to the prevention of oil spills and liability for
damages resulting from such spills in waters of the United States. The term
"responsible parties" includes the owner or operator of an oil or gas facility
that could be the source of an oil spill affecting jurisdictional waters of the
United States. The term "waters of the United States" has been broadly defined
to include inland water bodies, such as wetlands, rivers, and creeks, as well as
coastal waters. OPA assigns liability to each responsible party for oil spill
removal costs and a variety of public and private damages from oil spills. OPA
establishes a liability limit for onshore facilities of up to $350 million while
the

16

limit for offshore facilities is all removal costs plus up to $75 million in
other damages. Responsible parties, however, cannot take advantage of liability
limits if the spill is caused by gross negligence or willful misconduct, if the
spill resulted from violation of a federal safety, construction or operating
regulation, or if a responsible party fails to report a spill or to cooperate
fully in the cleanup. Few defenses exist to the liability for oil spills imposed
by OPA. OPA also imposes other requirements on facility operators, such as the
preparation of an oil spill response plan, and a demonstration of the operator's
ability to pay for environmental cleanup and restoration costs likely to be
incurred in connection with an oil spill. Failure to comply with these OPA
requirements or inadequate cooperation in a spill event may subject a
responsible party to administrative, civil or criminal actions. While we believe
that we are in substantial compliance with the requirements of OPA, we cannot
predict future events which would have a material impact on our financial
condition or our results of operations.

NEPA may apply to certain extensions or additions to a pipeline system.
Under NEPA, if any project is to be undertaken which would significantly affect
the quality of the environment and require a permit or approval from a federal
agency, the federal agency may require preparation of a detailed environmental
impact study. The issuance by a federal agency of a permit or approval to
construct or extend a pipeline system may constitute a major federal action
under NEPA. The effect of NEPA may be to delay or prevent construction of new
facilities or to alter their location, design or method of construction. Similar
state laws may also be applicable to us.

Enron received a request for information from the EPA under Section 308 of
the Clean Water Act requesting information regarding certain discharges and
releases from oil pipelines owned or operated by Enron and its affiliated
companies for the time period July 1, 1998 to July 11, 2001. The only domestic
crude oil pipelines owned or operated by Enron at the time of the request and
for the time period covered were EOTT's pipelines. EOTT's pipelines were
operated by either the General Partner, a wholly owned subsidiary of Enron, or
EPSC, also an Enron subsidiary, for the time period in question. At the time the
EPA issued the Section 308 request to Enron, EPSC operated EOTT's pipelines on
EOTT's behalf, through an agreement between EPSC and the General Partner. The
General Partner and EPSC retain operator liability for the time period at issue
per the Operation and Service Indemnity set forth in the Enron Settlement
Agreement. Enron responded to the EPA's Section 308 request in its capacity as
the operator of the pipelines actually owned by EOTT. EOTT retains all liability
for the pipelines for which an owner would be responsible. In addition to the
retention of ownership liability, EOTT may also be required to indemnify the
General Partner and its Affiliates for operator liability, should any be found.
Under the terms of the Partnership Agreement, EOTT is obligated to indemnify the
General Partner and its Affiliates (including Enron) for all actions associated
with activities undertaken on behalf of EOTT. This indemnification obligation is
limited to actions undertaken in good faith, and may only be satisfied from
EOTT's assets. Enron's bankruptcy and our bankruptcy did not affect our
liability as owner of the pipelines, nor does it affect EOTT's indemnification
obligations under the Partnership Agreement. While EOTT cannot predict the
outcome of the EPA's Section 308 review, the EPA could seek to impose liability
on us with respect to the matters being reviewed. The outcome of the EPA 308
request is not yet known and EOTT is unaware of any potential liability of EOTT,
Enron or its affiliates. However, EOTT assumes that it is fully responsible as
owner for any environmental claims or fines in relation to the pipelines
(subject to insurance claims or other third party claims to which EOTT might be
entitled). Our bankruptcy proceedings did not relieve us from potential
environmental liability. Consequently, we believe neither Enron's bankruptcy nor
our bankruptcy has had a material impact on any potential environmental
liability.

The presence of MTBE in some water supplies in California and other states
due to gasoline leakage from underground and aboveground storage tanks and other
sources, has led to public concern that MTBE has contaminated drinking water
supplies, and thereby resulted in a possible health risk. As a result, in 1999,
the Governor of California requested a waiver of oxygen requirements for
gasoline imposed by the CAA for areas of ozone non-attainment. In June 2001, the
EPA denied California's request to opt out of the oxygenated fuels requirements,
which would have allowed the state to ban the use of MTBE in gasoline sold
within its borders. As a result of the EPA's decision, the Governor of
California extended the deadline for the ban of the use of MTBE in California to
December 31, 2003 based on concerns about the availability and cost of
alternatives to MTBE as an oxygenate in gasoline.

17

Heightened awareness of possible MTBE contamination has resulted in the
filing of numerous lawsuits, generally pursuing products liability theories, in
numerous jurisdictions, including Texas. Defendants in these suits, including
MTBE producers, oil and gas companies, fuel distributors and others, have
claimed generally that federal and state laws permitted them to use MTBE to meet
federal clean air standards and have argued that such claims are pre-empted by
the 1990 CAA amendments. One such case was brought in a California Superior
Court against multiple defendants including MTBE manufacturers, refiners and
gasoline distributors alleging that MTBE contaminated ground water near Lake
Tahoe, California. The jury found the defendants liable for the MTBE
contamination and the case eventually reached settlement. While we believe we
have manufactured and sold MTBE in compliance with applicable laws permitting
our activities, and we have not been included in any of these lawsuits, it is
possible that we could be adversely affected by such a lawsuit in the future.

Heightened public awareness has also resulted in other states and the EPA
either passing or proposing restrictions on, or banning the use of, MTBE. As of
December 2002, 19 states had enacted laws to phase out or limit MTBE. In July
2001, Illinois enacted legislation banning MTBE as of July 2004. A Rhode Island
legislator has proposed a plan to eliminate MTBE by July 2003. The New England
Governors' Conference resolved in August 2001 to engage in a coordinated effort
to amend the CAA to lift the oxygen mandate for reformulated gasoline ("RFG") or
to press the EPA to allow these states to opt out of the RFG program's oxygen
requirements. Currently, Texas, the only state in which we produce MTBE, has not
banned MTBE. No assurances, however, can be made that Texas will not enact such
legislation. The July 1999 report of the EPA's "Blue Ribbon Panel on Oxygenates
in Gasoline" recommended the reduced use of MTBE in the United States. In 2000,
the EPA announced its intent to seek legislative changes to give the EPA the
authority to ban the use of MTBE over a three-year period, and as of March 2000,
the EPA also sought to ban MTBE using its rulemaking authority under the Toxic
Substances Control Act. Both the EPA and state regulatory agencies have also
established remediation and drinking water standards for MTBE that require
treatment for water with high concentrations of MTBE (the EPA drinking water
standard is 20 to 40 parts per billion).

As part of the ongoing Energy Policy Act debate, both the U.S. House of
Representatives and the U.S. Senate have introduced bills in 2002 which would
have had a significant impact on the MTBE market at the national level. The
Senate bill would have banned MTBE use in three years after enactment. Although
these bills were ultimately abandoned in late 2002, the concepts continue to be
considered as part of comprehensive energy legislation. In early 2003, the
Senate Minority Leader introduced legislation that would ban MTBE use in four
years and triple the use of ethanol in gasoline to 5 billion gallons by 2012.
Similarly, the House Energy and Air Quality Subcommittee Chairman introduced
comprehensive energy legislation that is silent on the issue of MTBE.

It is likely that fuel content, including MTBE use, will continue to be a
subject of legislative debate. Likewise, members of the Bush Administration have
made statements in favor of conversion for MTBE substitutes to the use of
ethanol as an alternative to MTBE. If MTBE were to be restricted or banned in
Texas or throughout the United States, we could modify the Morgan's Point
Facility to produce other products. We believe that modifying our existing
Morgan's Point Facility to produce other gasoline blendstocks such as alkylates
would require a substantial capital investment. As a result of our
restructuring, we may not have enough resources available to effect such a
conversion. Further, we cannot predict whether similar legislation to the
proposed Energy Policy Act may be passed, whether the federal government will
provide monetary assistance for conversion if legislation is eventually passed,
or if the federal government will take steps to reverse California's ban on the
use of MTBE as a gasoline component. If federal legislation or legislation in
Texas is enacted banning the use of MTBE, we would expect such ban to materially
reduce MTBE demand, which would have a material adverse effect on our financial
results.

We may experience future releases of crude oil, MTBE or other substances
into the environment or discover releases that were previously unidentified.
While an inspection program is maintained on our pipelines to prevent and detect
such releases, and operational safeguards and contingency plans are in place for
the operation of our processing facilities, damages and liabilities incurred due
to any future environmental releases could affect our business. We believe that
our operations and facilities are in substantial compliance

18

with applicable environmental laws and regulations and that there are no
outstanding potential liabilities or claims relating to safety and environmental
matters, that we are currently aware of, the resolution of which, individually
or in the aggregate, would have a materially adverse effect on our financial
position or results of operations. See Item 3. "Legal Proceedings" and Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Risk Factors." Our environmental expenditures include amounts spent
on permitting, compliance and response plans, monitoring and spill cleanup and
other remediation costs. In addition, we could be required to spend substantial
sums to ensure the integrity of and upgrade our pipeline systems, and in some
cases, we may take pipelines out of service if we believe the cost of upgrades
will exceed the value of the pipelines.

We cannot give any assurance as to the ultimate amount or timing of future
expenditures for environmental remediation or compliance, and actual future
expenditures may be different from the amounts currently estimated. In the event
of future increases in costs, we may be unable to pass on those increases to our
customers.

REGULATION

We are subject to a variety of federal and state regulations relating to our
interstate and intrastate pipeline transportation and safety activities, motor
carrier activities, and commodities trading business, the most significant of
which are discussed below.

Pipeline Regulation

Interstate Regulation Generally. Our interstate common carrier pipeline
operations are subject to rate regulation by the FERC under the provisions of
the Interstate Commerce Act ("ICA"). These operations include our Hobbs Pipeline
in New Mexico and Texas, our crude oil system in Mississippi and Alabama, our
crude oil systems acquired from CITGO Pipeline Company, portions of our crude
oil systems acquired from Koch Pipeline Company, L.P. and crude oil systems
acquired from Texas-New Mexico Pipe Line Company. The ICA requires that we
maintain our tariffs on file with the FERC, which tariffs set forth the rates we
charge for providing transportation services on our interstate common carrier
pipeline as well as the rules and regulations governing these services. The ICA
also requires, among other things, that petroleum pipeline rates be just and
reasonable and non-discriminatory. The ICA permits interested parties to
challenge proposed new or changed rates and authorizes the FERC to suspend the
effectiveness of such rates for a period of up to seven months and to
investigate such rates. If, upon the completion of an investigation, the FERC
finds that the new or changed rate is unlawful, it is authorized to require the
carrier to refund the revenues collected during the pendency of the
investigation in excess of those that would have been collected under the prior
tariff. In addition, the FERC, upon complaint or on its own motion and after
investigation, may order a carrier to change its rate prospectively. Upon an
appropriate showing, a shipper may obtain reparations for damages sustained for
a period of up to two years prior to the filing of a complaint.

Energy Policy Act of 1992 and Subsequent Developments. In October 1992,
Congress passed the Energy Policy Act of 1992. The Energy Policy Act deemed
petroleum pipeline rates that were in effect for the 365-day period ending on
the date of enactment or that were in effect on the 365th day preceding
enactment and had not been subject to complaint, protest, or investigation
during the 365-day period to be just and reasonable under the ICA (i.e.,
"grandfathered"). The vast majority of our FERC pipeline rates are grandfathered
under the Energy Policy Act, and therefore are deemed just and reasonable. The
Energy Policy Act provides that the FERC may change the grandfathered rates upon
complaints only under the following limited circumstances:

o a substantial change has occurred since enactment in either the
economic circumstances or the nature of the services which were the
basis for the rate;

o the complainant was contractually barred from challenging the rate
prior to enactment of the Energy Policy Act and filed the complaint
within 30 days of the expiration of the contractual bar; or

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o a provision of the tariff is unduly discriminatory or preferential.

The Energy Policy Act further required the FERC to issue rules establishing
a simplified and generally applicable ratemaking methodology for interstate
petroleum pipelines and to streamline procedures in petroleum pipeline
proceedings. On October 22, 1993, the FERC responded to this mandate by issuing
several orders, including Order No. 561, which adopts a new indexing rate
methodology for interstate petroleum pipelines. Under the new regulations,
effective January 1, 1995, petroleum pipelines are able to change their rates
within prescribed ceiling levels that are tied to changes in the Producer Price
Index for Finished Goods, minus one percent ("PPI-1"). Rate increases made
pursuant to the indexing methodology are subject to protest, but such protests
must show that the portion of the rate increase resulting from application of
the index is substantially in excess of the pipeline's increase in costs. If the
indexing methodology results in a reduced ceiling level that is lower than a
pipeline's filed rate, Order No. 561 requires the pipeline to reduce its rate to
comply with the lower ceiling. The new indexing methodology is applicable to any
existing rate, whether grandfathered or whether established after enactment of
the Energy Policy Act.

In July 2000, the FERC issued a Notice of Inquiry seeking comment on whether
to retain or to change the existing rate indexing methodology. In December 2000,
the FERC issued an order concluding that the PPI-1 index reasonably estimated
the actual cost changes in the pipeline industry and should be continued for
another five-year period, subject to review in July 2005. On February 24, 2003,
on remand of its December 2000 order from the U.S. Court of Appeals for the
District of Columbia, the FERC changed the rate indexing methodology to the PPI
for finished goods, eliminating the subtraction of one percent as had been done
previously. The FERC made the change prospective only, but did allow oil
pipelines to recalculate their maximum ceiling rates as though the new rate
indexing methodology had been in effect since July 1, 2001.

The FERC, however, has retained cost-based ratemaking, market-based rates
and settlements as alternatives to the indexing approach. A pipeline can follow
a cost-based approach when it can demonstrate that there is a substantial
divergence between the actual costs experienced by the carrier and the rates
resulting from application of the index. Under FERC's cost-based methodology,
crude oil pipeline rates are permitted to generate operating revenues, based on
projected volumes, not greater than the total of operating expenses,
depreciation and amortization, federal and state income taxes and an overall
allowed rate of return on the pipeline's rate base. In addition, a pipeline can
charge market-based rates if it first establishes that it lacks significant
market power in a particular relevant market, and a pipeline can establish rates
pursuant to a settlement if agreed upon by all current shippers. Initial rates
for new services can be established through a cost-based filing or through an
uncontested agreement between the pipeline and at least one shipper not
affiliated with the pipeline.

Since July of 1995, we have annually amended our tariffs on all of our
regulated pipelines as provided by FERC regulations. Although no assurance can
be given that the tariffs charged by us will ultimately be upheld if challenged,
we believe that the tariffs now in effect for all of our pipelines are within
the maximum rates allowed under the current FERC guidelines.

FERC Form 6 Annual Reporting. The FERC requires annual reporting from oil
pipelines through the submission of FERC Form 6, "Annual Report of Oil Pipeline
Companies." The FERC Form 6 is designed to provide the FERC with the financial,
operational and ratemaking information it needs to regulate and monitor the oil
pipeline industry. FERC advised us, in a letter dated January 9, 2002, that FERC
began an industry-wide audit with respect to the annual reporting requirements
of FERC Form 6 in December 2001, and that we had been selected for the audit.
The audit covers the period from January 1, 2000 through December 31, 2001. FERC
staff has subsequently visited our Houston office to review relevant
documentation and has made numerous data requests, all of which we have
responded to. The audit remains ongoing, and it is uncertain at this point what,
if any, actions FERC may propose upon completion of the audit. We timely filed
our FERC Form 6 for the year 2002 on March 31, 2003.

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Intrastate Regulation. Some of our pipeline operations are subject to
regulation by the respective agency of the state in which the pipeline is
located. The applicable state statutes require, among other things, that
pipeline rates be non-discriminatory and provide a fair return on the aggregate
value of the pipeline property used to render services. State commissions have
generally not been aggressive in regulating common carrier pipelines and have
generally not investigated the rates or practices of petroleum pipelines in the
absence of shipper complaints. Complaints to state agencies have been infrequent
and are usually resolved informally. Although no assurance can be given that our
intrastate rates would ultimately be upheld if challenged, we believe that,
given this history, the tariffs now in effect are more likely subject to
informal reviews rather than formal challenges.

Petroleum Pipeline Safety Legislation and Regulation. Our petroleum
pipelines are subject to regulation by the United States Department of
Transportation ("DOT") under the Accountable Pipeline and Safety Partnership Act
of 1996, sometimes referred to as the Hazardous Liquid Pipeline Safety Act
("HLPSA"), and comparable state statutes relating to the design, installation,
testing, construction, operation, replacement, and management of our pipeline
facilities. The HLPSA covers petroleum and petroleum products and requires any
entity that owns or operates pipeline facilities to comply with such
regulations, to permit access to and copying of records, and to prepare certain
reports and provide information as required by the Secretary of the DOT.
Comparable regulation exists in some states in which we conduct intrastate
common carrier or private pipeline operations.

We are subject to the Office of Pipeline Safety ("OPS") regulation requiring
qualification of pipeline personnel. The regulation requires pipeline operators
to develop and maintain a written qualification program for individuals
performing covered tasks on pipeline facilities. The intent of this regulation
is to ensure a qualified work force and to reduce the probability and
consequence of incidents caused by human error. The regulation establishes
qualification requirements for individuals performing covered tasks, and amends
certain training requirements in existing regulations. We believe we are in
compliance with these requirements through a written qualification program,
adopted by us effective January 1, 2003.

Pipeline safety issues are currently receiving significant attention in
various political and administrative arenas at both the state and federal
levels. For example, recent federal rule changes require operators of pipelines
of greater than 500 miles to: (i) develop and maintain a written qualification
program for individuals performing covered tasks on pipeline facilities, and
(ii) establish pipeline integrity management programs. In particular, during
2000, the DOT adopted the OPS Integrity Management regulations requiring
operators of interstate pipelines to develop and follow an integrity management
program ("IMP") that provides for continual assessment of the integrity of all
pipeline segments that could affect so-called high consequence areas ("HCA"),
including high population areas, drinking water areas and ecological resource
areas that are unusually sensitive to environmental damage from a pipeline
release, and commercially navigable waterways. HCAs related to our pipelines
were initially identified as all areas where jurisdictional lines are located.
We completed our IMP before the deadline of March 31, 2002. Our IMP has now been
reviewed by DOT personnel on two occasions, and we anticipate that we will
receive a Notice of Amendment for DOT-requested changes to our IMP sometime in
the near future.

The OPS Integrity Management regulations also require us to evaluate
pipeline conditions by means of periodic internal inspection, pressure testing,
or other equally effective assessment means and to correct identified anomalies.
If, as a result of our evaluation process, we determine that there is a need to
provide further protection to the HCA, then we will be required to implement
additional prevention and mitigation risk control measures for our pipelines,
including enhanced damage prevention programs, corrosion control program
improvements, leak detection system enhancements, installation of emergency flow
restricting devices, and emergency preparedness improvements. The regulations
also require us to evaluate and, as necessary, improve our management and
analysis processes for integrating available integrity-related data relating to
our pipeline segments and to remediate potential problems found as a result of
the required assessment and evaluation process. The regulations require that
initial HCA baseline integrity assessments are conducted within seven years,
with all subsequent assessments conducted on a five-year cycle. We will

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evaluate each pipeline segment's integrity by analyzing available information
and develop a range of potential impacts resulting from a release to a HCA.

In connection with extensive asset purchases in 1998 and 1999, we instituted
a pipeline integrity management program in 1999. This program was expanded in
December of 2001 with a pipeline integrity assurance program to comply with
certain regulatory and legislative changes. Under this program, the integrity of
a pipeline is evaluated to avoid operating a pipeline that poses significant
risk of crude oil spills. Our written EOTT Pipeline Integrity Program, which was
intended to comply with the new OPS Integrity Management regulations, was
formally implemented in January 2002, and expanded in January of 2003.
Anticipated operating expenses and capital expenditures to comply with that
program are budgeted annually; however, actual future expenditures may be
different from the amounts currently anticipated.

Although we believe that our pipeline operations are in substantial
compliance with applicable HLPSA requirements, these developments reflect the
prospect of incurring significant expenses if additional safety requirements are
imposed that exceed our current pipeline control system capabilities.

States are largely preempted by federal law from regulating pipeline safety,
but may assume responsibility for enforcing federal intrastate pipeline
regulations and inspection of intrastate pipelines. In practice, states vary
considerably in their authority and capacity to address pipeline safety.

We are also subject to the requirements of the Federal Occupational Safety
and Health Act ("OSHA") and comparable state statutes. We believe that we are in
substantial compliance with Federal OSHA requirements and comparable state
statutes, including general industry standards, recordkeeping requirements and
monitoring of occupational exposure to hazardous substances.

Trucking Regulation

Generally, we operate our fleet of trucks as a private carrier.
Additionally, we have engaged in contract carrier hauling of crude oil in
Louisiana and natural gas liquids in California for third parties. In Oklahoma,
Texas, Alabama and Mississippi, we haul salt water, crude oil and other fluids
for others as a common carrier. Although a private or common carrier that
transports property in interstate commerce is not required to obtain operating
authority from the Surface Transportation Board, the carrier is subject to
certain motor carrier safety regulations issued by the DOT. The trucking
regulations extend to driver operations, keeping of log books, truck manifest
preparations, safety placards on the trucks and trailer vehicles, drug and
alcohol testing, safety of operation and equipment, and many other aspects of
truck operations. We are also subject to OSHA regulations with respect to our
trucking operations. We believe that we are in substantial compliance with
applicable trucking regulation requirements.

We provide contract and common carrier services pursuant to permits issued
by the various state regulatory agencies. Accordingly, we, as a common or
contract carrier, are also subject to certain safety regulations related to
service and operations. We believe that we are in substantial compliance with
applicable state common or contract carrier regulation requirements.

Commodities Regulation

Our price risk management operations are subject to constraints imposed
under the Commodity Exchange Act (the "CEA"). Our futures and options contracts
that are traded on the NYMEX are subject to strict regulation by the Commodity
Futures Trading Commission (the "CFTC"). Although NYMEX futures contracts
include contracts on sweet crude oil, there are many products that we purchase
and sell for which no futures contracts are available, due in part to the strict
regulatory scheme for futures contracts. In addition, trading volumes and
pricing bases of futures contracts on some products are such that our ability to
use them to hedge our price risks may be limited.

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AVAILABLE INFORMATION

You may also obtain information about us through our Internet website at
www.eott.com. Copies of our periodic reports filed with the SEC (including our
annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports
on Form 8-K) are available free of charge through our Internet website as soon
as reasonably practicable after we electronically file such material with the
SEC.

INFORMATION REGARDING FORWARD-LOOKING INFORMATION

The statements in this Annual Report on Form 10-K that are not historical
information are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Such forward-looking statements include, in particular, the discussion
under "Business - Environmental Matters," and "Impact of Enron's Bankruptcy on
Our Business," the discussion under Item 3. "Legal Proceedings," the discussion
in Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Impact of the Bankruptcy of Enron and Certain of Its
Subsidiaries, and Related Events," "Risk Factors," "Liquidity and Capital
Resources," "Other," and "Environmental Matters." Any forward-looking statements
are not guarantees of future performance, and involve significant risks and
uncertainties, and actual results may vary materially from those in the
forward-looking statements as a result of various factors. Important factors
that could cause actual results to differ materially from those in the
forward-looking statements herein include, but are not limited to, the impact of
our bankruptcy on our business and our ability to operate according to our plan
of reorganization, the success of our marketing activities, the success of our
ongoing financing activities and the renewal or replacement thereof, our success
in obtaining additional lease crude oil barrels and maintaining existing lease
crude oil barrels, demand for various grades of crude oil and the resulting
changes in pricing relationships, ability to process and deliver liquids
products, ability to operate the Morgan's Point Facility efficiently,
developments relating to possible acquisitions or business combination
opportunities, industry conditions, our ability to avoid environmental
liabilities, developments at FERC relating to pipeline tariff regulation, the
successful resolution of litigation, the success of our risk management
activities and conditions of the capital markets and equity markets during the
periods covered by the forward-looking statements. We believe that our
expectations regarding future events are based on reasonable assumptions.
However, we can give no assurance that these are all the factors that could
cause actual results to vary materially from the forward-looking statements or
that our expectations regarding future developments will prove to be correct.

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ITEM 2. PROPERTIES

PIPELINE AND TRANSPORTATION ASSETS AND PROPERTIES

At year end 2002, we owned and operated approximately 8,000 miles of active
crude oil gathering and transmission pipelines. There are approximately 9.9
million barrels of active storage capacity associated with field tanks. By
state, the pipeline assets are as follows:

In addition, we own a gas processing plant in California, with 20 million cubic
feet per day of gas processing capacity; a fractionation plant with 8,000
barrels per day of fractionation capacity; five million gallons of refrigerated
propane storage; and related truck and rail distribution facilities. We operate
four active barge facilities in Louisiana, and one in Alabama. Approximately 1.7
million barrels of storage capacity are associated with these barge facilities.

LIQUIDS ASSETS

Our Morgan's Point Facility is located in southeast Harris County within the
city limits of Morgan's Point, Texas, approximately 30 miles from Houston. The
Morgan's Point Facility consists of three processing units and extensive product
handling facilities. The Morgan's Point Facility has a design capacity of 15,300
barrels per day and a rated capacity of 16,500 barrels per day of equivalent
MTBE production. On average, the Morgan's Point Facility produces approximately
16,000 barrels per day of MTBE or MTBE equivalents and other end products. The
product handling facilities include on-site tank storage, a barge dock and
railcar and truck loading/unloading facilities as well as various
interconnections to a number of pipelines. The dock is located at the entrance
of the Houston Ship Channel. The dock has the necessary facilities to load MTBE,
natural gasoline, normal butane, isobutane, isobutane (low sulfur) and to unload
methanol and normal butane. The dock can provide a loading berth for barges up
to 400 feet in length.

The Mont Belvieu Facility includes an underground storage facility and a
liquids pipeline grid system and related loading, unloading and transportation
facilities. The storage facility is located at Mont Belvieu, Texas,
approximately 30 miles east of Houston, Texas. The Mont Belvieu Facility
consists of ten active storage wells with a total capacity of 10 million
barrels, a surface brine pit with a total capacity of 1.1 million barrels and a
brine disposal well capable of disposing of up to 40,000 barrels of product per
day. The transportation grid system and related facilities include an extensive
transportation and distribution system that allows us to transport natural gas
liquids and other products to and from the Mont Belvieu Facility and the
Morgan's Point Facility by pipeline, ship or barge to the various refineries,
petrochemical plants and other buyers and suppliers of natural gas liquids that
are located in and throughout the area.

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ITEM 3. LEGAL PROCEEDINGS

We are, in the ordinary course of business, a defendant in various lawsuits,
some of which are covered in whole or in part by insurance. We believe that the
ultimate resolution of litigation, individually and in the aggregate, will not
have a materially adverse impact on our financial position or results of
operations. Generally, as a result of our bankruptcy, all pending litigation
against us was stayed while we continued our business operations as debtors in
possession. For matters where the parties negotiated a settlement during our
bankruptcy proceedings, the settlement amount was accrued at December 31, 2002
as an allowed general unsecured claim. Subsequent to year end, in connection
with our Restructuring Plan, general unsecured creditors with allowed claims
will receive a pro rata share of $104 million of 9% senior unsecured notes and a
pro rata share of 11,947,820 EOTT LLC units. Various legal actions arose in the
ordinary course of business, the most significant of which are discussed below.

State of Texas Royalty Suit. We were served on November 9, 1995, with a
petition styled The State of Texas, et al. vs. Amerada Hess Corporation, et al.
The matter was filed in District Court in Lee County, Texas and involves several
major and independent oil companies and marketers as defendants. The plaintiffs
are attempting to put together a class action lawsuit alleging that the
defendants acted in concert to buy oil owned by members of the plaintiff class
in Lee County, Texas, and elsewhere in Texas, at "posted" prices, which the
plaintiffs allege were lower than true market prices. There is not sufficient
information in the petition to fully quantify the allegations set forth in the
petition, but we believe that any such claims against us will prove to be
without merit. There has been no activity on this matter in several years. This
case will no longer be reported.

The State of Texas, et al. vs. Amerada Hess Corporation, et al., Cause No.
97-12040; In the 53rd Judicial District Court of Travis County, Texas (Common
Purchaser Act Suit). This case was filed on October 3, 1997, in Austin by the
Texas Attorney General's office and involves several major and independent oil
companies and marketers as defendants. We were served on November 18, 1997. The
petition states that the State of Texas brought this action in its sovereign
capacity to collect statutory penalties recoverable under the Texas Common
Purchaser Act, arising from defendants' alleged willful breach of statutory
duties owed to royalty, overriding royalty and working interest owners of crude
oil sold to defendants, as well as alleged breach of defendants' common law and
contractual duties. The plaintiffs also allege that the defendants have engaged
in discriminatory pricing of crude oil. This case appears to be similar to the
State of Texas Royalty Suit filed by the State of Texas on November 9, 1995. We
recorded a $0.4 million litigation reserve related to this suit in 1998. We and
several of the defendants reached a settlement with the State in the Common
Purchaser Act Suit in a Settlement Agreement dated August 5, 1999. The
settlement was funded to an escrow account in July 1999. Settlement amounts for
each defendant were confidential. This settlement disposed of any claims the
State may have in the State of Texas Royalty Suit, discussed above, but did not
dismiss that case, or fully dismiss the Common Purchaser Act Suit. Also, any
severance tax claims the State may have were specifically excluded from this
settlement. However, no severance tax claims were asserted in the petition filed
by the plaintiffs. There has been no activity on this matter in several years.
This case will no longer be reported.

Assessment for Crude Oil Production Tax from the Comptroller of Public
Accounts, State of Texas. We received a letter from the Comptroller's Office
dated October 9, 1998, assessing us for severance taxes the Comptroller's Office
alleges are due based on a difference the Comptroller's Office believes exists
between the market value of crude oil and the value reported on our crude oil
tax report for the period of September 1, 1994 through December 31, 1997. The
letter states that the action, based on a desk audit of our crude oil production
reports, is partly to preserve the statute of limitations where crude oil
severance tax may not have been paid on the true market price of the crude oil.
The letter further states that the Comptroller's position is similar to claims
made in several lawsuits, including the State of Texas Royalty Suit, in which
the Partnership is a defendant. The amount of the assessment, including penalty
and interest, is approximately $1.1 million. We believe we should be without
liability in this or related matters. There has been no action on this matter
since early 1999, except that the Comptroller filed a proof of claim in our
bankruptcy proceedings and subsequently withdrew this claim. We have not yet
determined the ongoing validity of this claim, if any, in light of our
bankruptcy proceedings.

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Export License with United States Department of Commerce. We have applied
for and maintained Export Licenses through the U.S. Department of Commerce
("DOC") since 1994. These licenses authorized us to export crude oil to Canada.
Each license provided an applicable license quantity and value of merchandise as
authorized by the DOC to be exported. The licenses generally covered either a
one or a two year period. In early 1999, as we were preparing a new license
application, we discovered that we had exported more barrels and value than had
been authorized by the DOC under our current (and prior) license. Pursuant to
Section 764.5 of the Export Administration Regulations, we filed a Voluntary
Disclosure with the DOC on February 5, 1999, giving the DOC notice of these
license overruns. We negotiated a monetary settlement with the DOC of $508,000
and have accrued the settlement amount. The settlement was signed on July 15,
2002, and requires the monetary settlement to be paid in five installments. The
first installment was paid on August 1, 2002, and the final installment is due
on October 15, 2003. In addition, the settlement agreement with the DOC was
reaffirmed by the EOTT Bankruptcy Court.

John H. Roam, et al. vs. Texas-New Mexico Pipe Line Company and EOTT Energy
Pipeline Limited Partnership, Cause No. CV43296, In the District Court of
Midland County, Texas, 238th Judicial District (Kniffen Estates Suit). The
Kniffen Estates Suit was filed on March 2, 2001, by certain residents of the
Kniffen Estates, a residential subdivision located outside of Midland, Texas.
The allegations in the petition state that free crude oil products were
discovered in water wells in the Kniffen Estates area, on or about October 3,
2000. The plaintiffs claim that the crude oil products are from a 1992 release
from a pipeline then owned by the Texas-New Mexico Pipe Line Company ("Tex-New
Mex"). We purchased that pipeline from Tex-New Mex in 1999. The plaintiffs have
alleged that Tex-New Mex was negligent, grossly negligent, and malicious in
failing to accurately report and remediate the spill. With respect to us, the
plaintiffs are seeking damages arising from any contamination of the soil or
groundwater since we acquired the pipeline in question. No specific amount of
money damages was claimed in the Kniffen Estate Suit, but the plaintiffs did
file proofs of claim in our bankruptcy proceeding totaling $62 million. In
response to the Kniffen Estates Suit, we filed a cross-claim against Tex-New
Mex. In the cross-claim, we claim that, in relation to the matters alleged by
the plaintiffs, Tex-New Mex breached the Purchase and Sale Agreement between the
parties dated May 1, 1999, by failing to disclose the 1992 release and by
failing to undertake the defense and handling of the toxic tort claims, fair
market value claims, and remediation claims arising from the release.
Additionally, we are asserting claims of gross negligence, fraud, and specific
performance and are seeking monetary and equitable relief sufficient to (i)
reimburse us for expenses incurred by us to date for remediation associated with
this pipeline, (ii) enable us to examine the condition of selected portions of
the pipeline to determine if additional repair work or remediation may be
necessary, and (iii) reimburse us for any future repair work or remediation
necessary because of the maintenance of the pipeline before we acquired it. On
April 5, 2002, we filed an amended cross-claim which alleges that Tex-New Mex
defrauded us as part of Tex-New Mex's sale of the pipeline systems to us in
1999. The amended cross-claim also alleges that various practices employed by
Tex-New Mex in the operation of its pipelines constitute gross negligence and
willful misconduct and void our obligation to indemnify Tex-New Mex for
remediation of releases that occurred prior to May 1, 1999. In the Purchase and
Sale Agreement, we agreed to indemnify Tex-New Mex only for certain remediation
obligations that arose before May 1, 1999, unless these obligations were the
result of the gross negligence or willful misconduct of Tex-New Mex prior to May
1, 1999. EOTT Energy Pipeline Limited Partnership ("PLP") and the plaintiffs
agreed to a settlement during our bankruptcy proceedings. The settlement
provides for the plaintiffs' release of their claims filed against PLP in this
proceeding and in the bankruptcy proceedings, in exchange for an allowed general
unsecured claim in our bankruptcy of $3,252,800 (as discussed above, the
plaintiffs filed proofs of claim in our bankruptcy proceedings totaling $62
million). The general unsecured claim has been accrued at December 31, 2002. The
plaintiffs and PLP continue to pursue their claims against Tex-New Mex. On April
1, 2003, we filed a second amended cross claim in this matter. In addition to
the claims filed in the previous cross claims, EOTT requested (i) injunctive
relief for Tex-New Mex's refusal to honor its indemnity obligations; (ii)
injunctive relief requiring Tex-New Mex to identify, investigate and remediate
sites where the conduct alleged in our cross claim occurred; and (iii)
restitution damages of over $125,000,000. Tex-New Mex also filed a motion to
compel arbitration of these issues, to which we objected. A hearing on the
motion to compel arbitration was held on April 11, 2003. The arbitration motion
filed by Tex-New Mex was denied. Tex-New Mex has indicated that they may appeal
that ruling. At the April 11, 2003 hearing, the court severed into a separate
action EOTT's cross-claims against Tex-New Mex that extend beyond the crude oil
release and groundwater contamination in the Kniffen Estates subdivision
("EOTT's Over-Arching Claim"). Our motion for summary judgement on certain
issues is set for hearing on May 5, 2003. Discovery is ongoing in this matter. A
trial date of June 9, 2003 is set for the plaintiff's claims against Tex New-
Mex and EOTT's original cross claim against Tex-New Mex arising from their crude
oil release and groundwater contamination in the Kniffen Estates subdivision
(the "Original Claims"). The court has indicated that it will schedule a trial
of EOTT's Over-Arching Claim after the Original Claims are tried.

26

Bankruptcy Issues related to Claims Made by Texas New Mexico Pipeline
Company and its affiliates. Tex-New Mex, Shell Oil Company and Equilon filed
proofs of claim in our bankruptcy, each filing the same claim in the amount of
$112 million. Equilon Pipeline Company LLC guaranteed, under certain
circumstances, the obligations of Tex-New Mex under the Purchase and Sale
Agreement dated May 1, 1999. According to Shell Oil Company's 2002 Annual
Report, in 2002, Shell became the sole owner of Equilon, which was merged into
Shell Oil Products US. The three claims filed each included the same supporting
information, consisting of indemnity claims under the Purchase and Sale
Agreement. In essence, there is only one claim of $112 million filed by three
entities and we have objected in the bankruptcy court to having the same claim
filed three times. The amount of the $112 million claim is equivalent to the sum
of the total amount of the proofs of claim filed in our bankruptcy proceedings
by owners of property on which the Tex-New Mex system is located and the
attorneys fees incurred by Tex-New Mex in defending the Kniffen Estates Suit and
other lawsuits (including our bankruptcy proceedings) with respect to the
Tex-New Mex system. The majority of these owners are plaintiffs in the Kniffen
Estates Suit and a group of New Mexico environmental claimants, with whom we
settled during our bankruptcy proceeding and accrued the allowed general
unsecured claim at December 31, 2002. A hearing on our objection to these claims
was scheduled for March 18, 2003, but the parties stipulated and agreed to delay
the hearing to allow the Kniffen Estates Suit to proceed. A final determination
of the extent of the allowance of this claim, if any, will be made after and
considering the outcome of this lawsuit.

Jerry W. Holmes and Barbara I. Holmes v. EOTT Energy Pipeline Limited
Partnership and Texas-New Mexico Pipe Line Company, Cause No. CV43800, In the
District Court of Midland County, Texas, 385th Judicial District. This lawsuit
was filed on June 21, 2002. The plaintiffs in this suit are the owners of a home
in the Kniffen Estates who allege that their water well was contaminated by
crude oil. The plaintiffs claim that the alleged crude oil contamination of
their water well resulted from the 1992 crude oil release that is the subject of
the Kniffen Estates Suit. The plaintiffs claim $1,000,000 in damages. EOTT filed
a motion to consolidate this lawsuit with the Kniffen Estates Suit, which motion
was granted on October 16, 2002. EOTT and the plaintiffs agreed to a settlement
during our bankruptcy proceedings. The settlement provided for the plaintiffs'
release of their claims against EOTT in exchange for an allowed general
unsecured claim in our bankruptcy in the amount of $300,000. The general
unsecured claim amount has been accrued at December 31, 2002. The plaintiffs and
EOTT continue to pursue their claims against Tex-New Mex in this matter.

Bernard Lankford and Bette Lankford vs. Texas-New Mexico Pipe Line Company
and EOTT Energy Pipeline Limited Partnership, Cause No. CC11176, In the County
Court at Law of Midland County, Texas. This lawsuit was filed on January 15,
2002. The plaintiffs in this lawsuit own property that is located to the north
of the Kniffen Estates subdivision. The plaintiff's allegations are virtually
identical to the allegations of the plaintiffs in the Kniffen Estates Suit. The
plaintiffs have asserted strict liability, nuisance, negligence, gross
negligence, trespass, and intentional infliction of emotional distress causes of
action. The plaintiffs are seeking unspecified actual damages and punitive
damages. The plaintiffs in this case joined in the settlement of the Kniffen
Estates Suit described above. That settlement provides for the plaintiff's
release of their claims against PLP and the allocation to the plaintiffs of a
portion of the general unsecured claim in our bankruptcy proceeding in the
amount of $3,252,800 that is discussed in the description of the Kniffen Estate
Suit.

Jimmie B. Cooper and Shryl S. Cooper v. Texas-New Mexico Pipeline Company,
Inc., EOTT Energy Pipeline Limited Partnership and Amerada Hess Corporation,
Case No. CIV 01-1321 M/JHG, In the United States District Court for the District
of New Mexico. Plaintiffs in this lawsuit, filed on October 5, 2001, are surface
interest owners of certain property located in Lea County, New Mexico. The
plaintiffs allege that aquifers underlying their property and water wells
located on their property have been contaminated as a result of spills and leaks
from a pipeline running across their property that is or was owned by Tex-New
Mex and us. The plaintiffs also allege that oil and gas operations conducted by
Amerada Hess Corporation resulted in leaks or spills of pollutants that
ultimately contaminated the plaintiffs' aquifers and water wells. Our initial
investigation of this matter indicated that the alleged contamination of the
aquifers underlying the plaintiffs' property was not caused by leaks from the
pipeline now owned by us that traverses the plaintiffs' property. EOTT and the
plaintiffs have agreed to the terms of a settlement, whereby the plaintiffs will
release their claims against EOTT and receive an allowed general unsecured claim
in our bankruptcy in the amount of $300,000. The general unsecured claim has
been accrued at December 31, 2002. EOTT and the plaintiffs continue to pursue
their claims against Tex-New Mex.

27

Jimmie T. Cooper and Betty P. Cooper vs. Texas-New Mexico Pipeline Company,
Inc., EOTT Energy Pipeline Limited Partnership, and EOTT Energy Corp., Case No.
D-0101-CV-2002-02122, In the 1st Judicial District Court, Santa Fe County, New
Mexico. This lawsuit was filed on October 1, 2002. The plaintiffs in this
lawsuit are surface interest owners of certain property located in Lea County,
New Mexico. The plaintiffs are alleging that aquifers underlying their property
and water wells located on their property have been contaminated as a result of
spills and leaks from a pipeline running across their property that is or was
owned by Tex-New Mex and PLP. The plaintiffs do not specify when the alleged
spills and leaks occurred. The plaintiffs are seeking payment of costs that
would be incurred in investigating and remediating the alleged crude oil
releases and replacing water supplies from aquifers that have allegedly been
contaminated. The plaintiffs are also seeking damages in an unspecified amount
arising from the plaintiffs' alleged fear of exposure to carcinogens and the
alleged interference with the plaintiffs' quiet enjoyment of their property. The
plaintiffs are also seeking an unspecified amount of punitive damages. PLP and
the plaintiffs agreed to the terms of a settlement, whereby the plaintiffs will
release their claims against PLP and receive an allowed general unsecured claim
in our bankruptcy in the amount of $1,027,000. The general unsecured claim has
been accrued at December 31, 2002. PLP and the plaintiffs continue to pursue
their claims against Tex-New Mex in this matter.

Richard D. Warden and Nancy J. Warden v. EOTT Energy Pipeline Limited
Partnership and EOTT Energy Corp., Case No. CIV-02-370 L, In the United States
District Court for the Western District of Oklahoma. In this lawsuit, filed on
February 28, 2002, the plaintiffs are landowners, seeking damages allegedly
arising from a release of crude oil from a pipeline owned by us. Although we
undertook extensive remediation efforts with respect to the crude oil release
that is the subject of this lawsuit, plaintiffs allege that we did not properly
remediate the crude oil release and claim causes of action for negligence, gross
negligence, unjust enrichment, and nuisance. The plaintiffs filed a proof of
claim in our bankruptcy proceedings claiming damages of $500,000. This matter is
being evaluated in the claims reconciliation process in our bankruptcy. We do
not believe that we are liable for the damages asserted by the Plaintiffs and
therefore we have not recorded a contingent liability.

David A. Huettner, et al v. EOTT Energy Partners, L.P., et al, Case No. 1:02
CV-917, In the United States District Court, Northern District of Ohio, Eastern
Division ("Securities Suit"). This lawsuit was filed on May 15, 2002, for
alleged violations of the Securities and Exchange Act of 1934 and common law
fraud. The suit was brought by three of our former unitholders who claim that
the General Partner, certain of the officers and directors of Enron and the
General Partner and our independent accountants were aware of material
misstatements or omissions of information within various press releases, SEC
filings and other public statements, and failed to correct the alleged material
misstatements or omissions. Plaintiffs maintain that they were misled by our
press releases, SEC filings, and other public statements when purchasing our
common units and were financially damaged thereby. On June 28, 2002, the
Judicial Panel on Multidistrict Litigation issued a Conditional Transfer Order
that provides for the transfer of this case to the Southern District of Texas
for consolidated pretrial proceedings with other lawsuits asserting securities
claims against Enron and Arthur Andersen. On September 20, 2002, EOTT Energy
Partners, L.P. filed a motion to dismiss on the basis of the plaintiff's failure
to state a claim upon which relief can be granted. EOTT Energy Corp. joined in
that motion on October 11, 2002. The plaintiffs filed a motion to lift the stay,
which was denied by the bankruptcy court judge. Additionally, the plaintiffs
filed proofs of claim in the amount of $500,000 each. These claims are being
reviewed in our claims reconciliation process. Based on management's current
knowledge, we believe the allegations are without merit and therefore, we have
not recorded a contingent liability. We can provide no assurances regarding the
outcome of this lawsuit, but will continue to gather and analyze new information
as it becomes available.

Big Warrior Corporation v. Enron Transportation Services, Inc., EOTT Energy
Corp., REM Services, Inc., Enron Pipeline Services Company, et al., Case No.
2:02CV749PG, In the United States District Court for the Southern District of
Mississippi, Hattiesburg Division. This case was filed in the Circuit Court of
Jones County Mississippi on August 5, 2002. EOTT filed a Notice of Removal to
the United States District Court for the Southern District of Mississippi,
Hattiesburg Division, which was granted on September 11, 2002. In October 2001,
EPSC awarded a contract to Big Warrior Corporation ("Big Warrior") for the
construction of

28

PLP's new ten-inch (10") crude oil pipeline that runs from Lumberton,
Mississippi to Eucutta, Mississippi. Big Warrior alleges that EOTT Energy Corp.
ratified and accepted the contract and other alleged agreements associated
therewith. In this lawsuit, Big Warrior was seeking payment (under various
theories) of unanticipated additional costs that allegedly resulted from
adjustments to the project work schedule and EPSC's alleged failure to timely
procure necessary rights of way and rights of ingress and egress. Big Warrior
asserted claims for breach of contract, quantum merit, fraud and
misrepresentation, tortious interference with contractual relations, civil
conspiracy, and negligence. Big Warrior was claiming actual and punitive damages
of up to $30 million. Big Warrior was also seeking the enforcement of mechanics'
and materialmens' liens it had filed against EOTT's pipeline. In connection with
our bankruptcy, this matter was settled in February of 2003 under the following
terms: (a) after execution of the settlement agreement, EOTT made a cash payment
to Big Warrior in the amount of $1,764,700; (b) EOTT executed a note in the
original principal amount to Big Warrior of $2,700,000, secured by a second lien
position in the Lumberton-Eucutta Pipeline, with the note payable in quarterly
installments at an interest rate of six percent per annum with the first payment
to be made on June 1, 2003; (c) the note is to be amortized over seven years
with a balloon payment at the end of four years, with the final payment due
March 1, 2007; and (d) Big Warrior will dismiss us and EPSC from the lawsuit.
The Order in this matter was entered in the EOTT Bankruptcy Court on February 4,
2003. The settlement agreement was accrued as of December 31, 2002.

In re EOTT Energy Partners, L.P., Case No. 02-21730, EOTT Energy Finance
Corp., Case No. 02-21731, EOTT Energy General Partner, L.L.C., Case No.
02-21732, EOTT Energy Operating Limited Partnership, Case No. 02-21733, EOTT
Energy Canada Limited Partnership, Case No. 02-21734, EOTT Energy Liquids, L.P.,
Case No. 02-21736, EOTT Energy Corp., Case No. 02-21788, Debtors (Jointly
Administered under Case No. 02-21730), In the United State Bankruptcy Court for
the Southern District of Texas, Corpus Christi Division. On October 8, 2002, we
and all of our subsidiaries filed voluntary petitions for relief under Chapter
11 of the United States Bankruptcy Code in the United States Bankruptcy Court
for the Southern District of Texas (the "EOTT Bankruptcy Court") to facilitate
reorganization of our business and financial affairs for the benefit of us, our
creditors and other interested parties. Additionally, the General Partner filed
its voluntary petition for reorganization under Chapter 11 on October 21, 2002
in the EOTT Bankruptcy Court. The General Partner filed in order to join in our
voluntary, pre-negotiated restructuring plan filed on October 8, 2002. On
October 24, 2002, the EOTT Bankruptcy Court administratively consolidated, for
distribution purposes, the General Partner's bankruptcy filing with our
previously filed cases. Pursuant to the automatic stay provisions of the
Bankruptcy Code, all actions to collect pre-petition claims from us and to
interfere with our business as well as most other pending litigation against us,
were stayed. In addition, as debtor-in-possession, we had the right, subject to
the approval of the EOTT Bankruptcy Court, to assume or reject any pre-petition
executory contracts or unexpired leases. The EOTT Bankruptcy Court approved
payment of certain pre-petition liabilities, such as employee wages and
benefits, trust fund taxes in the ordinary course of business and certain
pre-petition claims of crude oil suppliers, critical vendors and foreign
vendors. In addition, the EOTT Bankruptcy Court allowed for the payment of the
certain bankruptcy professionals and retention of the professionals in the
ordinary course of business. Finally, the EOTT Bankruptcy Court extended the
time within which we must assume or reject any unexpired leases of
nonresidential property. We continued to operate our business and control our
assets as a debtor-in-possession, subject to the EOTT Bankruptcy Court's
supervision and orders until our Restructuring Plan was confirmed on February
18, 2003 and became effective on March 1, 2003. We, therefore, have emerged from
bankruptcy. The provisions of the restructuring plan are further described in
Item 1, Description of Business, of this annual report. Shell and Tex-New Mex
filed a notice of appeal to our plan confirmation on February 24, 2003. The
Record on Appeal is being assembled. We intend to file a motion to dismiss the
appeal as being moot.

EPA Section 308 Request. Enron received a request for information from the
Environmental Protection Agency ("EPA") under Section 308 of the Clean Water
Act, requesting information regarding certain spills and releases from oil
pipelines owned or operated by Enron and its affiliated companies for the time
period July 1, 1998 to July 11, 2001. The only domestic crude oil pipelines
owned or operated by Enron at the time of the request were our pipelines. Our
pipelines have been operated by either the General Partner, a wholly-owned
subsidiary of Enron, or EPSC, also an Enron subsidiary, for the time period in
question. At the

29

time the EPA issued the Section 308 request to Enron, EPSC operated our
pipelines. The General Partner and EPSC retain operator liability for the time
period at issue. Enron responded to the EPA's Section 308 request in its
capacity as the operator of the pipelines actually owned by us. We retain all
liability for the pipelines for which an owner would be responsible. In addition
to the retention of ownership liability, we may also be required to indemnify
the General Partner and its Affiliates with regard to any environmental charges.
Under the terms of the Partnership Agreement, we are obligated to indemnify the
General Partner and its Affiliates (including Enron) for all losses associated
with activities undertaken on our behalf. This indemnification obligation is
limited to actions undertaken in good faith, and may only be satisfied from our
assets. Neither our bankruptcy nor Enron's bankruptcy affect our liability as
owner of the pipelines, nor does it affect our indemnification obligations under
the Partnership Agreement. While we cannot predict the outcome of the EPA's
Section 308 review, the EPA could seek to impose liability on us with respect to
the matters being reviewed. The outcome of the EPA 308 request is not yet known,
and we are unaware of any potential liability of us, Enron, or its affiliates.
However, we assume that we are fully responsible as owner for any environmental
claims or fines in relation to the pipelines (subject to insurance claims or
other third party claims to which we may be entitled). Our bankruptcy
proceedings did not relieve us from potential environmental liability.
Consequently, believe that neither our bankruptcy nor Enron's bankruptcy has had
a material impact on our environmental liability.

We are subject to extensive federal, state and local laws and regulations
covering the discharge of materials into the environment, or otherwise relating
to the protection of the environment. See "Business - Environmental Matters"
above.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the MLP's unitholders
during the fourth quarter. In December 2002, the disclosure statement and
Reorganization Plan were approved by the EOTT Bankruptcy Court. Subsequent to
the approval, ballots were mailed to creditors and the MLP's unitholders for
approval of the Reorganization Plan.

30

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON UNITS AND RELATED SECURITY HOLDER
MATTERS.

On October 11, 2002 the New York Stock Exchange ("NYSE") announced it had
determined that our common units (ticker symbol EOT) should be suspended
immediately from listing on the NYSE because of our Chapter 11 bankruptcy filing
and the fact that our common units had recently traded below $1.00. An order was
issued granting the application of the NYSE to strike from listing and
registration our common units effective at the opening of business on November
22, 2002. Following the delisting from the NYSE, the MLP's common units, which
were eliminated under our Restructuring Plan, traded over-the-counter and were
listed in the Pink Sheets under the symbol EOTPQ until the effective date of our
Restructuring Plan. We expect that all new limited liability company units we
will issue with respect to the extinguishment of certain liabilities and the
elimination of the MLP's common units under our Restructuring Plan will be
issued by August 2003. As of March 18, 2003, our LLC units were being traded
over-the-counter and were listed in the Pink Sheets. It is not our current
intention to become listed on a securities exchange in the near future, but we
may elect to do so at an appropriate time, assuming we meet any applicable
listing requirements. The following table sets forth, for the periods indicated,
the high and low sale prices per common unit, as reported on the NYSE Composite
Tape and through the Pink Sheets, and the amount of cash distributions paid per
common unit.

- ----------

(1) Distributions are shown in the quarter paid to common unitholders and
are based on the prior quarter's earnings.

Holders

As of February 15, 2003, there were approximately 307 record holders of our
common units, and there were an estimated 10,000 beneficial owners of our common
units held in a street name. Two holders held our subordinated units. There was
no established public trading market for these subordinated units. All of our
outstanding common units and subordinated units were eliminated as a result of
our Restructuring Plan, which was effective on March 1, 2003. As a part of the
Restructuring Plan, we issued 11,947,820 EOTT LLC units to be allocated to our
former senior noteholders and general unsecured creditors with allowed claims
and we issued 369,520 EOTT LLC units to former common unitholders.

31

Issuance of Unregistered Securities

Pursuant to our Restructuring Plan, we issued the following new equity and
debt securities:

o EOTT LLC issued 369,520 limited liability company units and 957,981
warrants for limited liability company units to the former holders of
the MLP's common units;

o EOTT LLC issued 11,947,820 limited liability company units to be
allocated to the holders of the MLP's former 11% senior notes due 2009
and our general unsecured creditors with allowed claims;

o EOTT LLC and EOTT Energy Finance Corp. issued $104 million of 9% senior
notes due 2010 to be allocated to the holders of the MLP's former 11%
senior notes due 2009 and our general unsecured creditors with allowed
claims; and

o each of the MLP, EOTT Energy General Partner, L.L.C., EOTT Energy
Operating Limited Partnership, EOTT Energy Pipeline Limited
Partnership, EOTT Energy Canada Limited Partnership, and EOTT Energy
Liquids L.P. issued guarantees with respect to the senior notes.

We are in the process of determining the pro rata allocation of the
11,947,820 units and the $104 million 9% senior notes. The exact pro rata
allocation of these limited liability company units cannot be determined until
the precise amount of each allowed claim is determined. For further information,
see Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Working Capital and Credit Resources" and Item 12.
"Security Ownership of Certain Beneficial Owners and Management."

The securities and guarantees listed above were issued or will be issued
without registration under the Securities Act, or state or local law, in
reliance on the exemptions provided for in Section 1145 of Title 11 of the
Bankruptcy Code and Section 4(2) of the Securities Act. Our new limited
liability company units will, however, be registered pursuant to Section 12(g)
of the Securities Exchange Act of 1934 and therefore subject to the reporting
requirements under this act, and the indenture governing our senior notes is
subject to the Trust Indenture Act of 1939 and a Form T-3 filing in compliance
with that act.

Distribution Policy

Under the MLP's amended and restated agreement of limited partnership and
amendments thereto in effect until the consummation of our Restructuring Plan
(the "Partnership Agreement"), it was intended that we distribute 100% of our
Available Cash, as defined in the Partnership Agreement, within 45 days after
the end of each quarter to unitholders of record and to the General Partner.

Because of the bankruptcy of Enron and certain of its subsidiaries and the
resulting uncertainty related to our term financing and working capital
facilities, along with the continued weakness in the crude markets, projected
expenditure requirements related to scheduled turnaround costs for our Morgan's
Point Facility and certain capital expansion projects currently underway, our
distribution for the fourth quarter of 2001 (paid in the first quarter of 2002)
was $0.25 per common unit, which was lower than the intended minimum quarterly
distribution amount of $0.475 per common unit. We made a claim against Enron for
failure to provide the shortfall in the distribution amount of $4.2 million
under a distribution support agreement in the Enron Bankruptcy Court. However,
we released this claim against Enron under the terms of the Enron Settlement
Agreement. See further discussion in Note 9 to the Consolidated Financial
Statements.

On April 3, 2002, we suspended the distribution to unitholders for the first
quarter of 2002 and we did not make a distribution to our unitholders for the
second, third or fourth quarters of 2002. Our credit facilities restrict our
ability to make any distribution of dividends during the term of the facility.
See further discussion in Note 8 to the Consolidated Financial Statements, Item
7. "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Impact of the Bankruptcy of Enron and Certain of Its

32

Subsidiaries, and Related Events - Distributions to Our Common Unitholders" and
"Liquidity and Capital Resources - Working Capital and Credit Resources." In
addition, pursuant to the terms of our indenture governing our senior notes, the
distribution of dividends will be limited due to the existing restrictions of
our ability to pay dividends under the credit facilities and other debt
instruments.

ITEM 6. SELECTED FINANCIAL DATA (Unaudited)

The following table sets forth selected income, balance sheet and operating
data for the years ended December 31, 2002, 2001, 2000, 1999, and 1998. The
selected financial data presented below is financial information of the MLP and
its affiliates, which is the predecessor to EOTT LLC. The selected financial
data as of and for the years ended December 31, 2002 and 2001, has been derived
from our audited Consolidated Financial Statements contained elsewhere herein.
The selected financial data for all other periods has been derived from our
unaudited Consolidated Financial Statements for the relevant periods. See
further discussion of our unaudited Consolidated Financial Statements in
Management's Discussion and Analysis - Results of Operations and Note 3 to the
Consolidated Financial Statements.

- ----------

(1) 1999 includes charges of $6.8 million related to mid-continent NGL activity
and $2.0 million of severance costs for reduction of workforce. 2000
includes income of $0.6 million related to an insurance recovery related to
the theft of NGL product in 1999 partially offset by charges related to
mid-continent NGL activity and severance costs related to a former officer
of the company. 2001 includes the impairment of the 10 year tolling
agreement and the 10 year storage and transportation agreement with Enron
Gas Liquids, Inc. 2002 includes charges of $76.1 million related to asset
impairments of our Morgan's Point Facility, Mont Belvieu Facility and
natural gas liquids operations on the West Coast. See additional discussion
in Note 7 to the Consolidated Financial Statements.

(2) 1998 includes one month of results of operations associated with the assets
acquired from Koch Pipeline Company, L.P. on December 1, 1998. 2001 includes
six months of results of operations associated with the assets acquired from
Enron Corp. on June 30, 2001.

(3) 1999 includes the cumulative effect of adopting Emerging Issues Task Force
("EITF") Issue 98-10, "Accounting for Contracts Involved in Energy Trading
Activities." 2001 includes the cumulative effect of adopting Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" and the change in the method of valuing
inventories used in our energy trading activities. See additional discussion
in Notes 2 and 4 to the Consolidated Financial Statements.

(4) In connection with the adoption of EITF Issue No. 02-03, we have netted all
sales and purchases related to our crude oil and refined product marketing
and trading activities and have reclassified previously reported amounts.

(5) Reorganization items includes primarily the net effects of the Enron
Settlement Agreement ($45.5 million gain), adjustment to reflect the allowed
claim amount of the 11% senior notes (write-off of deferred issuance costs
of $5.1 million), and legal and professional fees ($7.1 million) as a result
of our reorganization proceedings. See additional discussion in Note 1 to
the Consolidated Financial Statements.

(6) Certain liabilities which existed at the date of our Chapter 11 filing are
subject to compromise or other treatment under the Restructuring Plan.
Liabilities Subject to Compromise include the 11% Senior Notes of $235
million, interest accrued on the 11% Senior Notes through our Chapter 11
filing date of $13.5 million, accounts payable of $34.9 million and allowed
claims for environmental settlements during our bankruptcy of $8.0 million.
See additional discussion in Note 1 to the Consolidated Financial
Statements.

(7) Partners' Capital in 1999 includes the issuance of 3,500,000 Common Units to
the public in September 1999.

(8) In February 1999, Enron contributed $21.9 million in Additional Partnership
Interests to the MLP pursuant to its commitment made in connection with the
Support Agreement. In May 1999 and February 2000, Enron paid $2.5 million
and $6.8 million, respectively, in support of EOTT's first and fourth
quarter 1999 distributions to its Common Unitholders in exchange for
Additional Partnership Interests.

(9) 1998 includes $258.1 million for the purchase of crude oil gathering and
transportation assets in multiple states. 1999 includes $38.4 million for
the purchase of crude oil transportation and storage assets in New Mexico
and Texas in May 1999. 2001 includes $117 million for the purchase of
certain liquids processing, storage and transportation assets in the Texas
Gulf Coast region in June 2001. See additional discussion in Note 5 to the
Consolidated Financial Statements.

34

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

INFORMATION REGARDING FORWARD-LOOKING INFORMATION

The statements in this Annual Report on Form 10-K that are not historical
information are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Such forward-looking statements include the discussions in "Management's
Discussion and Analysis of Financial Condition and Results of Operations." Any
forward-looking statements are not guarantees of future performance and involve
significant risks and uncertainties, and actual results may vary materially from
those in the forward-looking statements as a result of various factors. See Item
1. "Business - Information Regarding Forward-Looking Information" and in this
section, "Bankruptcy Proceeding and Restructuring Plan," "Risk Factors," and
"Liquidity and Capital Resources" for statements regarding important factors
that could cause actual results to differ materially from those in the
forward-looking statements herein. Although we believe that our expectations
regarding future events are based on reasonable assumptions, we can give no
assurance that these are all the factors that could cause actual results to vary
materially or that our expectations regarding future developments will prove to
be correct.

BANKRUPTCY PROCEEDINGS AND RESTRUCTURING PLAN

On October 8, 2002, EOTT Energy Partners, L.P. (the "MLP") and our four
affiliated limited operating partnerships, EOTT Energy Finance Corp. and EOTT
Energy General Partner, L.L.C. (the "Subsidiary Entities") filed pre-negotiated
voluntary petitions for reorganization under Chapter 11 of the United States
Bankruptcy Code (the "EOTT Bankruptcy"). The filing was made in the United
States Bankruptcy Court for the Southern District of Texas, Corpus Christi
Division (the "EOTT Bankruptcy Court"). Additionally, EOTT Energy Corp. (the
"General Partner") filed a voluntary petition for reorganization under Chapter
11 on October 21, 2002 in the EOTT Bankruptcy Court in order to join in the
voluntary, pre-negotiated Joint Chapter 11 Plan of Reorganization filed on
October 8, 2002. On October 24, 2002, the EOTT Bankruptcy Court administratively
consolidated for distribution purposes the General Partner's bankruptcy filing
with the previously filed cases. We operated as debtors-in-possession under the
Bankruptcy Code, which means we continued to remain in possession of our assets
and properties and continued our day-to-day operations.

The EOTT Bankruptcy Court confirmed our Third Amended I Joint Chapter 11
Plan of Reorganization, as supplemented ("Restructuring Plan") on February 18,
2003, and it became effective on March 1, 2003. We emerged from bankruptcy as a
limited liability company structure and EOTT Energy LLC ("EOTT LLC") became the
successor registrant to the MLP. While this report covers the fiscal year ended
December 31, 2002, this report should be read in light of our bankruptcy
proceeding and Restructuring Plan. The Restructuring Plan and related disclosure
statement were filed with the Securities and Exchange Commission ("SEC") on
December 17, 2002 as part of a Form 8-K/A filing concerning the filing of the
Restructuring Plan with the EOTT Bankruptcy Court, and supplemented as part of a
Form 8-K filed on March 4, 2003 concerning the confirmation of the Restructuring
Plan (which filings are incorporated herein by reference). The outcome of our
emergence from bankruptcy, the consummation of our Restructuring Plan and the
level of success of our Restructuring Plan will materially affect many of the
matters described in this report.

Restructuring Plan

We entered into an agreement, dated October 7, 2002, with Enron Corp.
("Enron"), Standard Chartered Bank ("Standard Chartered"), Standard Chartered
Trade Services Corporation ("SCTS"), Lehman Commercial Paper Inc. ("Lehman
Commercial") and holders of approximately 66% of the outstanding principal
amount of our senior notes (the "Restructuring Agreement"). Under this
Restructuring Agreement, Enron, Standard Chartered, SCTS, Lehman Commercial and
approximately 66% of our senior note holders agreed to vote in favor of the
Restructuring Plan, and to refrain from taking actions not in support of the
Restructuring Plan.

The Restructuring Plan, however, was subject to the approval of the EOTT
Bankruptcy Court, and the proposed settlement agreement with Enron, discussed
further below, was subject to the additional approval of the United States
Bankruptcy Court for the Southern District of New York (the "Enron Bankruptcy
Court"), where Enron and certain of its affiliates filed for Chapter 11
bankruptcy protection. The EOTT Bankruptcy Court approved the settlement
agreement with Enron on November 22, 2002, and the Enron Bankruptcy Court

35

approved the settlement agreement on December 5, 2002. The major provisions of
the Restructuring Plan, which became effective March 1, 2003, are as follows:

o Enron has no further affiliation with us or the General Partner. The
General Partner will be liquidated as soon as reasonably possible.

o We consummated the settlement agreement with Enron, described further
below.

o EOTT was converted to a limited liability company structure and EOTT
LLC became the successor registrant to the MLP. The MLP was merged into
EOTT Energy Operating Limited Partnership. EOTT LLC owns and manages
the current operating limited partnerships.

o We are now managed by a seven-member Board of Directors. One of the
directors is the chief executive officer of EOTT LLC, and the remaining
six directors were selected by the former senior noteholders who signed
the Restructuring Agreement at the confirmation hearing for our
Restructuring Plan. The new board members are Thomas M. Matthews, who
serves as Chairman, J. Robert Chambers, Julie H. Edwards, Robert E.
Ogle, James M. Tidwell, S. Wil VanLoh, Jr., and Daniel J. Zaloudek. For
further details on our new board members, see Item 10. "Directors and
Executive Officers of the Registrant" below.

o We cancelled our outstanding $235 million of 11% senior unsecured
notes. Our former senior unsecured noteholders and holders of allowed
general unsecured claims will receive a pro rata share of $104 million
of 9% senior unsecured notes and a pro rata share of 11,947,820 limited
liability company units of EOTT LLC representing 97% of the newly
issued units. See "Working Capital and Credit Resources - EOTT LLC
Senior Notes 2010."

o We cancelled the MLP's publicly traded common units, and the former
holders of the MLP's common units received a pro rata share of 369,520
limited liability company units of EOTT LLC representing 3% of newly
issued units and a pro rata share of 957,981 warrants to purchase an
additional 7% of the new units. We cancelled the subordinated units and
additional partnership interests. See "Working Capital and Credit
Resources - EOTT LLC Equity Units and Warrants."

o We are authorized and intend to implement a management incentive plan
for certain of our key employees and our directors. The incentive plan,
once implemented, may reserve up to approximately 10% of EOTT LLC's
authorized units for issuance to certain key employees and directors.

o We will issue various notes for payment for certain classes of
creditors in accordance with the Restructuring Plan.

o We closed an exit credit facility with Standard Chartered, Lehman
Brothers Inc. ("Lehman") and other lenders on February 28, 2003. The
Term Loan Agreement and Letter of Credit Agreement under this facility
have a term of 18 months post-bankruptcy under substantially the same
terms as the debtor in possession facilities, with the inclusion of
certain additional financial covenants. The inventory repurchase and
trade receivables financing arrangements with SCTS under this exit
credit facility each have an initial term of 6 months. We have the
option to extend these arrangements for an additional 12 months,
subject to the payment of extension fees in the amount of 1% per annum
of the maximum commitment under these arrangements and an increase in
the interest rate from LIBOR plus 3% to LIBOR plus 7%.

In connection with the Restructuring Plan being confirmed, we will adopt
fresh start reporting on March 1, 2003. In connection with the confirmation of
our Restructuring Plan, the enterprise value of EOTT, inclusive of working
capital, was determined to be in the range of $365 million to $395 million. We
have arranged for independent valuations to be performed to assist in the
allocation of reorganization value (enterprise value before liabilities) as of
March 1, 2003 to the assets and liabilities of EOTT in proportion to their
relative fair value; however, these valuations have not been completed. We are

36

presenting below a summary of our debt at December 31, 2002 and March 1, 2003,
respectively and a table indicating the ownership of our new EOTT LLC units
being issued.

The following is a summary of our debt (in thousands):

Following the restructuring, the ownership of EOTT LLC will be as follows:

(1) Assumes a management incentive plan with 1,200,000 New LLC Units is approved
by the board of directors of EOTT LLC. No decision has currently been made
regarding the size of, or awards under, the incentive plan.

(2) Does not include up to 957,981 LLC Units to be issued if LLC Warrants are
exercised

(3) Includes 957,981 LLC Units that may be issued upon exercise of the LLC
Warrants

Enron Settlement Agreement

The General Partner and EOTT entered into a settlement agreement dated
October 8, 2002 (the "Enron Settlement Agreement") with Enron, Enron North
America Corp., Enron Energy Services, Inc., Enron Pipeline Services Company
("EPSC"), EGP Fuels Company ("EGP Fuels") and Enron Gas Liquids, Inc. ("EGLI")
(collectively, the "Enron Parties"). As part of the Enron Settlement Agreement,
Enron consented to the filing of our bankruptcy in the Southern District of
Texas, and Enron waived its rights of first refusal with respect to the sale of
the Morgan's Point Facility, Mont Belvieu Facility and other assets we purchased
pursuant to the Purchase and Sale Agreement dated June 29, 2001 between Enron
and us ("Purchase Agreement"). The EOTT Bankruptcy Court approved the Settlement
Agreement with Enron on November 22, 2002, and the Enron Bankruptcy Court
approved the Settlement Agreement on December 5, 2002. The Enron Settlement
Agreement was consummated on December 31, 2002. In connection with the
settlement of outstanding claims between the Enron Parties and us, the Enron
Settlement Agreement provides for the parties to enter into the following
agreements:

o We entered into an Employee Transition Agreement with EPSC, which
provided for the transfer to us of certain employees of subsidiaries of
Enron which perform pipeline operations services for us, effective
January 1, 2003.

o The General Partner and EPSC entered into a Termination Agreement on
October 8, 2002, which provided for the termination of the EPSC
Corporate Services Agreement.

37

o The General Partner, the MLP, and the Subsidiary Entities and Enron
entered into a Termination Agreement on October 8, 2002, which provided
for the termination of the Corporate Services Agreement.

o The General Partner and EGP Fuels entered into a Termination Agreement
on October 8, 2002, which provided for the termination of the
Transition Services Agreement.

o At December 31, 2002, we executed a promissory note payable to Enron in
the initial principal amount of $6.2 million that is guaranteed by our
subsidiaries (the "EOTT Note"). The EOTT Note is secured by an
irrevocable letter of credit and bears interest at 10 % per annum.

o The employees, former employees and their covered spouses and
dependents of the General Partner continued to participate in the Enron
retirement and welfare benefit plans until December 31, 2002.

As additional consideration and as a compromise of certain claims, we paid
Enron $1,250,000 (the "EOTT Cash Payment") on the effective date of our
Restructuring Plan.

We agreed, among other things, to assume obligations in our bankruptcy cases
and cure defaults under the Operation and Service Agreement with EPSC whereby
EPSC provided certain pipeline operation services to us. We also agreed to
indemnify EPSC against claims arising from the General Partner's failure to
perform its duties under the Operation and Services Agreement or the General
Partner's refusal to approve EPSC recommended items or modifications in the
budgets.

We and the Enron Parties also mutually released each other for any and all
claims except those expressly resolved in the Enron Settlement Agreement,
including as follows:

o All of the parties to the Enron Settlement Agreement retained any
rights to payments with regard to EGLI's inventory at the Mont Belvieu
Facility pursuant to the Stipulation entered by the Enron Bankruptcy
Court on April 2, 2002, rejecting the ten-year toll conversion and
storage agreements (the "Toll Conversion Agreement and Storage
Agreement").

o The Enron Parties did not release us for claims with respect to the
EOTT Note or any undisputed amounts owed to EPSC pursuant to the
Operation and Service Agreement for the period beginning August 1,
2002. We have disputed certain amounts billed in a final invoice from
EPSC related to the Operation and Service Agreement and are working to
resolve the dispute.

The following is a summary of the net Enron Settlement amount recorded in
Reorganization Items in the Consolidated Statement of Operations (in millions)
as discussed in Note 1 to the Consolidated Financial Statements:

Forgiveness of Payable to Enron and affiliates $ 38.5
Forgiveness of Performance Collateral from Enron 15.8
Note issued to Enron (EOTT Note) (6.2)
EOTT Cash Payment to Enron for certain claims (1.2)
Final EOTT contribution to Enron Cash Balance Plan (1.4)
------
Total $ 45.5
======

NYSE DELISTING

On October 11, 2002 the New York Stock Exchange ("NYSE") announced it had
determined that the MLP's common units (ticker symbol: EOT) should be suspended
immediately from listing on the NYSE because of our Chapter 11 bankruptcy filing
and the fact that our common units had recently traded below $1.00. We were
formally delisted from the NYSE on November 22, 2002. These common units were
canceled under our Restructuring Plan in March 2003. EOTT LLC issued new equity
units for allocation to certain creditors and former unitholders. We expect
determination of the allocation of new limited

38

liability company units under our Restructuring Plan will be complete by August
2003, and we expect that the units will be traded over-the-counter and listed in
the Pink Sheets. We have no current plan to become listed on a securities
exchange in the near future, but may elect to do so at an appropriate time,
assuming we meet the applicable listing requirements.

IMPACT OF THE BANKRUPTCY OF ENRON AND CERTAIN OF ITS SUBSIDIARIES, AND RELATED
EVENTS

The MLP was managed by the General Partner, a wholly-owned subsidiary of
Enron. See Item 1. "Business." Beginning on December 2, 2001, Enron and certain
subsidiaries of Enron filed voluntary petitions for relief under Chapter 11 of
Title 11 of the United States Code (the "Enron Bankruptcy"). Neither the General
Partner nor we were included in the Enron Bankruptcy. However, because of our
contractual relationships with Enron and certain of its subsidiaries at the time
of the filing of the Enron Bankruptcy petition, the Enron Bankruptcy has
impacted us in various ways, discussed below.

Rejection of Toll Conversion and Storage Agreements with EGLI; Claims Against
Enron's Bankruptcy Estate

We were adversely impacted as a result of the inclusion of EGLI in Enron's
bankruptcy proceedings. We had in place ten-year Toll Conversion and Storage
Agreements with EGLI. On April 2, 2002, the Enron Bankruptcy Court entered a
stipulation and agreed order rejecting the Toll Conversion and Storage
Agreements (the "Stipulation"), which Stipulation became final and
non-appealable on April 12, 2002. As a result of EGLI's non-performance under
these agreements, we recorded a $29.1 million non-cash impairment, which was our
remaining investment in these long-term contracts, at December 31, 2001. We had
a monetary damage claim against EGLI and Enron as a result of the rejection of
the agreements under the Stipulation. Accordingly, we filed claims against EGLI
in the Enron Bankruptcy Court on May 12, 2002, resulting from EGLI's rejection
of the Toll Conversion and Storage Agreements in the amount of $540.5 million.

In addition, Enron guaranteed EGLI's performance under the EGLI agreements;
however, its guarantee was limited to $50 million under the Toll Conversion
Agreement and $25 million under the Storage Agreement. Accordingly, we filed a
claim against Enron in the Enron Bankruptcy Court resulting from EGLI's
rejection of the agreements in the amount of $75 million. We filed additional
claims against numerous Enron affiliates on October 15, 2002 totaling $213.5
million. Under the terms of the Enron Settlement Agreement, we withdrew all
claims filed by us in the Enron Bankruptcy Court upon the effective date of our
Restructuring Plan.

Tax and Environmental Indemnities

We also had indemnities from Enron for certain ad valorem taxes, possible
environmental expenditures and title defects relating to the Morgan's Point
Facility and the Mont Belvieu Facility. The total indemnity amount provided for
under the Purchase Agreement was $25 million and we had made no claims under the
indemnities through December 31, 2002. Under the terms of the Enron Settlement
Agreement, we released Enron from these indemnities.

Performance Collateral from Enron

As discussed above, Enron guaranteed payments under the Toll Conversion and
Storage Agreements. In addition, EGLI owed us approximately $9 million under the
Toll Conversion and Storage Agreements prior to filing for bankruptcy. Pursuant
to the Toll Conversion and Storage Agreements, if Enron's credit rating dropped
below certain defined levels specified in these agreements, we could request
within five days of this occurrence for EGLI to post letters of credit. The
letters of credit could be drawn upon if EGLI failed to pay any amount owed to
us under these agreements. The Toll Conversion Agreement provided that the
letter of credit would be in an amount reasonably requested by us, not to exceed
$25 million. The Storage Agreement provided that the letter of credit would be
in an amount as reasonably requested, but no amount was specified. In late
November 2001, Enron's credit rating fell below the ratings specified in these
agreements. Accordingly, on November 27, 2001, we requested that EGLI post two
$25 million letters of credit. In lieu of posting letters

39

of credit, we received a $25 million deposit/performance collateral from
EGLI/Enron, against which we recouped the $9 million of outstanding invoices. We
applied the remaining sum, approximately $16 million, to recoup or offset a
portion of our damages as a result of EGLI's rejection of the Toll Conversion
and Storage Agreements. Our Restructuring Plan resulted in a release by Enron of
any claim to the $25 million deposit/performance collateral.

Cost and Availability of Credit

As a result of Enron's bankruptcy, we incurred higher costs in obtaining
credit than we had in the past. In addition, our trade creditors were less
willing to extend credit to us on an unsecured basis and the amount of letters
of credit we have been required to post for our marketing activities increased
significantly, contributing to the necessity of our Chapter 11 bankruptcy
filing. See further discussion in Note 8 to the Consolidated Financial
Statements.

Distributions to Our Common Unitholders

Our distribution for the fourth quarter of 2001 was $0.25 per common unit,
which was lower than the minimum quarterly distribution amount of $0.475 per
common unit provided under the MLP's Amended and Restated Agreement of Limited
Partnership and amendments thereto (the "Partnership Agreement"). Enron was
obligated under a support agreement to provide cash distribution support to us
for any shortfall in available cash for the fourth quarter of 2001 below the
minimum quarterly distribution amount. As a result of Enron's financial
deterioration and bankruptcy, however, Enron did not pay the fourth quarter cash
distribution shortfall of $0.225 per common unit. We made a claim for the
distribution support amount of $4.2 million in the Enron Bankruptcy Court.
However, we released this claim against Enron under the terms of the Enron
Settlement Agreement.

We did not make a distribution to our common unitholders for any quarter
during 2002. We do not expect to make distributions to our new EOTT LLC
unitholders in the foreseeable future due to restrictions in our exit credit
facilities. See "Liquidity and Capital Resources" below.

Audit Committee of the General Partner

The Board of Directors of the General Partner established an Audit Committee
consisting of three independent directors - individuals who are neither officers
nor employees of the General Partner or an affiliate of the General Partner. By
December 5, 2001, all of the independent directors of the Board of Directors of
the General Partner had resigned, citing personal reasons. As a result of these
resignations, there were no independent directors to sit on the Audit Committee.
On April 10, 2002, Messrs. Matthews, Tidwell and Lovett were elected as new
independent directors of the Board of Directors of the General Partner. Mr.
Tidwell served as chairman of the Audit Committee until our Restructuring Plan
was effective on March 1, 2003. The same three independent directors also
comprised our Compensation Committee and our Restructuring Committee until our
Restructuring Plan was effective on March 1, 2003.

Change in Our Independent Accountants and Unaudited Financial Statements

Arthur Andersen LLP ("Andersen") withdrew as our independent accountants on
February 5, 2002, citing professional concerns, including auditor independence
issues, relating to the recent events involving Enron. On March 25, 2002, the
Board of Directors of the General Partner authorized the engagement of
PricewaterhouseCoopers LLP ("PwC") as our independent accountants to replace
Andersen. As more fully disclosed elsewhere herein, financial statements
included in the Form 10-K for the year 2000 are unaudited. For further
details, see "Prior Year Unaudited Information" below.

40

Board of Directors of The General Partner

As discussed above, on April 10, 2002, three independent directors joined
the Board of Directors of the General Partner, allowing the General Partner to
reconstitute its Audit Committee. On September 26, 2002, the remaining two Enron
affiliated directors resigned, leaving the board in the control of our three
independent directors. The sole shareholder of the General Partner had created
the Restructuring Committee in March 2002, and reduced the maximum number of
directors from seven to five, such that independent directors immediately
constituted a majority of our Board of Directors. The Restructuring Committee
was given powers and authority of the Board of Directors with respect to any
restructuring transactions concerning the General Partner or any of its
affiliates or the MLP or any of its affiliates. The Restructuring Committee was
also given the power and authority over the commencement by us of any bankruptcy
proceedings under Title 11. With the agreement of Enron, Standard Chartered,
SCTS and a majority of the then outstanding principal amount of our senior
notes, we filed for reorganization under Chapter 11 of the Bankruptcy Code
beginning on October 8, 2002. See "Bankruptcy Proceedings and Restructuring
Plan" above.

The General Partner's Operation and General Administration of the Partnership

As is commonly the case with publicly traded partnerships, the MLP did not
directly employ any persons responsible for managing or operating us or for
providing services relating to day-to-day business affairs. The General Partner
provided such services or obtained such services from third parties, and the MLP
was responsible for reimbursement of substantially all of its direct and
indirect costs and expenses. As of January 1, 2003, all employees who perform
services for us are employed by EOTT LLC. Prior to January 1, 2003, the General
Partner provided certain services to us under the following agreements:

o The General Partner entered into a Corporate Services Agreement dated
March 24, 1994 whereby Enron provided services to us, including
liability and casualty insurance and certain data processing services.

o The General Partner entered into an Operation and Service Agreement
("O&S Agreement") with EPSC, a wholly-owned subsidiary of Enron that is
currently not in bankruptcy, to provide certain operating and
administrative services to the General Partner, effective October 1,
2000.

o In connection with the acquisition of the liquids assets in June 2001,
the General Partner entered into a Transition Services Agreement with
EGP Fuels to provide transition services through December 31, 2001 for
the processing of invoices and payments to third parties related to the
Morgan's Point Facility and Mont Belvieu Facility.

As previously discussed, all of these agreements were terminated as part of
the Enron Settlement Agreement. We had approximately $29 million in outstanding
obligations under these agreements, which were forgiven at December 31, 2002. We
had recorded liabilities of approximately $36 million to Enron and its
affiliates as of December 31, 2001, including the General Partner, under these
agreements discussed above. See Note 10 to our Consolidated Financial
Statements. For further discussion regarding the Enron Settlement Agreement, see
Note 9 to our Consolidated Financial Statements.

Pension Plan Underfunding Issues

The Enron Settlement Agreement provided that we withdraw from the defined
benefit pension plan known as the Enron Corp. Cash Balance Plan (the "Cash
Balance Plan") on December 31, 2002.

We understand, based on information provided by Enron, that the assets of
the Cash Balance Plan are currently less than the present value of all accrued
benefits on both a SFAS No. 87 (Employers' Accounting for Pensions) basis and a
plan termination basis, with approximately 48 percent of that underfunded amount
attributable to members of the Enron "controlled group" that are not in
bankruptcy. By statute, the Pension Benefits Guaranty Corporation (the "PBGC")
has the right to terminate pension plans due to their failure to

41

meet minimum funding standards and for other reasons set forth in 29 U.S.C.
Section 1342. The PBGC filed proofs of claim in our bankruptcy proceedings to
address concerns about the Cash Balance Plan, and also an objection to our
Restructuring Plan ("PBGC/EOTT Claim").

To address the issues raised by the PBGC, as well as the objections we filed
to the PBGC's proofs of claim, a Stipulation and Order Regarding EOTT Chapter 11
Proceedings and Settlement Among the Enron Parties, us and the PBGC (the "PBGC
Stipulation") was executed and entered by the Enron Bankruptcy Court on February
27, 2003, plus the PBGC Stipulation was attached as an exhibit to the Order
confirming our Restructuring Plan.

The PBGC Stipulation set forth the following:

1. Enron will continue to hold, subject to the terms of the PBGC
Stipulation, the EOTT Note, the letter of credit securing the EOTT Note, any
payments thereunder, and the EOTT Cash Payment (collectively, the "EOTT
Settlement Proceeds") on behalf of the Enron Parties.

2. Any claim of the PBGC against us for liabilities (if any) arising from
the Cash Balance Plan will attach to the EOTT Settlement Proceeds with the same
effect (if any) that such claim (if any) now has as against us and such claim
will be subject to the claims and defenses of the Enron Parties and the Enron
Creditors' Committee with respect thereto. The PBGC's rights regarding the EOTT
Settlement Proceeds will constitute the sole basis for the PBGC to seek to
enforce its claims (if any) against us for the PBGC/EOTT Claims.

3. The PBGC will: (a) withdraw, with prejudice only as to us, all proofs of
claim filed in our bankruptcy proceedings and we will withdraw, with prejudice,
our objection to any such proofs of claim; (b) release us from the underfunded
benefit liability and premium claims asserted in the proofs of claim related to
an event other than a "standard termination" of the Cash Balance Plan; and (c)
withdraw, with prejudice, all objections the PBGC has filed to the confirmation
of our Restructuring Plan. The foregoing will not affect the validity of the
PBGC's interest, if any, in the EOTT Settlement Proceeds.

4. Except as explicitly provided for in the PBGC Stipulation, the PBGC
Stipulation does not constitute a waiver or admission by the Enron Parties, us
or the PBGC with respect to the PBGC's allegations, the PBGC/EOTT Claim, or the
nature of the Enron Parties' or PBGC's entitlement to the EOTT Settlement
Proceeds.

Other Effects

Enron's bankruptcy filing had a number of other adverse effects on our
business. Our recapitalization plan proposed in 2001 was terminated. Our senior
notes were downgraded and were rated a "B-" by Standard & Poor's and a "Caa2" by
Moodys prior to filing for bankruptcy. The value of the MLP's common units
declined significantly and we were formally delisted from the NYSE on November
22, 2002. This restricted our access to the capital markets, and Enron's
bankruptcy and related events also caused us to lose market share in our crude
oil marketing, gathering and pipeline operations. Additionally, we were included
in requests for documents related to Congressional and regulatory investigations
as a result of Enron's bankruptcy and have fully cooperated with such requests.
For further information concerning our relationships and related transactions
with Enron and its affiliates, see Note 10 to our Consolidated Financial
Statements.

OVERVIEW

Through our four operating limited partnerships, EOTT Energy Operating
Limited Partnership, EOTT Energy Canada Limited Partnership, EOTT Energy
Pipeline Limited Partnership, and EOTT Energy Liquids, L.P., we purchase,
gather, transport, store, process and resell crude oil, refined petroleum
products, natural gas liquids ("NGL") and other related products. Our principal
business segments are our North American Crude Oil - East of Rockies Operations,
our Pipeline Operations, our Liquids Operations and our West Coast

42

Operations. See Note 15 to our Consolidated Financial Statements for certain
financial information by business segment.

Gathering, Marketing and Trading Operations

Gross profit from gathering, marketing and trading operations varies from
period-to-period, depending to a significant extent upon changes in the supply
and demand of crude oil and the resulting changes in United States crude oil
inventory levels. The gross profit from gathering and marketing operations is
generated by the difference between the price of crude oil at the point of
purchase and the price of crude oil at the point of sale, minus the associated
costs of gathering and transportation, field operating costs and depreciation
and amortization. In addition to purchasing crude oil at field gathering
locations, we purchase crude oil in bulk at major pipeline terminal points and
major marketing points and enter into exchange transactions with third parties.
These bulk and exchange transactions are characterized by large volume and
narrow profit margins on purchase and sale transactions, and the absolute price
levels for crude oil do not necessarily bear a relationship to gross profit.

Our operating results are sensitive to a number of factors including: grades
or types of crude oil, variability in lease crude oil barrels produced,
individual refinery demand for specific grades of crude oil, area market price
structures for the different grades of crude oil, location of customers,
availability of transportation facilities, and timing and costs (including
storage) involved in delivering crude oil to the appropriate customer.

In general, as we purchase crude oil, we establish a margin by selling crude
oil for physical delivery to third party users, such as independent refiners or
major oil companies, or by entering into future delivery obligations with
respect to futures contracts on the New York Mercantile Exchange (the "NYMEX"),
thereby minimizing or reducing exposure to price fluctuations. Through these
transactions, we seek to maintain positions that are substantially balanced
between crude oil purchases and sales or future delivery obligations. However,
depending on market conditions, positions may be taken subject to established
price risk management position limits. As a result, changes in the absolute
price level for crude oil do not necessarily impact the margin from gathering
and marketing.

Throughout the marketing process, we seek to maintain a substantially
balanced risk position. We do have certain risks that cannot be completely
hedged, such as a portion of certain basis risks. Basis risk arises when crude
oil is acquired by a purchase or exchange that does not meet the specifications
of the crude oil we are contractually obligated to deliver, whether in terms of
geographic location, grade or delivery schedule. In accordance with our risk
management policy, we seek to limit price risk and maintain margins through a
combination of physical sales, NYMEX hedging activities and exchanges of crude
oil with third parties.

We operate the business differently as market conditions change. During
periods when the demand for crude oil is weak, the market for crude oil is often
in "contango," meaning that the price of crude oil in a given month is less than
the price of crude oil in a subsequent month. In a contango market, storing
crude oil is favorable, because storage owners at major trading locations can
simultaneously purchase production at low current prices for storage and sell at
higher prices for future delivery. When there is a higher demand than supply of
crude oil in the near term, the market is "backwardated," meaning that the price
of crude oil in the prompt month exceeds the price of crude oil in a subsequent
month. A backwardated market has a positive impact on marketing margins because
crude oil gatherers can capture a premium for prompt deliveries.

Pipeline Operations

Pipeline revenues and gross profit are primarily a function of the level of
throughput and storage activity and are generated by the difference between the
regulated published tariff and the fixed and variable costs of operating the
pipeline. Transporting crude oil at published pipeline tariffs for our North
American Crude Oil - East of Rockies business segment, generates a majority of
our pipeline revenues. Approximately 74% of the revenues of our Pipeline
Operations business segment for the twelve months ended December 31, 2002 were
generated from tariffs charged to our North American Crude Oil - East of Rockies
business segment and sales

43

of crude oil inventory to our North American Crude Oil - East of Rockies
business segment. Changes in revenues and pipeline operating costs are relevant
to the analysis of financial results of the Pipeline Operations business segment
and are addressed in the following discussions of the Pipeline Operations
business segment.

Liquids Operations

Gross profit for our Liquids Operations, prior to Enron's bankruptcy, was
determined by the provisions of the ten-year Toll Conversion and Storage
Agreements, which included the processing fee for converting feedstocks into
products at the Morgan's Point Facility; storage and transportation fees related
to our Mont Belvieu Facility; the fixed and variable costs of operating these
facilities; and the depreciation and amortization related to these facilities.
Revenues from the processing operations were based upon a fixed fee received for
certain minimum quantities of product converted on a take-or-pay basis. Revenues
from the storage and transportation operations were based upon a fixed rate for
certain minimum capacity levels and actual volumes stored and transported at the
liquids storage facility.

Subsequent to the filing of EGLI's bankruptcy, we began conducting
commercial supply and marketing activities of the Morgan's Point Facility. Under
a merchant operation, gross profit from the Liquids Operations includes the
difference between the purchase price of feedstocks and the price of methyl
tertiary butyl ether ("MTBE") at the point of sale minus any transportation
costs, fixed and variable costs of operating the facility and the depreciation
and amortization related to the facility.

On April 2, 2002, the Enron Bankruptcy Court entered the Stipulation
rejecting the Toll Conversion and Storage Agreements, which became final and
non-appealable on April 12, 2002. Until the Storage Agreement was rejected, we
could not enter into any third party spot or term contracts for storage at the
Mont Belvieu Facility. As a result, we could only charge a daily administrative
fee to EGLI for the use of the Mont Belvieu Facility, until April 12, 2002. We
are currently in the process of building our customer base, and have recaptured
approximately half of historically normal storage and throughput volumes. Since
the Enron bankruptcy and the filing of the Stipulation, we are exploring various
alternatives for these facilities. See Item 1. "Business - Liquid Operations -
Toll Conversion and Storage Agreements," and "Impact of the Bankruptcy of Enron
and Certain of Its Subsidiaries, and Related Events - Rejection of Toll
Conversion and Storage Agreements with EGLI; Claims Against Enron's Bankruptcy
Estate" above.

ACQUISITIONS AND DISPOSITIONS

Effective June 1, 2002, we sold our West Coast refined products marketing
operations to Trammo Petroleum, Inc. The sales price was not significant.

In June 2001, we purchased certain liquids processing, storage and
transportation assets located in the Texas Gulf Coast region through our
wholly-owned subsidiary, EOTT Energy Liquids, L.P. and concurrently entered into
ten-year Toll Conversion and Storage Agreements. We paid $117 million in cash to
Enron and State Street Bank and Trust Company of Connecticut, National
Association, Trustee. The assets owned by the Trustee were held under a lease
financing arrangement with Enron. Immediately prior to the acquisition, all of
the assets were operated by EGP Fuels, a wholly-owned subsidiary of Enron. We
acquired these facilities pursuant to the terms of a purchase and sale agreement
with Enron, effective June 30, 2001. We financed the purchase price through
short-term borrowings from SCTS under short-term inventory and receivable
financing facilities. For further details see "Liquidity and Capital Resources"
below.

Effective June 30, 2001, we sold our West Coast crude oil gathering and
blending operations to Pacific Marketing and Transportation LLC ("Pacific") for
$14.3 million. We could be required to repay up to $1.5 million of the sale
price, subject to a two-year look-back provision regarding average operating
results during the period July 1, 2001 through June 30, 2003. Such amount is
reflected in Liabilities Subject to Compromise and Other Long-Term Liabilities
in the Consolidated Balance Sheet at December 31, 2002 and 2001, respectively.

44

OTHER

Due to changes in market conditions, we modified a 15-year contract between
Koch Oil Company, now Koch Supply & Trading, L.P. ("Koch") and us, which began
December 1, 1998, whereby we supply crude oil to Koch at market based prices. We
have amended the supply volume and related price on a periodic basis to respond
to market changes.

PRIOR YEAR UNAUDITED INFORMATION

In connection with a proxy filing submitted to the SEC in the fall of 2001
concerning our planned recapitalization, which was subsequently terminated due
to the Enron bankruptcy, the SEC has been reviewing our 1934 Act filings. We
have received a series of comments from the SEC to which we either have
responded or are in the process of responding. In response to the SEC's comments
regarding unauthorized trading activities, disclosed in our previous SEC
filings, we restated prior year financial results in connection with our 2001
Form 10-K to reflect the fair value impact of these transactions over the
periods during which the contracts were outstanding. The restatement resulted in
a decrease in net income for the year 1998 of $1.0 million ($0.05 per diluted
unit) and a corresponding increase in net income for the year 1999 of $1.0
million ($0.04 per diluted unit). The effect of the restatement in 2000 only
related to the quarterly periods. See Note 3 to the Consolidated Financial
Statements.

On February 5, 2002, Andersen withdrew as our independent accountants. We
were informed that Andersen's withdrawal related to Andersen's professional
standard concerns, including auditor independence issues, related to events
involving Enron. The restatement of our financial statements for the years 1998
and 1999, and the quarterly periods in 1999 and 2000, requires the issuance of a
new audit opinion covering the years 1999 and 2000. PwC, our current independent
accountants, has verbally agreed to perform re-audits of our financial
statements for the years 1999 and 2000. In connection with our Restructuring
Plan, a new Board of Directors and Audit Committee have been formed; however,
the new Board of Directors and Audit Committee have not yet completed their
review of this matter or formally engaged PwC to conduct the re-audits. Because
the re-audits have not been performed, we are filing unaudited financial
statements for the year 2000 with this Annual Report. See Note 3 to the
Consolidated Financial Statements.

RESULTS OF OPERATIONS

The following review of our results of operations and financial condition
should be read in conjunction with our Consolidated Financial Statements and
Notes thereto. We have made certain reclassifications and revisions to our
income statement presentation. See further discussion in Note 2 to the
Consolidated Financial Statements.

We reported a net loss of $101.7 million or $1.07 per diluted unit for the
year ended December 31, 2002, a net loss of $15.2 million or $0.54 per diluted
unit for the year 2001 and net income of $13.8 million or $0.49 per diluted unit
for the year 2000. However, results for 2002 and 2001 include impairment charges
and reorganization items discussed below.

In 2002, we recorded a $77.3 million charge which primarily relates to an
impairment of our Morgan's Point Facility ($20.2 million), Mont Belvieu Facility
($33.0 million) and natural gas liquids assets on the West Coast ($22.9
million). In connection with the development of our exit strategy from
bankruptcy, we determined that these assets were not strategic to EOTT.
Therefore, we are evaluating our options with regard to these assets, which
could include continued operation of these assets, sale to a third party,
modification of certain assets to produce alternative products or a potential
shutdown. Reorganization items recognized in connection with our Chapter 11
bankruptcy filing increased 2002 net income by $32.8 million. Reorganization
items include net amounts forgiven in connection with our settlement agreement
with Enron ($45.5 million), interest income earned on amounts advanced to us
under the Debtor In Possession ("DIP") financing agreements described below
($0.2 million) offset by legal and

45

professional fees incurred related to the bankruptcy filing ($7.1 million),
retention charges ($ 0.7 million), and the adjustment to reflect the allowed
claim amount of the senior notes (write-off of deferred issuance costs of $5.1
million). The $29.1 million impairment charge in the fourth quarter of 2001
resulted from EGLI's non-performance under the Toll Conversion and Storage
Agreements and represented our total remaining investment allocated to the
agreements.

TWELVE MONTHS ENDED DECEMBER 31, 2002 COMPARED WITH TWELVE MONTHS ENDED DECEMBER
31, 2001.

We reported a net loss of $101.7 million for the twelve months ended
December 31, 2002 compared to a net loss of $15.2 million in 2001. The decline
in net income, which includes the effect of the impairment charges and
reorganization items discussed above, reflects a $107.1 million decrease in
operating income, an increase of $11.7 million in interest and financing costs,
net and a $32.8 million gain on reorganization items in 2002 as compared to
2001. The primary factors affecting operating income are as follows:

o Lower gross profit of $21.8 million from our North American Crude Oil - East
of Rockies business segment. The primary factors affecting gross profit in
this segment are:

-- Reduction in our crude oil marketing activities and lease volumes
purchased in 2002 compared to 2001. The reduction in marketing
activities and lease volumes purchased reflects the loss of certain
lease and spot barrels as a result of increased requests for credit
from our suppliers and other factors resulting from Enron's bankruptcy
and our bankruptcy as well as the overall credit environment in the
energy industry. Crude oil lease volumes averaged 277,000 barrels per
day ("bpd") in 2002 compared to 361,000 bpd in 2001. Total sales
volumes averaged 520,000 bpd in 2002 compared to 888,000 bpd in 2001.

-- Stronger crude oil market conditions in 2001. Two primary market
factors which affect our crude oil marketing business are the forward
price spread between field postings and liquid market locations, called
P+ and grade differentials (largely represented by the price spread
between West Texas Intermediate ("WTI") and West Texas Sour ("WTS")
crude oil). P+ averaged $ 3.26 per barrel in 2002 compared to $3.22 per
barrel in 2001 ($3.91 per barrel in the first quarter of 2001). The
spread between WTI and WTS averaged $ 1.39 per barrel in 2002 as
compared to $2.91 per barrel in 2001 ($3.75 per barrel in the first six
months of 2001).

o Lower operating income of $34.7 million from our Pipeline Operations.
Revenues from our Pipeline Operations decreased $20.2 million reflecting
reduced lease volumes transported by our North American Crude Oil - East of
Rockies business segment. Average volumes transported in 2002 were 407,000
bpd compared to 511,000 bpd in 2001. Revenue per barrel was $0.72 per barrel
in 2002 compared to $0.68 per barrel in 2001. Total expenses for our
Pipeline Operations increased approximately $4.5 million primarily
reflecting higher environmental costs of $1.7 million, higher employee
expenses of $3.3 million, severance costs of $0.3 million offset by lower
operating costs of $0.6 million.

o Operating losses from our Liquids Operations, which include impairment
charges of $53.2 million in 2002 and $29.1 million. in 2001, increased $24.6
million. These operations were acquired in June 2001.

o Operating loss from our West Coast Operations increased $20.5 million due to
the $22.9 million impairment charges recorded in 2002 offset by the sale of
the West Coast gathering and marketing business in June 2001.

o Other expenses of $8.0 million in 2002 related to the settlement of various
environmental matters and claims made with respect to environmental
contingencies during our bankruptcy process. EOTT and various plaintiffs
agreed to the terms of settlements, whereby the plaintiffs released their
claims against EOTT in exchange for an allowed general unsecured claim in
our bankruptcy.

46

o Corporate and other costs increased approximately $3.6 million, which
reflects increased legal, financial and administrative costs related to
Enron's bankruptcy and restructuring costs (incurred prior to October 2002)
related to our Chapter 11 filing.

The primary factors affecting interest and financing costs are as follows:

o Facility fees on the credit facilities and term loan with Standard
Chartered, SCTS and Lehman were $8.4 million higher during 2002.

o Interest on working capital loans increased $1.8 million. Amounts
outstanding under financing facilities were $200.0 million and $182.5
million at December 31, 2002 and 2001, respectively, with borrowing rates
which ranged from LIBOR plus 75 basis points to LIBOR plus 300 basis points
under the amended credit facility in early 2002 and DIP Facilities.

o Letter of credit costs were $6.3 million in 2002 under the credit facilities
with Standard Chartered and the DIP Letter of Credit Facility as compared to
$0.8 million in 2001. Letters of credit outstanding at December 31, 2002 and
2001 were $274.0 million and $196.1 million, respectively. Letter of credit
fees averaged 3.0% during 2002 and ranged from 0.375% under the Enron Credit
Facility to up to 3.0% under the Credit Facility in late 2001.

o Interest on the DIP Term Loan totaled $1.5 million in 2002.

o Interest on the 11% senior notes was $5.9 million lower in 2002 due to the
cessation of interest accruals effective October 8, 2002.

TWELVE MONTHS ENDED DECEMBER 31, 2001 COMPARED WITH TWELVE MONTHS ENDED DECEMBER
31, 2000

We record a net loss of $15.2 million (including the $29.1 million
impairment charge) in 2001 compared to net income of $13.8 million in 2000.
Operating income decreased $27.0 million, interest and financing costs, net
increased $3.2 million and we recognized $1.1 million of income related to the
cumulative effect of an accounting change in 2001. The primary factors affecting
operating income are as follows:

o Higher operating income of $7.7 million from our North American Crude
Oil-East of Rockies business segment. The primary factors affecting gross
profit in this segment are:

-- Elimination of certain low margin crude oil lease volumes during early
2001. Crude oil lease volumes averaged 361,000 bpd for 2001 compared to
an average of 408,000 bpd in 2000. Total sales volumes for the year
ended 2001 were 0.9 million bpd compared to 1.0 million bpd for the
same period in 2000.

-- Stronger crude oil market conditions in 2001, primarily the first
quarter of 2001. Two primary market factors which affect our crude oil
marketing business are the forward price spread between field postings
and liquid market locations, called P+ and grade differentials (largely
represented by the price spread between WTI and WTS crude oil). The
spread between WTI and WTS averaged $2.91 per barrel in 2001 ($3.75 per
barrel in the first six months of 2001) compared to $2.01 per barrel in
2000. P+ averaged $3.22 per barrel in 2001 compared to $3.85 per barrel
in 2000.

-- Sales of line-fill inventory, previously held in a third party pipeline
which was taken out of service, for approximately $2.0 million.

o Lower operating income of $16.3 million from our Pipeline Operations.
Revenues from our Pipeline Operations decreased $12.8 million reflecting
reduced lease volumes transported by our North American Crude Oil-East of
Rockies business segment discussed above. Average volumes transported in
2001 were

47

511,000 bpd compared to 562,000 bpd in 2000. Revenue per barrel was $0.68
per barrel in 2001 and 2000. Total expenses for the Pipeline Operations
were $4.4 million higher in 2001 compared to 2000. The primary factors
contributing to the higher costs were higher environmental expenses of $7.0
million related to the Environmental Protection Agency (the "EPA") 308
information request, increased estimates to complete existing remediation
plans and higher than anticipated actual environmental costs incurred, net
of insurance recovery and higher depreciation and amortization ($0.6
million). These increases were offset by lower employee expenses ($1.2
million) and lower ad valorem taxes ($1.3 million).

o Operating loss of $11.9 million (including the $29.1 million impairment
charge) from our Liquids Operations, which were acquired in June 2001.

o Lower operating income of $4.3 million from our West Coast Operations due to
the sale of the crude oil gathering assets in June 2001 and the strong
market conditions for the marketing of refined products and the
fractionation of natural gas liquids in 2000.

o Corporate costs were $2.1 million higher in 2001 compared to 2000. The
primary factors contributing to the increased costs were the write-off of
costs incurred related to our proposed recapitalization plan, and costs
incurred to set up the interim credit facility.

The primary factors affecting interest and financing costs are as follows:

o Facility fees on the new Credit Facility with Standard Chartered were $0.8
million for 2001.

o Letter of credit costs increased $0.4 million under the Credit Facility.
Letters of credit outstanding at December 31, 2001 and 2000, were $196.1
million and $103.3 million, respectively. Letter of credit fees in 2001
ranged from .375% to up to 3% under the Credit Facility in 2001 compared to
fees of .375% in 2000.

o Interest on working capital loans and financings increased $1.0 million.
Amounts outstanding under loans or financing facilities were $182.5 million
and $45.0 million, at December 31, 2001 and 2000, respectively. The
significant increase in borrowings is primarily attributable to the $117
million acquisition of Liquids assets in June 2001. Borrowing rates ranged
from LIBOR plus 75 basis points to LIBOR plus 300 basis points in 2001
compared to LIBOR plus 75 basis points to LIBOR plus 250 basis points in
2000.

48

Selected financial data for our business segments are summarized below, in
millions:

(1) In connection with the adoption of EITF Issue No. 02-03, which
requires realized and unrealized gains and losses on derivative
instruments held for trading purposes to be shown net in
the income statement, we are presenting all of our crude oil and
refined product marketing and trading purchase and sale
transactions on a net basis and comparative financial information
has been reclassified to conform to the new presentation. See Note
2 to the Consolidated Financial Statements.

(2) Prior to the filing of EGLI's bankruptcy, revenue from external
customers included a processing fee for converting feedstocks into
products at the Morgan's Point Facility and storage and
transportation fees related to the Mont Belvieu Facility.
Subsequent to EGLI's bankruptcy, we began operating the Morgan's
Point Facility as a merchant operation and therefore revenue from
external customers reflects sales of MTBE or other products.

(3) Includes intersegment transportation costs from our Pipeline
Operations segment for the transport of crude oil at published
pipeline tariffs and purchases of crude oil inventory from our
Pipeline Operations segment. Intersegment transportation costs and
net purchases of crude oil inventory from our Pipeline Operations
segment were $79.0 million, $103.5 million and $119.3 million for
the twelve months ended December 31, 2002, 2001 and 2000,
respectively.

(4) 2001 includes a $29.1 million impairment loss related to the
agreements with EGLI.

(5) 2002 includes a $53.2 million impairment charge related to assets
in our Liquids Operations and a $22.9 million impairment charge
related to assets in our West Coast Operations.

SEGMENT RESULTS

TWELVE MONTHS ENDED DECEMBER 31, 2002 COMPARED WITH TWELVE MONTHS ENDED
DECEMBER 31, 2001

North American Crude Oil - East of Rockies. The North American Crude Oil -
East of Rockies business segment had an operating loss of $13.9 million for 2002
compared to operating income of $9.8 million during 2001. Gross profit decreased
$21.8 million from $25.2 million in 2001 to $3.4 million in 2002 due primarily
to: the strong crude oil market conditions in 2001, primarily in the first
quarter of 2001 (P+ averaged $3.91 per barrel in the first quarter of 2001) and
reductions in our marketing activities and lease volumes purchased in 2002 due
to increased requests for credit from our suppliers (our ability to respond was
limited by our existing

49

credit capacity) and other factors resulting from Enron's bankruptcy and our
Chapter 11 filing. P+ averaged $3.26 per barrel in 2002 compared to $3.22 per
barrel in 2001. The spread between WTI and WTS crude oil averaged $1.39 per
barrel in 2002 compared to $2.91 per barrel in 2001. Crude oil lease volumes
averaged 277,000 bpd during 2002 compared to an average of 361,000 bpd in 2001.
The decline in lease volumes is attributable to the elimination of certain low
margin crude oil lease volumes in the first nine months of 2001 and the loss of
lease volumes resulting from increased requests for letters of credit from our
suppliers (which significantly reduced the amount of buy/sell contracts we
could enter into) starting in late 2001 as a result of the Enron Bankruptcy and
subsequently our Chapter 11 filing in October 2002. These decreases were offset
by reductions in employee related costs of $6.0 million (primarily payroll
related to our fleet operations due to the significant decline in lease volumes
transported); however, severance costs were $0.7 million in connection with our
realignment initiatives in the third quarter of 2002. Intersegment costs charged
by our Pipeline Operations segment were $79.0 million and $103.5 million during
2002 and 2001, respectively.

Pipeline Operations. Operating income from our Pipeline Operations declined
$34.7 million to $15.3 million in 2002 compared to $50.0 million in 2001.
Revenues decreased $20.2 million from $127.5 million in 2001 to $107.3 million
in 2002 due primarily to a decline in volumes being transported by our North
American Crude Oil - East of Rockies segment discussed above. Pipeline volumes
averaged 407,000 bpd during 2002 as compared to 511,000 bpd in 2001.
Approximately $79.0 million and $103.5 million of revenues for the twelve months
ended December 31, 2002 and 2001, respectively, were generated primarily from
tariffs charged to the North American Crude Oil - East of Rockies segment and
sales of crude oil inventory to that business segment. Expenses, including
depreciation and amortization, of $79.4 million in 2002 were $4.5 million higher
compared to 2001 due primarily to higher employee expenses ($3.3 million),
environmental costs ($1.7 million), and severance costs ($0.3 million) offset by
lower operating costs ($0.6 million).

Liquids Operations. Our Liquids Operations, acquired in June 2001, had an
operating loss of $36.5 million, including impairment charges of $53.2 million
in 2002 compared to an operating loss of $11.9 million, which includes a $29.1
million impairment charge. Factors affecting our Liquids Operations are as
follows: lower MTBE equivalent sales volumes of 13,800 bpd in 2002 due primarily
to a one month scheduled turnaround in the first quarter of 2002; and lower
gross margins due to the transition of these operations to a merchant function
subsequent to EGLI's bankruptcy. MTBE margins averaged $0.26 per gallon in 2002,
which was lower than we anticipated primarily due to higher methanol and butane
feedstock prices. Until the Storage Agreement was rejected by EGLI in April
2002, we could only charge an administrative fee to EGLI of approximately $0.5
million per month related to the Storage Agreement. We are currently in the
process of building our customer base and have recaptured approximately 50% of
historically normal storage and throughput levels. In addition, severance costs
of $0.4 million were recognized in connection with reorganization initiatives.

West Coast Operations. West Coast Operations had an operating loss of $25.2
million in 2002 including impairment charges of $22.9 million, compared to an
operating loss of $4.7 million in 2001 primarily due to the sale of the crude
oil operations in June 2001 offset by increased gross profit from new business
activities in our natural gas liquids operations.

Corporate and Other. Corporate and other costs were $28.5 million in 2002
compared to $24.9 million in 2001. The increase is due primarily to increased
costs related to Enron's Bankruptcy and restructuring costs (incurred prior to
October 2002) related to our Chapter 11 filing. These costs included
restructuring costs of $2.6 million for the first nine months of 2002, severance
costs of $0.7 million, accounting costs of $0.5 million and insurance costs of
$2.4 million. These increases were partially offset by settlement of an
insurance claim for $1.1 million in the first quarter of 2002 and a gain on the
sale of NYMEX seats for $1.3 million in the second quarter of 2002.

Interest and related charges, net in 2002 were $45.7 million compared to
$34.0 million in 2001. The increase is due to higher interest rates on financing
facilities, increased letter of credit costs and facility fees under the credit
facilities ($14.0 million) and interest and fees under our debtor-in-possession
loan agreement

50

with Lehman Brothers Inc. (the "DIP Term Loan Agreement") ($3.1 million), offset
by lower interest accrued on the 11% Senior Notes ($5.9 million) as a result of
our Chapter 11 filing on October 8, 2002.

TWELVE MONTHS ENDED DECEMBER 31, 2001 COMPARED WITH TWELVE MONTHS ENDED DECEMBER
31, 2000

North American Crude Oil - East of Rockies. Operating income from our North
American Crude Oil - East of Rockies segment increased $7.7 million to $9.8
million in 2001 compared to $2.1 million in 2000. The increase primarily
reflects improved market conditions in the first half of 2001, the elimination
of certain low margin crude oil lease volumes, and sales of line-fill inventory
previously held in a third party pipeline, which was taken out of service, for
approximately $2.0 million. In addition, lower employee costs ($2.2 million) and
lower depreciation and amortization ($1.5 million) also contributed to the
increase in operating income. These decreases were partially offset by an
increase in our operations costs of $1.8 million. The spread between WTI and WTS
averaged $2.91 per barrel in 2001 ($3.75 per barrel in the first half of 2001)
compared to $2.01 per barrel in 2000. P+ averaged $3.22 per barrel in 2001
compared to $3.85 per barrel in 2000. Lease crude oil purchases averaged 361,000
bpd for 2001, compared to an average of 408,000 bpd in 2000. Intersegment costs
charged by our Pipeline Operations segment were $103.5 million and $119.3
million for the years ended December 31, 2001 and 2000, respectively.

Pipeline Operations. Operating income from our Pipeline Operations declined
$16.3 million to $50.0 million in 2001 compared to $66.3 million in 2000,
reflecting declines in revenues due to lower volumes transported and higher
operating expenses, primarily related to environmental remediation. Revenues
decreased $12.8 million to $127.5 million in 2001 due to a decline in volumes
transported to 511,000 bpd in 2001 compared to 562,000 bpd in 2000. The decline
in volumes is primarily associated with the elimination of low margin lease
volumes in the North American Crude Oil - East of Rockies business segment.
Approximately $103.5 million or 81% and $119.3 million or 85% of revenues for
the years ended December 31, 2001 and 2000, respectively, were generated from
tariffs charged to our North American Crude Oil-East of Rockies segment and
sales of crude oil inventory to our North American Crude Oil-East of Rockies
segment. Total operating expenses were $4.4 million higher than in 2000 due
primarily to higher environmental expenses ($7.0 million) related to the EPA 308
information request and revised estimates to complete existing remediation plans
based on information currently available and higher depreciation and
amortization expense ($0.6 million). These increases were partially offset by
lower ad valorem taxes ($1.3 million) and lower employee expenses ($1.2
million).

Liquids Operations. Our Liquids Operations, acquired in June 2001, generated
$18.3 million of gross profit and an operating loss of $11.9 million in 2001,
including the $29.1 million impairment resulting from EGLI's non-performance
under the Toll Conversion and Storage Agreements. The contract impairment
represents our remaining investment in these contracts. Revenues for the six
months ended December 31, 2001 include $37.5 million of processing and storage
fees from the Toll Conversion Agreement and the Storage Agreement. As a result
of the EGLI bankruptcy, we took over commercial operations of the Morgan's Point
Facility; however, until the Storage Agreement was rejected we could not enter
into any third party storage contracts. As a result, we could only charge an
administrative fee to EGLI of approximately $0.5 million for December 2001
related to the Storage Agreement. For the six months ended December 31, 2001,
the Morgan's Point Facility volumes averaged 15,773 bpd.

West Coast Operations. Our West Coast Operations had an operating loss of
$4.7 million in 2001 compared to an operating loss of $0.4 million in 2000. Our
West Coast Operations had income of $1.3 million for 2000 which includes $2.5
million attributable to reimbursements received in the second quarter of 2000 in
connection with an insurance claim related to the theft of NGL product in 1999
by a former employee offset by charges of $1.2 million related to the remaining
contracts for the NGL activity. The significant decline in gross profit is due
to the sale of the crude oil gathering assets in June 2001 and strong market
conditions for the marketing of refined products and the fractionation of
natural gas liquids in 2000 offset by lower operating expenses in 2001 due
primarily to the sale of the crude oil gathering and marketing assets.

51

Corporate and Other. Our Corporate and other costs of $24.9 million for 2001
were $2.1 million higher compared to 2000. The increase is due primarily to the
write-off of costs incurred related to our proposed recapitalization plan, which
was terminated as a result of the Enron bankruptcy, and costs incurred to set up
the interim credit facility ($1.5 million), higher rent expense ($0.8 million)
and insurance expense ($0.6 million) partially offset by a $1.5 million
reduction in employee expenses.

The increase in interest and financing costs during 2001 primarily reflects
facility fees in connection with the credit facilities of $0.8 million, an
increase in letter of credit costs of $0.4 million and higher interest on
working capital loans and financings of $1.0 million. Costs associated with
receivables transferred under our pre-bankruptcy trade receivables agreement
(the "Receivables Agreement") were relatively unchanged in 2001 as compared to
2000. Prior to March 31, 2001, such transfers were accounted for as sales under
the provisions of SFAS No. 125 and the related costs were reflected in other
income (expense), net. Subsequent to that date, the transfers are being
accounted for as financings under the provisions of SFAS No. 140 with the
related costs being included in interest expense.

LIQUIDITY AND CAPITAL RESOURCES

General

We anticipate that our cash requirements, including sustaining capital
expenditures for the foreseeable future, will be funded primarily from cash on
hand and by cash generated from operations. Additionally, we anticipate that
short-term liquidity and working capital requirements will be supported by our
exit credit facility, inventory repurchase agreement and receivables agreement
discussed below.

Our ability to obtain letters of credit to support our purchases of crude
oil and feedstocks is fundamental to our crude oil gathering and marketing
activities and Liquids Operations. As a result of the Enron bankruptcy filing
and our subsequent bankruptcy filing, our trade creditors have been less willing
to extend credit to us on an unsecured basis and we have had to significantly
reduce our marketing activities due to the amount of credit support available to
us under our credit facilities. We believe that our exit credit facilities
discussed below will be sufficient to permit us to return to a profitable level
of business activity. However, in light of our bankruptcy filing and planned
restructuring, we can give no assurance that we will not be required to further
reduce or restrict our gathering and marketing activities because of continuing
limitations on our ability to obtain credit support and financing for our
working capital needs.

Our ability to fund our liquidity and working capital requirements through
available cash, cash generated from operations and our exit credit facilities is
based on our ability to successfully implement our Restructuring Plan. Any
significant decrease in our financial strength, may make it difficult to meet
our debt covenants and, therefore, adversely affect our ability to fund our
working capital needs and obtain letters of credit, or may increase the cost
thereof.

Cash Flows From Operating Activities

Net cash provided by operating activities totaled $29.6 million in 2002
compared to cash used in operating activities of $54.6 million in 2001. Cash
from operations in 2002 reflects reduced inventory levels as a result of sales
of inventory. Cash used in operations in 2001 reflects a $42.5 million increase
in receivables as a result of the change in accounting for the transfer of
certain receivables under the Receivables Agreement, a $7.1 million increase in
insurance receivables related to environmental expenditures, a $3.4 million
increase in funds on deposit with commodity brokers, and a decline in trade
payables (net of receivables) related to our crude oil marketing activities.

Cash Flows From Investing Activities

Net cash used in investing activities totaled $28.8 million in 2002 compared
to $136.0 million in 2001. Cash additions to property, plant, and equipment of
$31.2 million in 2002 primarily include $10.5 million for

52

the construction of a new pipeline in Mississippi, $5.3 million to complete a
new pipeline and truck and rail facility for the West Coast operations, $6.5
million for other pipeline, storage tank and related facility improvements, $7.3
million related to the Morgan's Point Facility, and $0.2 million for information
systems hardware and software. Cash paid for acquisitions in 2001 of $117.0
million relates to the acquisitions of the Liquids assets in June 2001. Proceeds
from asset sales were $2.4 million in 2002 compared to $17.2 million in 2001.
The 2001 amount primarily reflects the sale of the West Coast crude oil
gathering and marketing operations.

We estimate that capital expenditures necessary to maintain the existing
asset base at current operating levels will be approximately $10 million to $13
million each year. The level of additional capital expenditures by us will vary
depending upon cash from operations, availability of financing, prevailing
energy markets, general economic conditions and the current regulatory
environment.

Cash Flows From Financing Activities

Net cash provided by financing activities totaled $12.8 million in 2002 as
compared to $139.3 million in 2001. The 2002 amount represents an increase in
receivable financing and term loans which was offset by the repayment of
short-term borrowings to Standard Chartered and a decrease in the amount of
repurchase agreements from the proceeds of the term loans and cash distributions
to unitholders. The 2001 amount represents an increase in repurchase agreements
outstanding primarily to finance the acquisition of Liquids assets, and the
change in reporting our receivable financings as discussed above, partially
offset by distributions paid to unitholders for the period October 1, 2000
through September 30, 2001.

Cash distributions paid to unitholders were $4.7 million in 2002 compared to
$43.2 million in 2001. We suspended distribution payments to unitholders in
April 2002.

Contractual Obligations

The table below summarizes our long-term non-cancelable contractual
obligations at December 31, 2002 (in millions):

Our 11% senior notes were cancelled at the effective date of our
Restructuring Plan. The $104 million of 9% senior unsecured notes, which will be
issued in connection with our Restructuring Plan, are due in 2010.

WORKING CAPITAL AND CREDIT RESOURCES

Summary of Pre-Bankruptcy Financing

Until December 31, 2001, we had an unsecured credit facility with Enron to
provide credit support in the form of guarantees, letters of credit and working
capital loans through December 31, 2001. The total amount of the Enron facility
was $1.0 billion, and it contained sublimits of $100 million for working capital
loans and $900 million for guarantees and letters of credit. Letter of credit
fees were based on actual charges by the banks which range from .20% to .375%
per annum. Interest on outstanding loans was charged at LIBOR plus 250 basis
points per annum.

53

On November 30, 2001, we entered into an interim credit facility with
Standard Chartered, our primary lender, for the purpose of replacing our
existing credit facility with Enron. This interim facility provided for the
issuance through March 2002 of up to $150 million of letters of credit. On
December 21, 2001, we increased this interim credit facility to $300 million,
which included a $40 million limit for working capital loans, and the facility
was extended to April 30, 2002.

Additionally, we had an agreement with SCTS, which provided for the
financing of purchases of crude oil inventory up to an aggregate amount of $100
million utilizing forward commodity repurchase agreements. We also had an
agreement with SCTS which provided for the transfer of up to an aggregate amount
of $100 million of certain trade receivables outstanding at any one time. These
transactions do not qualify as sales under SFAS No. 140 and therefore are
accounted for as financings.

Effective April 23, 2002, we amended and extended our credit facility with
Standard Chartered as well as our inventory repurchase agreement and trade
receivables agreement with SCTS to February 2003. These facilities provided up
to an aggregate of $500 million of working capital loans, letters of credit,
trade receivables financing and inventory commodity repurchase funding comprised
of the following:

(i) up to $300 million of letter of credit and working capital financing
with a working capital loan sublimit of $40 million;

(ii) up to $100 million of receivables financing under a trade
receivables financing agreement with SCTS; and

(iii) up to $100 million of commodity repurchase financing under an
inventory repurchase agreement with SCTS.

We paid an arrangement fee of 2% of these amended credit facilities. The
amended inventory repurchase and trade receivables agreements bore interest at
LIBOR plus 3%. Following our Chapter 11 filing, these facilities were replaced
by our DIP financing arrangements discussed below.

At June 30, 2002, and September 30, 2002, we were in violation of the
negative covenants under our financing arrangements relating to consolidated net
income, consolidated earnings before interest, taxes and depreciation and
consolidated net worth. The violation of these covenants was principally due to
the lower operating income associated with our crude marketing and
transportation business, lower operating income from the Morgan's Point Facility
and higher corporate costs. On August 13, 2002, Standard Chartered agreed to a
limited forbearance until September 16, 2002, which allowed time for us to
discuss with Standard Chartered possible modifications of the credit facility.
On August 27, 2002 Standard Chartered agreed to extend the limited forbearance
until October 30, 2002.

Summary of DIP Financing

On October 18, 2002, we entered into agreements with Standard Chartered,
SCTS and other lending institutions for $575 million in DIP financing
facilities. The DIP facilities provided (i) $400 million of working capital
facilities, which included up to $325 million for letters of credit and $75
million of term loans, and (ii) $175 million of inventory repurchase/accounts
receivable financing. The credit facilities were secured by a first-priority
lien on all or substantially all of our real and personal property. As of
December 31, 2002, we had outstanding approximately $274.0 million of letters of
credit, $75 million of term loans, $125 million of inventory repurchase/accounts
receivable financing and cash and short-term investments of approximately $16
million. The DIP financing facilities contained certain restrictive covenants
that, among other things, limited distributions, other debt, and certain asset
sales. The DIP financing facilities had a maturity date of the earlier of March
31, 2003 or the date we emerged from bankruptcy. The major terms of the DIP
financing facilities were as follows:

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DIP Letter of Credit Facility

On October 18, 2002, we entered into an agreement as debtors-in-possession
and guarantors with Standard Chartered, which provided a letter of credit
facility not to exceed at any one time outstanding $325 million ("DIP Letter of
Credit Facility").

The DIP Letter of Credit Facility was subject to defined borrowing base
limitations. The borrowing base was the sum of (i) cash equivalents, specified
percentages of eligible receivables, deliveries, fixed assets, inventory, margin
deposits and undrawn product purchase letters of credit, minus (as of the date
of determination) (ii) first purchase crude payables, other priority claims,
aggregate net amounts payable by the borrowers under all hedging contracts and
certain eligible receivables arising from future crude oil obligations, minus
(iii) the principal amount of loans outstanding and any accrued and unpaid fees
and expenses under the Term Loans, minus (iv) all outstanding amounts under the
Amended and Restated Commodities Repurchase Agreement and the Amended and
Restated Receivables Purchase Agreement, both dated as of October 18, 2002
("SCTS Purchase Agreements").

Under the DIP Letter of Credit Facility, letter of credit fees ranged from
2.25% to 2.75% per annum. The commitment fee was 0.5% per annum of the unused
portion of the DIP Letter of Credit Facility. Additionally, we agreed to a
fronting fee, which was the greater of 0.25% per annum times the face amount of
the letter of credit or $250. The arrangement fee was 1% per annum times the
average daily maximum facility amount, as defined in the DIP Letter of Credit
Facility. Additionally, distributions were not permitted by us under either the
Term Loan Agreement or the DIP Letter of Credit Facility.

DIP Term Loan Agreement

We entered into an agreement as debtors-in-possession and guarantors on
October 18, 2002 with Lehman Brothers Inc. ("Lehman"), as Term Lender Agent, and
other lenders (collectively, "Term Lenders"), which provided term loans in the
aggregate amount of $75 million (the "Term Loans"). Pursuant to the conditions
of the Term Loans, the Term Lenders made a single advance to the borrowers on
October 18, 2002.

The financing included two term notes. The Tier-A Term Note was for $50
million with a 9% per annum interest rate. The Tier-B Term Note was for $25
million with a 10% per annum interest rate. Interest was payable monthly on both
notes. The arrangement fee was $100,000, which was to be reduced by the amounts
received by Lehman pursuant to the letter agreement dated September 30, 2002
between Lehman and EOTT Energy Operating Limited Partnership. We paid Lehman, on
behalf of each Term Lender, a facility fee in the aggregate amount of $750,000.
We agreed to pay a deferred financing fee in the aggregate amount of $2 million
on, at our option, either (i) the closing date of the Term Loans, or, the (ii)
earlier to occur of the maturity date and the date the Term Loans were paid in
full. The deferred financing fee would be reduced to $1 million if we prepaid
the Term Loans and we were not in default.

SCTS Purchase Agreements

We also had an agreement with SCTS similar to our pre-bankruptcy inventory
repurchase agreement, which provided for the financing of purchases of crude oil
inventory utilizing a forward commodity repurchase agreement ("DIP Inventory
Repurchase Agreement"). The maximum commitment under the Amended Inventory
Repurchase Agreement was $75 million and the interest rate was LIBOR plus 3%.
The facility fee was 1% per annum times the average daily maximum facility
amount, as defined in the DIP Inventory Repurchase Agreement.

In addition, we also had an agreement with SCTS similar to our
pre-bankruptcy trade receivables agreement, which provided for the financing of
up to an aggregate amount of $100 million of certain trade receivables ("DIP
Trade Receivables Agreement") outstanding at any one time. The discount fee was
LIBOR plus 3% and the facility fee was 1% per annum times the average daily
maximum facility amount, as defined in the DIP Trade Receivables Agreement.

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Intercreditor and Security Agreement

In connection with the DIP Letter of Credit Facility, the Term Loans and the
SCTS Purchase Agreements, we entered into the Intercreditor and Security
Agreement ("Intercreditor Agreement"), dated as of October 18, 2002, with
Standard Chartered, Lehman, SCTS and various other secured parties ("Secured
Parties") in order to provide for rights and distribution of the proceeds of the
collateral with respect to each Secured Party. Prior to a triggering event under
the Intercreditor Agreement, funds in our debt service payment account will be
paid in the manner and order of priority provided for in the agreement.

In addition, to the extent that drawings are made on any letters of credit,
Standard Chartered, as collateral agent, may distribute funds from our debt
service payment account to itself (as letter of credit issuer agent on behalf of
the letter of credit issuer) as needed to allow the debtors to reimburse
Standard Chartered, as letter of credit issuer, for such drawings.

Summary of Exit Credit Facilities

On February 11, 2003, we entered into our exit credit facilities with the
same lenders and under substantially the same terms as set forth above in the
DIP financing facilities. These new facilities were closed on February 28, 2003
and $2.9 million of facility and extension fees were paid in connection with
these new facilities.

The new Term Loan Agreement and Letter of Credit Facilities mature on the
earlier of eighteen calendar months from the closing date or August 30, 2004.
The STSC Purchase Agreements were extended for six months to August 30, 2003,
which we have the option to extend for an additional twelve months. The
extension fee is $750,000 under the Inventory Repurchase Agreement and $1
million under the Trade Receivables Agreement. In addition, if we elect to
extend these agreements, the interest rate under the Inventory Repurchase
Agreement and the discount fee under the Receivables Agreement will increase to
LIBOR plus 7%.

The new Letter of Credit Agreement also included the following monthly
covenants:

o Minimum Earnings Before Interest Depreciation and Amortization
("EBIDA");

o Minimum Interest coverage (EBIDA/cash interest expense);

o Minimum Current ratio (adjusted current assets/adjusted current
liabilities);

o Minimum adjusted consolidated tangible net worth.

Additionally, the exit credit facilities restrict the payment of distributions
or dividends by us.

Senior Notes

On October 1, 1999, we issued to the public $235 million of 11% senior
notes. The senior notes were due October 1, 2009, and interest was paid
semiannually on April 1 and October 1. The senior notes were fully and
unconditionally guaranteed by all of our operating limited partnerships but were
otherwise unsecured. On October 1, 2002, we did not make the interest payment of
$12.9 million on our $235 million 11% senior notes. These notes were cancelled
effective on March 1, 2003 as a result of our Restructuring Plan and the holders
of these notes, along with our general unsecured creditors with allowed claims,
will receive a pro rata share of $104 million of 9% senior unsecured notes, plus
new EOTT LLC units.

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EOTT LLC Senior Notes 2010

In 2003, we issued $104 million of 9% senior unsecured notes to be allocated
to former holders of the 11% senior notes described above and our general
unsecured creditors with allowed claims. However, the exact pro rata allocation
of the senior notes cannot be determined until the precise amount of each
allowed claim is determined. This process is under way in the EOTT Bankruptcy
Court as part of our Restructuring Plan and is expected to be completed no
sooner than August 2003.

The senior notes are due in March 2010, and interest will be paid
semiannually on September 1 and March 1. Under the terms of the indenture
governing our senior notes, we are allowed to pay interest payments in kind by
issuing additional senior notes on the first two interest payment dates. If we
make payments in kind, we must make the payments as if interest were being
charged at 10% per annum instead of 9% per annum. We may not optionally redeem
the notes. The notes are subject to mandatory redemption or sinking fund
payments if we sell assets and use the money for certain purposes or if we have
a change of control. Provisions of the indenture could limit additional
borrowings, sale and lease back transactions, affiliate transactions, purchases
of our own equity, payments on debt subordinated to the senior notes,
distributions to unitholders or merger, consolidation or sale of assets if
certain financial performance ratios are not met.

EOTT LLC Equity Units and Warrants

Under our Restructuring Plan, the MLP's common units were eliminated. We
issued 12,317,340 new EOTT LLC units to be allocated to former equity holders,
former noteholders, and holders of allowed general unsecured claims. We also
issued to former equity holders 957,981 warrants to purchase additional EOTT LLC
units. See Table of EOTT LLC Ownership under "Restructuring Plan" above. As with
the issuance of our senior notes, the allocation of 11,947,820 of these new
units to former noteholders and holders of allowed general unsecured claims
cannot be determined until the precise amount of each allowed claim is
determined, which process is expected to be completed no sooner than August
2003. We do not expect to make distributions to our unitholders in the
foreseeable future due to restrictions in our exit credit facilities.

Summarized Financial Information Concerning our General Partner

EOTT Energy Corp., a wholly-owned subsidiary of Enron, served as our General
Partner until the confirmation of our Restructuring Plan. As previously
discussed, the General Partner filed for bankruptcy on October 21, 2002. In
connection with the Restructuring Plan, the General Partner's interest in EOTT
has been cancelled and the General Partner will be liquidated in the future.

The preparation of the General Partner's financial records and reporting
were controlled by Enron. The summary unaudited information presented below was
prepared using limited information provided by Enron. The following information
for the General Partner for 2002 and 2001 is shown below, in thousands:

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(1) At December 31, 2002, certain intercompany receivables and payables with
EOTT were forgiven in connection with the Enron Settlement Agreement.

(2) Total receivables of $56.2 million due to the General Partner from Enron at
December 31, 2002 and 2001, have been classified by the General Partner as
an offset against shareholder's equity as a result of Enron's bankruptcy.

(3) During 2001, Enron, which owns 100% of the General Partner, effected a
transfer of substantially all of the General Partner's investment (7 million
subordinated units) in the MLP.

NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This statement requires entities to record the fair value of a
liability for legal obligations associated with the retirement obligations of
tangible long-lived assets in the period in which it is incurred. When the
liability is initially recorded, a corresponding increase in the carrying amount
of the related long-lived asset would be recorded. Over time, accretion of the
liability is recognized each period, and the capitalized cost is depreciated
over the useful life of the related asset. Upon settlement of the liability, an
entity either settles the obligation for its recorded amount or incurs a gain or
loss on settlement. The standard is effective for fiscal years beginning after
June 15, 2002, with earlier application encouraged. We believe the majority of
our assets do not have an obligation to perform removal activities when the
asset is retired; however, we are still in the process of reviewing all of our
rights of way associated with our pipelines and identifying any other legal
obligations associated with our assets. As such, we have not determined the
effect of adopting this statement on our financial position or results of
operations; however, we will reflect the impact of adoption in our 2003 first
quarter Form 10-Q.

In October 2002, the EITF reached a consensus in EITF Issue 02-03, "Issues
Involved in Accounting for Derivative Contracts Held for Trading Purposes and
Contracts Involved in Energy Trading and Risk Management Activities." The EITF
reached a consensus to rescind Issue 98-10, and related interpretive guidance,
and preclude mark to market accounting for energy trading contracts that are not
derivative instruments pursuant to SFAS 133. The consensus requires that gains
and losses (realized and unrealized) on all derivative instruments held for
trading purposes be shown net in the income statement, whether or not the
instrument is settled physically. The consensus to rescind Issue 98-10
eliminated EOTT's basis for recognizing physical inventories at fair value. The
consensus to rescind Issue 98-10 is effective for all new contracts entered into
(and physical inventory purchased) after October 25, 2002. For energy trading
contracts and physical inventories that existed on or before October 25, 2002,
that remain at December 31, 2002, the consensus is effective January 1, 2003 and
will be reported as a cumulative effect of a change in accounting principle. The
cumulative effect of the accounting change on January 1, 2003 will be a loss of
approximately $2.0 million. With the rescission of Issue 98-10, inventories
purchased after October 25, 2002, have been valued at average cost.

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In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies EITF Issue No. 94-3. This statement requires that a liability for
costs associated with exit or disposal activities be recognized when the
liability is incurred whereas under EITF Issue 94-3, a liability for an exit
cost was recognized at the date of an entity's commitment to an exit plan. This
statement also establishes that fair value will be used to initially determine
the liability. The provisions of this statement are effective for exit or
disposal activities that are initiated after December 31, 2002. We have not
initiated any exit or disposal activities that are subject to this statement.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." This Statement 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, this Statement amends the
disclosure requirements of Statement 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 148 is effective for financial statements for fiscal years ending
after December 15, 2002. Our General Partner had a Unit Option Plan (see Note 11
to the Consolidated financial Statements) which will be terminated as part of
the Restructuring Plan. There is no effect from SFAS 148 because the General
Partner did not voluntarily elect the transition to the fair value based method
of accounting.

In November 2002, the FASB issued Financial Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" ("FIN No. 45"). This
interpretation of FASB Statements No. 5, 57 and 107, and rescission of FIN No.
34 elaborates on the disclosures to be made by a guarantor in its interim and
annual financial statements about its obligations under certain guarantees that
it has issued. It also clarifies that a guarantor is required to recognize, at
the inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. This interpretation incorporates, without
change, the guidance in FIN No. 34, "Disclosure of Indirect Guarantees of
Indebtedness of Others," which is being superceded. The initial recognition and
initial measurement provisions of FIN No. 45 are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. The disclosure
requirements in this interpretation are effective for financial statements of
interim or annual periods after December 15, 2002.

In January 2003, the FASB issued Financial Interpretation No. 46,
"Consolidation of Variable Interest Entities - an interpretation of ARB No. 51"
("FIN 46"). FIN 46 is an interpretation of Accounting Research Bulletin 51,
"Consolidated Financial Statements", and addresses consolidation by business
enterprises of variable interest entities ("VIE's"). FIN 46 requires an
enterprise to consolidate a VIE if that enterprise has a variable interest that
will absorb a majority of the entity's expected losses if they occur, receive a
majority of the entity's expected residual returns if they occur, or both. This
guidance applies immediately to VIE's created after January 31, 2003, and to
VIE's in which an enterprise obtains an interest after that date. It applies in
the first fiscal year or interim period beginning after June 15, 2003, to VIE's
in which an enterprise holds a variable interest that it acquired before
February 1, 2003. We do not expect this statement to have any impact on our
financial statements since we do not own an interest in any VIE's.

CERTAIN LITIGATION AND ENVIRONMENTAL MATTERS

We are subject to federal, state and local laws and regulations governing
the discharge of materials into the environment or otherwise relating to
environmental protection. At the federal level, such laws include, among others,
the Clean Air Act, the Clean Water Act, the Oil Pollution Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, and the National Environmental Policy Act, as
each may be amended from time to time. Failure to comply with these laws and
regulations may result in the assessment of administrative, civil, and criminal
penalties or the imposition of an

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injunctive relief. Moreover, compliance with such laws and regulations in the
future could prove to be costly, and there can be no assurance that we will not
incur such costs in material amounts. Environmental laws and regulations have
changed substantially and rapidly over the last 20 years, and we anticipate that
there will be continuing changes. The clear trend in environmental regulation is
to place more restrictions and limitations on activities that may impact the
environment, such as emissions of pollutants, generation and disposal of wastes
and use and handling of chemical substances. Increasingly strict environmental
restrictions and limitations have resulted in increased operating costs for us
and other businesses throughout the United States, and it is possible that the
costs of compliance with environmental laws and regulations will continue to
increase. We will attempt to anticipate future regulatory requirements that
might be imposed and to plan accordingly in order to remain in compliance with
changing environmental laws and regulations and to minimize the costs of such
compliance.

Enron received a request for information from the EPA under Section 308 of
the Clean Water Act requesting information regarding certain discharges and
releases from oil pipelines owned or operated by Enron and its affiliates for
the time period July 1, 1998 to July 11, 2001. Because we were the only Enron
affiliated entity with domestic crude oil pipelines operated by Enron, Enron
responded for itself and on behalf of us to the EPA's request on January 29,
2002. At this time, we are not able to predict the outcome of the response made
to the EPA's Section 308 request.

In connection with extensive asset purchases in 1998 and 1999, we instituted
a pipeline integrity management program in 1999. This program was expanded in
December of 2001 with a pipeline integrity assurance program to comply with
certain regulatory and legislative changes. Under this program, the integrity of
a pipeline is evaluated to avoid operating a pipeline that poses significant
risk of crude oil spills. Our written EOTT Pipeline Integrity Program, which was
intended to comply with the new Office of Pipeline Safety ("OPS") Integrity
Management regulations was formally implemented in January 2002 and further
expanded in January 2003. Anticipated operating expenses and capital
expenditures to comply with that program are budgeted annually; however, actual
future expenditures may be different from the amounts currently anticipated.

John H. Roam, et al. vs. Texas-New Mexico Pipe Line Company and EOTT Energy
Pipeline Limited Partnership, Cause No. CV43296, ("Kniffen Estates Suit") was
filed on March 2, 2001, in the District Court of Midland County, Texas, 238th
Judicial District by certain residents of the Kniffen Estates, a residential
subdivision located outside of Midland, Texas. The allegations in the petition
state that free crude oil products were discovered in water wells in the Kniffen
Estates area, on or about October 3, 2000. The plaintiffs claim that the crude
oil products are from a 1992 release from a pipeline then owned by the Texas-New
Mexico Pipe Line Company ("Tex-New Mex"). We purchased that pipeline from
Tex-New Mex in 1999. The plaintiffs have alleged that Tex-New Mex was negligent,
grossly negligent, and malicious in failing to accurately report and remediate
the spill. With respect to us, the plaintiffs are seeking damages arising from
any contamination of the soil or groundwater since we acquired the pipeline in
question. No specific amount of money damages was claimed in the Kniffen Estate
Suit, but the plaintiffs did file proofs of claim in our bankruptcy proceeding
totaling $62 million. In response to the Kniffen Estates Suit, we filed a
cross-claim against Tex-New Mex. In the cross-claim, we claim that, in relation
to the matters alleged by the plaintiffs, Tex-New Mex breached the Purchase and
Sale Agreement between the parties dated May 1, 1999, by failing to disclose the
1992 release and by failing to undertake the defense and handling of the toxic
tort claims, fair market value claims, and remediation claims arising from the
release. Additionally, we are asserting claims of gross negligence, fraud, and
specific performance and are seeking monetary and equitable relief sufficient to
(i) reimburse us for expenses incurred by us to date for remediation associated
with this pipeline, (ii) enable us to examine the condition of selected portions
of the pipeline to determine if additional repair work or remediation may be
necessary, and (iii) reimburse us for any future repair work or remediation
necessary because of the maintenance of the pipeline before we acquired it. On
April 5, 2002, we filed an amended cross-claim which alleges that Tex-New Mex
defrauded us as part of Tex-New Mex's sale of the pipeline systems to us in
1999. The amended cross-claim also alleges that various practices employed by
Tex-New Mex in the operation of its pipelines constitute gross negligence and
willful misconduct and void our obligation to indemnify Tex-New Mex for
remediation of releases that occurred prior to May 1, 1999. In the Purchase and
Sale Agreement, we

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agreed to indemnify Tex-New Mex only for certain remediation obligations that
arose before May 1, 1999, unless these obligations were the result of the gross
negligence or willful misconduct of Tex-New Mex prior to May 1, 1999. EOTT
Energy Pipeline Limited Partnership ("PLP") and the plaintiffs agreed to a
settlement during our bankruptcy proceedings. The settlement provides for the
plaintiffs' release of their claims filed against PLP in this proceeding and in
the bankruptcy proceedings, in exchange for an allowed general unsecured claim
in our bankruptcy of $3,252,800 (as discussed above, the plaintiffs filed proofs
of claim in our bankruptcy proceedings totaling $62 million). The general
unsecured claim has been accrued at December 31, 2002. The plaintiffs and PLP
continue to pursue their claims against Tex-New Mex. On April 1, 2003, we filed
a second amended cross claim in this matter. In addition to the claims filed in
the previous cross claims, EOTT requested (i) injunctive relief for Tex-New
Mex's refusal to honor its indemnity obligations; (ii) injunctive relief
requiring Tex-New Mex to identify, investigate and remediate sites where the
conduct alleged in our cross claim occurred; and (iii) restitution damages of
over $125,000,000. Tex-New Mex also filed a motion to compel arbitration of
these issues, to which we objected. A hearing on the motion to compel
arbitration was held on April 11, 2003. The arbitration motion filed by Tex-New
Mex was denied. Tex-New Mex has indicated that they may appeal that ruling. At
the April 11, 2003 hearing, the court severed into a separate action EOTT's
cross-claims against Tex-New Mex that extend beyond the crude oil release and
groundwater contamination in the Kniffen Estates subdivision ("EOTT's
Over-Arching Claim"). Our motion for summary judgement on certain issues is set
for hearing on May 5, 2003. Discovery is ongoing in this matter. A trial date of
June 9, 2003 is set for the plaintiff's claims against Tex-New Mex and EOTT's
original cross claim against Tex-New Mex arising from their crude oil release
and groundwater contamination in the Kniffen Estates subdivision (the "Original
Claims"). The court has indicated that it will schedule a trial of EOTT's
Over-Arching Claim after the Original Claims are tried.

In 2001, expenses incurred for spill clean up and remediation costs related
to the assets purchased from Tex-New Mex increased significantly. Based on our
experience with these assets, we filed an amended cross-claim against Tex-New
Mex, as previously discussed, alleging contingent claims for potential
remediation issues not yet known to us. We allege that Tex-New Mex failed to
report spills, underreported spills, failed to properly respond to leaks in the
pipeline and engaged in other activities with regard to the pipeline that may
result in future remediation liabilities. We obtained $20 million in insurance
coverage in connection with the acquisition from Tex-New Mex believing that
amount would be sufficient to cover remediation requirements along the pipeline
for a ten-year period. After three years into the term of the insurance policy,
we have completely exhausted the amount of insurance coverage.

In addition to costs associated with the assets acquired from Tex-New Mex,
EOTT has incurred spill clean up and remediation costs in connection with other
properties it owns in various locations throughout the United States. We have
acquired insurance coverage to cover clean up and remediation costs that may be
incurred in connection with properties not acquired from Tex-New Mex. We have
accrued current estimates for future remediation costs on all environmental
spills or releases which occurred prior to December 31, 2002; however, actual
future expenditures may be different than amounts currently anticipated. See
further discussion of the estimated environmental liability and amounts expected
to be recovered from insurance recorded at December 31, 2002 in Note 12 to the
Consolidated Financial Statements.

As part of the ongoing Energy Policy Act debate, both the U.S. House of
Representatives and the U.S. Senate introduced bills in 2002 which would have
had a significant impact on the MTBE market at the national level. The Bush
Administration has also made statements in favor of conversion for MTBE
substitutes to the use of ethanol as an alternative to MTBE. If MTBE were to be
restricted or banned in Texas or throughout the United States, we could modify
the Morgan's Point Facility to produce other products. We believe that modifying
our existing Morgan's Point Facility to produce other gasoline blendstocks such
as alkylates would require a substantial capital investment and as a result of
our restructuring, we may not have the resources available to effect such a
conversion or that such conversion would be economically viable. Further, we
cannot predict whether the proposed Energy Policy Act or other similar
legislation may be passed or whether the federal government will take steps to
reverse California's ban on the use of MTBE as a gasoline component, or if the
federal government will provide monetary assistance for conversion. If federal
legislation is enacted, the ban in California becomes effective, or Texas bans
the use of MTBE, we would expect such ban to materially reduce MTBE demand,
which would have a material adverse effect on our financial results.

We may experience future releases of crude oil, MTBE or other substances
into the environment or discover releases that were previously unidentified.
While an inspection program is maintained on our pipelines to prevent and detect
such releases, and operational safeguards and contingency plans are in place for
the operation of our processing facilities, damages and liabilities incurred due
to any future environmental releases could affect our business. We believe that
our operations and facilities are in substantial compliance with applicable
environmental laws and regulations and that there are no outstanding potential
liabilities or

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claims relating to safety and environmental matters that we are currently aware
of, the resolution of which, individually or in the aggregate, would have a
materially adverse effect on our financial position or results of operations.
However, we could be significantly adversely impacted by additional repair or
remediation costs related to the pipeline assets we acquired from Tex-New Mex if
the need for any additional repair or remediation arises and we do not obtain
reimbursement for any such costs as a result of the pending litigation
concerning those assets. Our environmental expenditures include amounts spent on
permitting, compliance and response plans, monitoring and spill cleanup and
other remediation costs. In addition, we could be required to spend substantial
sums to ensure the integrity of and upgrade our pipeline systems, and in some
cases, we may take pipelines out of service if we believe the cost of upgrades
will exceed the value of the pipelines.

No assurance can be given as to the ultimate amount or timing of future
expenditures for environmental remediation or compliance, and actual future
expenditures may be different from the amounts currently estimated. In the event
of future increases in costs, we may be unable to pass on those increases to our
customers.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP") requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of actual revenues
and expenses during the reporting period. Although we believe these estimates
are reasonable, actual results could differ from those estimates. Our
significant accounting policies are summarized in Note 2 to the Consolidated
Financial Statements included elsewhere in this report.

Financial statements for periods subsequent to the Chapter 11 filing are
prepared in accordance with the American Institute of Certified Public
Accountant's Statement of Position No. 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7"). The financial statements
presented herein have been prepared on a "going concern" basis in accordance
with generally accepted accounting principles. The "going concern" basis of
presentation assumes that we will continue in operation for the foreseeable
future and will be able to realize our assets and discharge our liabilities in
the normal course of business.

In connection with the confirmation of our Restructuring Plan, we will adopt
fresh start reporting under SOP 90-7 effective March 1, 2003. In connection with
the confirmation of our Restructuring Plan, the enterprise value of EOTT,
inclusive of working capital, was determined to be in the range of $365 million
to $395 million. We have arranged for independent valuations to be performed to
assist in the allocation of reorganization value (enterprise value before
liabilities) as of March 1, 2003 to the assets and liabilities of EOTT in
proportion to their relative fair value. The critical accounting policies that
we have identified are discussed below.

Revenue and Expenses

We routinely make accruals for both revenues and expenses due to the timing
of receiving information from third parties, reconciling our records with those
of third parties, claims that have been incurred but not processed and costs
that accrue over time under benefit and incentive plans. In addition,
substantially all of our crude oil and refined products gathering, marketing and
trading operations are marked to fair value pursuant to EITF Issue 98-10 or SFAS
No. 133. Certain estimates were made in determining the fair value of contracts.
We have determined these estimates using available market data and valuation
methodologies. We believe our estimates for these items are reasonable, but
there is no assurance that actual amounts will not vary from estimated amounts.
See also "New Accounting Pronouncements Not Yet Adopted" for discussion of the
rescission of EITF 98-10 and the related impact on accounting for inventory.

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Depreciation and Amortization

We calculate our depreciation and amortization based on estimated useful
lives and salvage values of our assets. When assets are put into service, we
make estimates with respect to useful lives that we believe are reasonable.
However, factors such as competition, regulation or environmental matters could
cause us to change our estimates, thus impacting the future calculation of
depreciation and amortization. When any asset is tested for recoverability, we
also review the remaining useful life of the asset. Any changes to the estimated
useful life resulting from that review are made prospectively.

Impairment of Assets

We evaluate impairment of our long-lived assets in accordance with SFAS No.
144, and would recognize an impairment when estimated undiscounted future cash
flows associated with an asset or group of assets are less than the asset
carrying amount. If an asset is impaired, the asset is written down to fair
value. Long-lived assets are subject to factors which could affect future cash
flows. These factors include competition, regulation, environmental matters,
consolidation in the industry, refinery demand for specific grades of crude oil,
area market price structures and continued development drilling in certain areas
of the United States. We continuously monitor these factors and pursue
alternative strategies to maintain or enhance cash flows associated with these
assets; however, no assurances can be given that we can mitigate the effects, if
any, on future cash flows related to any changes in these factors. See further
discussion of asset impairments recorded in Note 7 to the Consolidated Financial
Statements.

Contingencies

We accrue reserves for contingent liabilities, which include environmental
remediation and potential legal claims. A loss contingency is accrued when our
assessment indicates that it is probable that a liability has been incurred and
the amount of the liability can be reasonably estimated. Our estimates are based
upon currently available facts, prior experience in remediation of spills,
existing technology and presently enacted laws and regulations. These estimated
liabilities are subject to revision in future periods based on actual costs or
new information.

RISK FACTORS

Although we believe that our expectations regarding future events are based
on reasonable assumptions, we cannot assure you that such expectations will be
realized. In addition to other factors and matters discussed elsewhere in this
report, and although new factors emerge from time to time which are not
predictable, the following risk factors could cause actual results or outcomes
to differ materially:

RISK FACTORS RELATING TO OUR BUSINESS

WE HAVE RECENTLY EMERGED FROM BANKRUPTCY AND MAY NOT BE ABLE TO RE-ESTABLISH
MARKET CREDIBILITY OR EXECUTE OUR RESTRUCTURING PLAN.

As a former Enron related affiliated entity, our market credibility has been
adversely affected since Enron's bankruptcy filing. Such adverse effects
included, without limitation, the matters discussed above in "Impact of the
Bankruptcy of Enron and Certain of Its Subsidiaries, and Related Events." While
we have settled our issues with Enron through our Restructuring Plan, in the
near term we expect continued pressure on our gross profits until we are able to
re-establish our market credibility. Our ability to obtain letters of credit to
support our purchases of crude oil and feedstocks is fundamental to our crude
oil gathering and marketing activities and Liquids Operations. Subsequent to the
Enron bankruptcy filing, our trade creditors have been less willing to extend
credit to us on an unsecured basis and we have had to significantly reduce our
marketing activities due to the amount of credit support available under our
credit facilities. In light of our bankruptcy filing and restructuring, we can
give no assurance that we will not be required to further reduce or restrict our
gathering and marketing activities because of continuing limitations on our
ability to obtain credit support and

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financing for our working capital needs. Any significant decrease in our
financial strength, regardless of the reason for such decrease, may also
increase the number of transactions requiring letters of credit or other
financial support, may make it more difficult for us to obtain such letters of
credit, and/or may increase the cost of obtaining them. This could in turn
adversely affect our ability to maintain our level of purchasing and marketing
activities or otherwise adversely affect our profitability.

ECONOMIC AND INDUSTRY FACTORS BEYOND OUR CONTROL CAN ADVERSELY AFFECT OUR
GROSS PROFITS.

Historically, our business has been very competitive with thin and volatile
profit margins. The ability to generate margins in the crude oil marketing
business is not tied to the absolute price of crude oil but is generated by the
difference between the price at which crude oil is sold and the price paid and
other costs incurred in the purchase and transportation of the crude oil.
Pipeline tariff revenues are dependent on volumes primarily from our marketing
business. Additionally, gross profits could be affected by the change in fair
value of positions taken, if any. Our gross profits are also affected by factors
beyond our control, including, without limitation:

o the performance of the U.S. and world economies;

o volumes of crude oil produced in the areas we serve;

o demand for oil by refineries and other customers;

o prices for crude oil at various lease locations;

o prices for crude oil futures contracts on the New York Mercantile
Exchange;

o the competitive position of alternative energy sources; and

o the availability of pipeline and other transportation facilities
that may make crude oil production from other producing areas
competitive with crude oil production that we purchase at the
lease.

In addition to these factors, as further described below, the bankruptcy of
Enron has significantly impacted our ability to maintain volumes of crude oil
purchased at the lease, the amount of letters of credit our trade creditors have
requested us to post, and therefore our profitability.

OUR ABILITY TO MAINTAIN OUR VOLUMES OF CRUDE OIL PURCHASED AT THE LEASE MAY
BE ADVERSELY AFFECTED BY LIMITED ACCESS TO CREDIT, WHICH WILL IN TURN AFFECT OUR
PROFITABILITY.

Since the bankruptcy of Enron and our bankruptcy, we have experienced an
increased amount of requests for letters of credit from our trade creditors. As
a result of the Enron Bankruptcy and our bankruptcy, our trade creditors have
been less willing than before the Enron Bankruptcy to extend credit to us on an
unsecured basis. In addition, the amount of letters of credit has also increased
as a result of the rise in crude oil prices. The amount of letters of credit is
primarily based on volume and crude oil prices. If volumes remain constant and
crude oil prices increase, the dollar amount of letters of credit will increase.
Since our capacity to post letters of credit is limited to a set amount under
our current credit facility, we have lost, and may continue to lose, crude oil
volumes based upon letter of credit requests that we cannot fulfill, which
significantly affects our profitability, as well as our ability to service our
debt obligations.

OUR ABILITY TO MAINTAIN OUR VOLUMES OF CRUDE OIL PURCHASED AT THE LEASE MAY
ALSO BE ADVERSELY AFFECTED BECAUSE OF REDUCED DRILLING AND PRODUCTION ACTIVITY.

Our profitability depends in part on our ability to offset volumes lost
because of natural declines in crude oil production from depleting wells or
volumes lost to competitors. This is particularly difficult in the current
environment of reduced drilling activity and discontinued production operations.
The amount of drilling and production will depend in large part on crude oil
prices. To the extent that low crude oil prices result in lower volumes of lease
crude oil available for purchase, we may experience lower per barrel margins, as
competition for available lease crude oil on the basis of price intensifies. It
is possible that domestic crude oil producers may further reduce or discontinue
drilling and production operations. In addition, a sustained depression in crude
oil prices could result in the bankruptcy of some producers.

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OUR ABILITY TO MAINTAIN OR INCREASE OUR GROSS PROFITS IS DEPENDENT ON THE
SUCCESS OF OUR PRICE RISK MANAGEMENT STRATEGIES.

Price risk management strategies, including those involving price hedges
using NYMEX futures contracts, are very important in maintaining or increasing
our gross profits. Hedging techniques require significant resources dedicated to
the management of futures positions and physical inventories. We cannot assure
you that our price risk management strategies will be successful in protecting
us from risks or in maintaining our gross profits at desirable levels.
Furthermore, we have certain basis risks (the risk that price relationships
between delivery points, grades of crude oil or delivery periods will change)
that cannot be completely hedged, and from time to time we enter into
transactions providing for purchases and sales in future periods in which the
volumes of crude oil are balanced, but where either the purchase or the sale
prices are not fixed at the time the transactions are entered into. In these
cases, we are subject to the risk that prices may change or that price changes
will not occur as anticipated. See Item 1. "Business - Risk
Management/Derivatives."

OUR PERFORMANCE DEPENDS ON OUR ABILITY TO MINIMIZE BAD DEBTS AND LEGAL
LIABILITY WHEN EXTENDING CREDIT TO OPERATORS AND CUSTOMERS.

When we purchase crude oil at the lease, we often make payment to an
operator who is responsible for the correct payment and distribution of the
proceeds to other parties. If the operator does not have sufficient resources to
indemnify and defend us in case of a protest, action or complaint by those other
parties, our costs could rise. In addition, because we may extend credit to some
customers in large amounts, it is important that our credit review, evaluation
and control mechanisms work properly. Even if our mechanisms work properly, we
cannot assure you that our customers will not experience losses in dealings with
other parties, in which case we could be adversely affected.

MORGAN'S POINT FACILITY OPERATIONAL RISKS WHICH COULD AFFECT CASH FLOW.

With respect to our Morgan's Point Facility, we are now subject to
operational and commodity price risk. The Morgan's Point Facility utilizes a
complex chemical conversion process to produce MTBE and other products and is
subject to significant operational risk. These operational risks include the
efficient mechanical operation of each of the three main processing units, the
ability to secure transportation of all required feedstocks and transportation
of finished products to end-use markets. Annual maintenance is performed at the
Morgan's Point Facility to ensure the efficient operation of the facility;
however, numerous factors including quality of feedstocks, weather and
mechanical malfunction can result in an outage at the facility and/or the need
for significant additional maintenance of the facility. As a result of the
rejection of our Toll Conversion Agreement by EGLI, our operation of the
Morgan's Point Facility has been converted to a merchant operation, which means
that we take title to feedstocks and sell products directly to third parties, as
opposed to providing tolling services to EGLI. This means that we bear the risk
of physical loss associated with storing these feedstocks and products. We are
also exposed to fluctuations in the commodities market. We are subject to a
significant increase in commodity price risk for feedstocks and marketing and
commodity price risk associated with owning and selling MTBE and other end
products, which may vary based on factors beyond our control. Due to this
commodity risk, our cash flow over the expected life of this asset will likely
vary significantly.

Also, there continues to be increased limitations and restrictions, due to
environmental regulations, related to the use of MTBE in the United States and
it is possible that in the future the use of MTBE may no longer be allowed in
the United States. We would expect such ban to materially reduce MTBE demand,
which would have a material adverse effect on our financial results. If MTBE
were to be restricted or banned in Texas or throughout the United States, we
could modify the Morgan's Point Facility to produce other products. We believe
that modifying our existing Morgan's Point Facility to produce other gasoline
blendstocks such as alkylates would require a substantial capital investment. We
cannot be certain that we will have the resources available to effect such a
conversion or that such conversion would be economically viable.

65

OUR FINANCIAL RESOURCES ARE A MAJOR CONSIDERATION FOR PARTIES THAT ENTER
INTO TRANSACTIONS WITH US, AND BECAUSE OF THE LARGE DOLLAR VOLUME OF THE
MARKETING TRANSACTIONS IN WHICH WE ENGAGE, WE HAVE A SIGNIFICANT NEED FOR
WORKING CAPITAL.

Any significant decrease in our financial strength, regardless of the reason
for the decrease, may increase the number of transactions requiring letters of
credit or other financial support; make it more difficult for us to obtain
letters of credit upon expiration of our exit credit facility or in an amount
greater than currently permitted by our exit credit facility; or increase the
cost of obtaining letters of credit.

ENVIRONMENTAL AND OTHER REGULATORY COSTS AND LIABILITIES COULD AFFECT OUR
CASH FLOW.

Our business is heavily regulated by federal, state and local agencies with
respect to environmental, safety and other regulatory matters. This regulation
increases our cost of doing business. We may be subject to substantial penalties
if we fail to comply with any regulation. We cannot assure you that changes
enacted by regulatory agencies that have jurisdiction over us will not increase
our cost of conducting business or otherwise negatively impact our
profitability, cash flow and financial condition. If an accidental leak or spill
occurs in one of our pipelines, at a storage facility or from one of our
operating units, we may have to pay a significant amount to clean up the leak or
spill. The resulting costs and liabilities, net of insurance recovery, if any,
could negatively affect the level of cash available to pay amounts due on our
debt. Although we believe we are in compliance in all material respects with all
applicable environmental laws and regulations, we could be adversely affected by
environmental costs and liabilities that may be incurred or increased costs
resulting from failure to obtain all required regulatory consents and approvals.
As to all of our properties, we cannot assure you that past operating practices,
including those that were state of the art at the time employed, will not result
in significant future environmental liabilities. In particular, we could be
significantly adversely impacted by additional repair or remediation costs
related to the pipeline assets we acquired from Tex-New Mex if the need for any
additional repairs or remediation arises and we do not obtain reimbursement for
any such costs as a result of the pending litigation concerning those assets.
See Item 1. "Business - Environmental Matters," "Regulation," and Item 3. "Legal
Proceedings."

SEPTEMBER 11, 2001 AND SUBSEQUENT WORLD EVENTS MAY ADVERSELY AFFECT OUR
BUSINESS.

We are currently unable to measure the ultimate impact of the terrorist
attacks of September 11, 2001, and the United States' military action in
Afghanistan and Iraq in response to these attacks, on our industry and the
United States economy as a whole. The uncertainty and risk of future terrorist
activity may impact our results of operations and financial condition in
unpredictable ways. These developments have resulted in adverse changes in the
insurance markets and insurance premiums could be increased further or coverages
may be unavailable in the future. These developments could also result in
disruptions of financial, power and fuel markets and certain of our facilities
could be directly or indirectly harmed by future terrorist activity. Instability
in the financial markets may also adversely affect our ability to access
capital. These developments could also lead to increased volatility in prices
for crude oil, natural gas, and certain feedstocks.

RISK FACTORS RELATING TO OUR NEW CORPORATE STRUCTURE

ALLOWED GENERAL UNSECURED CLAIMS WILL REDUCE THE AMOUNT OF NEW UNITS TO BE
RECEIVED BY OUR FORMER SENIOR UNSECURED NOTEHOLDERS.

Pursuant to our Restructuring Plan, we cancelled our outstanding $235
million of 11% senior unsecured notes. Our former senior unsecured noteholders
and holders of allowed general unsecured claims will receive a pro rata share of
$104 million of 9% senior notes and a pro rata share of 11,947,820 limited
liability company units of EOTT LLC representing 97% of the newly issued LLC
units. Former common unitholders of the MLP have received 369,520 or 3% of the
newly issued LLC units in connection with the extinguishment of the MLP's common
units.

66

The determination of the final amounts of allowed general unsecured claims
is still pending in the claims reconciliation process in our bankruptcy.
Consequently, the former bondholders do not yet know what their allocation of
the 9% senior notes and the 11,947,820 EOTT LLC units will be. Their percentage
ownership of our new senior notes and LLC units could be significantly less than
their previous ownership percentage of the extinguished 11% senior unsecured
notes. The greater the amount of general unsecured claims determined in the
claims reconciliation process, the less the amount of limited liability company
units to be issued to our former senior unsecured noteholders.

OUR UNITS MAY BE SUBJECT TO RESTRAINTS ON LIQUIDITY.

While we are a public company required to file public reports under the
Securities Exchange Act of 1934, we are not, however, currently listed on the
New York Stock Exchange, the American Stock Exchange, the NASDAQ quotation
system or any other stock exchange. As of March 18, 2003, our LLC Units were
being traded over-the-counter and are listed in the Pink Sheets. It is not our
current intention to become listed on a national stock exchange or the NASDAQ
quotation system in the near future, but may elect to do so at an appropriate
time, assuming we meet any applicable listing requirements. Consequently, and
because of the nature of over-the-counter trading, trading in our units may be
limited, the price of our units could be volatile, and as a result holders of
units may not be able to effect sales of significant quantities of units at
prices posted in the Pink Sheets, or in the quantities desired.

WE COULD BE TREATED AS A CORPORATION FOR UNITED STATES INCOME TAX PURPOSES.

As a result of our Restructuring Plan, we have adopted the limited liability
company ("LLC") corporate form in place of our previous limited partnership
form. The LLC is a relatively recent creation of state statutory law, generally
treated like a partnership for federal income tax purposes and like a
corporation with limited liability for state law and other non-tax purposes,
such as protection from liability for holders of LLC units, analogous to the
protection from liability afforded to shareholders in a corporation. So long as
an LLC does not affirmatively elect to be taxed as a corporation, and, so long
as at least 90% of the LLC's annual gross income consists of income derived from
specific activities, the LLC will not be subject to federal income tax on its
income at the entity level, because it will be treated as a partnership, or a
flow-through entity. We may not find it possible, regardless of our efforts, to
meet this income requirement or may inadvertently fail to meet this income
requirement. Current law may change so as to cause us to be treated as a
corporation for United States income tax purposes without regard to our sources
of income or otherwise subject us to entity-level taxation.

If we were to be treated as a corporation for United States income tax
purposes, we would pay United States income tax on our income at the corporate
tax rate, which is currently a maximum of 35% and would pay state income taxes
at varying rates. Distributions to unitholders would generally be taxed as a
corporate distribution. Because a tax would be imposed upon us as a corporation,
the cash available for distribution to a unitholder would be substantially
reduced. Treatment of us as a corporation would cause a substantial reduction in
the value of our units.

THE LLC STRUCTURE IS RELATIVELY NEW AND COULD BE CHALLENGED.

Because most LLC statutes were only recently enacted, there is little or no
judicial guidance as to their interpretation. This could create uncertainty
regarding the rights and obligations of and among our unitholders, directors and
officers. Also, some doubt as to liability under state law of LLC members in
certain states, combined with absence of case law on the point, creates some
uncertainty as to the possibility of such liability to our unitholders in such
states.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We enter into forwards, futures and other contracts primarily for the
purpose of hedging the impact of market fluctuations on assets, liabilities or
other contractual commitments. The use of financial instruments may expose us to
market and credit risks resulting from adverse changes in commodity prices,
interest rates and foreign exchange rates. The major market risks are discussed
below.

Commodity Price Risk. Commodity price risk is a consequence of gathering
crude oil at the lease and marketing the crude oil to refineries or other trade
partners. We may use forwards, futures, swaps and options, as needed, to
mitigate price exposure and manage this risk on a portfolio basis.

Interest Rate Risk. Interest rate risk is the result of having variable rate
debt obligations, as changing interest rates impact the discounted value of
future cash flows and having fixed rate debt obligations which impact the change
in fair value.

COMMODITY PRICE RISK

We have performed a value at risk analysis of our financial derivative
commodity instruments. Value at risk incorporates numerous variables that could
impact the fair value of our investments, including commodity prices, as well as
correlation within and across these variables. We estimate value at risk
commodity exposures using a parametric model, which captures the exposure
related to open futures contracts. The value at risk method utilizes a one-day
holding period and a 95% confidence level.

The following table illustrates the value at risk for commodity price risk
(in millions):

(1) The above value at risk amount represents financial derivative
commodity instruments, primarily commodity futures contracts,
entered into to hedge future physical crude oil purchase
commitments. The commitments to purchase physical crude oil have
not been included in the above value at risk computation.

(2) At December 31, 2002, we had crude oil future contracts to
purchase 0.6 million barrels of crude oil and to sell 0.6 million
barrels of crude oil, with the majority of these contracts
maturing in the first quarter of 2003. At December 31, 2001, we
had crude oil future contracts to purchase 2.6 million barrels of
crude oil and to sell 3.8 million barrels of crude oil, with the
majority of these contracts maturing in the first quarter of 2002.

INTEREST RATE RISK

Our exposure to changes in interest rates primarily results from our
short-term debt with floating interest rates. As of December 31, 2002,
short-term debt of $125 million with floating interest rates was outstanding
under our DIP credit facility.

ACCOUNTING POLICIES

Our accounting policies for price risk management and hedging activities are
described in Note 2 to the Consolidated Financial Statements.

ENERGY TRADING AND DERIVATIVE TRANSACTIONS ACCOUNTED FOR AT FAIR VALUE

Generally, as we purchase crude oil, we enter into corresponding sales
transactions involving physical delivery of crude oil to third party users or
corresponding sales transactions on the NYMEX. This process

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enables us to minimize our exposure to price risk until we take physical
delivery of the crude oil. In 2002 and 2001, substantially all of our crude oil
and refined products marketing and trading operations are accounted for on a
fair value basis pursuant to SFAS No. 133 or EITF Issue 98-10. Prior to the
rescission of EITF 98-10, we accounted for inventories used in our energy
trading activities at fair value. See further discussion of our accounting
policies in Note 2 to the Consolidated Financial Statements.

The following table indicates fair values and changes in fair value of our
energy trading and derivative transactions (in thousands):

*Approximately $2.6 million of the fair value loss at December 31, 2001 relates
to physical sales transactions or sales transactions on the NYMEX entered into
to hedge physical inventory. The fair value of inventory is not included in the
table above.

FAIR VALUE OF CONTRACTS AT DECEMBER 31, 2002

*In determining the fair value of certain contracts, adjustments may be made to
published posting data, for location differentials and quality basis
adjustments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required hereunder is included in this report as set forth
in the "Index to Financial Statements" on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

We previously reported the information required by this Item 9 in a Form 8-K
filed with the SEC on February 11, 2002. This filing included information
regarding Andersen's withdrawal as our independent accountants on February 5,
2002 and related disclosures required by Regulation S-K, Item 304(a).

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS OF THE GENERAL PARTNER

Prior to January 1, 2003, the MLP did not directly employ any persons
responsible for the management or operations of EOTT or for providing services
relating to our day-to-day business affairs. The General Partner prior to the
effective date of the Restructuring Plan provided such services or obtained such
services from third parties or its affiliates. The MLP was responsible for
reimbursing the General Partner for all of its direct and indirect costs and
expenses including compensation and benefit costs related to the MLP. In
connection with the restructuring, all of the employees responsible for managing
and operating the MLP were hired effective January 1, 2003, by EOTT LLC.

The Board of Directors of the General Partner established an Audit Committee
consisting of three individuals who were neither officers nor employees of the
General Partner or any affiliate of the General Partner ("Independent
Directors"). The Audit Committee had the authority to review, at the request of
the General Partner, specific matters as to which the General Partner believed
there might have been a conflict of interest in order to determine if the
resolution of such conflict was fair and reasonable to the MLP. In addition, the
Audit Committee had the authority and responsibility for selecting the MLP's
independent public accountants, reviewing the MLP's annual audit and resolving
accounting policy questions.

In late 2001, Mr. Edward O. Gaylord, Mr. Dee S. Osborne, and Mr. Daniel P.
Whitty, the three Independent Directors of the Board of Directors of the General
Partner, resigned. Mr. John M. Duncan, an interlocking director with Enron,
resigned from the Board of Directors of the General Partner on February 13,
2002. Following those resignations, the General Partner restructured its Board
of Directors from a maximum of seven members to five, three of which were
independent directors. On April 10, 2002, Mr. Thomas M. Matthews, Mr. H. Malcolm
Lovett, Jr., and Mr. James M. Tidwell joined the Board of Directors of the
General Partner as Independent Directors. Messrs. Matthews, Lovett, and Tidwell
comprised all of the membership of the Audit Committee, the Compensation
Committee, and the Restructuring Committee. Mr. Stanley C. Horton continued on
the Board until his resignation on May 31, 2002. Mr. George Wassaf joined the
Board on May 31, 2002, replacing Mr. Horton. On September 26, 2002, Mr. Roderick
Hayslett and Mr. George Wassaf resigned from the Board. The two vacant director
positions were not filled.

Employees of Enron or its affiliates or of the General Partner did not
receive additional compensation for serving the General Partner as members of
the Board of Directors or any of its committees. Each director who was not an
employee of the General Partner or its affiliates received an annual retainer of
$25,000 for serving as a director for twelve (12) consecutive months.
Non-employee directors were paid a fee of $2,000 for each director's meeting
attended and $1,000 for each committee meeting attended. Each committee
chairperson was paid a fee of $4,000 annually.

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Set forth below is certain information concerning the directors and
executive officers of EOTT Energy Corp., the General Partner prior to the
effective date of the Restructuring Plan. During 2002, all directors of the
General Partner were elected annually by and could be removed by Enron, as the
sole shareholder of the General Partner. All executive officers served at the
discretion of the Board of Directors of the General Partner.

EOTT ENERGY CORP. (THE GENERAL PARTNER OF THE MLP PRIOR TO THE EFFECTIVE DATE OF
THE RESTRUCTURING PLAN)

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Effective March 1, 2003, EOTT LLC is managed by its Board of Directors,
consisting of seven individuals. Six of the seven directors were selected by
former noteholders of the MLP pursuant to agreements under our Restructuring
Agreement, and the seventh director is the Chief Executive Officer of EOTT LLC.
Each executive officer has been elected to serve until his or her successor is
duly appointed or elected by the Board of Directors of EOTT LLC or their earlier
removal or resignation from office.

The Board of Directors of EOTT LLC established an Audit Committee consisting
of three individuals who were neither officers nor employees of EOTT LLC or any
affiliate of EOTT LLC. The members of the Audit Committee are James M. Tidwell,
Robert E. Ogle and S. Wil VanLoh, Jr. The Audit Committee has the authority and
responsibility for selecting EOTT LLC's independent public accountants,
reviewing its annual audit and resolving accounting policy questions.

EOTT ENERGY LLC

On March 7, 2003, Thomas M. Matthews was appointed as the Chairman of the
Board and Chief Executive Officer. Prior to this appointment, Mr. Matthews
served on the board of the General Partner as Chairman of the Board and Chairman
of the Restructuring Committee, beginning in April 2002. Mr.

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Matthews served as the Chief Executive Office of Avista Corp. from July 1998 to
January 2001. Mr. Matthews served as President of NGC Corporation from November
1996 to June 1998. Mr. Matthews also currently serves on the board of
Environmental Power Corporation.

On March 7, 2003, James M. Tidwell was appointed to the Board and was
appointed Chairman of the Audit Committee. Prior to this appointment with EOTT
LLC, Mr. Tidwell served on the Board of the General Partner and as Chairman of
the Audit Committee, beginning in April 2002. Mr. Tidwell has served as Vice
President, Finance and Chief Financial Officer of WEDGE Group Incorporated since
January 2000. Mr. Tidwell served as President of Daniel Measurement & Control
from June 1999 to January 2000, and as Executive Vice President and Chief
Financial Officer of Daniel Industries, Inc. from August 1996 to June 1999,
before its acquisition by Emerson Electric. In addition, Mr. Tidwell currently
serves on the boards of Pioneer Drilling Company, T3 Energy Services and
Tidelands Geophysical. He is a member of the Audit Committees for each of the
three companies.

On November 14, 2002, Dana R. Gibbs was appointed as the Chief Executive
Officer, President and Chief Operating Officer of EOTT Energy LLC. Mr. Gibbs
resigned as Chief Executive Officer and Chief Operating Officer on March 7,
2003, and was appointed Chief Commercial Officer on that same date. Previously,
Mr. Gibbs served as Chief Executive Officer of the General Partner beginning in
January 2002, in addition to his positions as President and Chief Operating
Officer, to which he was appointed in June 2000. He joined the General Partner
as Executive Vice President in April 1999. Mr. Gibbs was elected to the General
Partner Board of Directors in June 2000 and served until April 2002. Mr. Gibbs
served as Vice President of Enron North America Corp. from 1992 to 1999.

On November 14, 2002, Mary Ellen Coombe was appointed as the Vice President,
Human Resources and Administration. Previously, Ms. Coombe served as Vice
President, Human Resources and Administration of the General Partner from
December 1992. Ms. Coombe served in various Human Resources and Administration
positions with Enron beginning in September 1980.

On January 28, 2003, Mr. H. Keith Kaelber was appointed as the Executive
Vice President and Chief Financial Officer. Prior to joining EOTT LLC, Mr.
Kaelber served in various capacities in the non-profit sector and founded
INDWELL, a nonprofit charitable corporation, in 1999. Mr. Kaelber served as
President, Financial Services, Senior Vice President and Chief Financial Officer
to NGC Corporation, a natural gas gathering, processing and marketing company,
from 1990 to 1997. Prior to 1990, Mr. Kaelber served as Executive Vice
President in the Energy Group of NCNB Texas where he was employed for twelve
years.

On November 14, 2002, Lori L. Maddox was appointed as the Vice President and
Controller. Previously, Ms. Maddox served as Vice President and Controller of
the General Partner beginning in February 2001 and has served as Controller from
October 1996 until February 2001. Prior to joining the General Partner, Ms.
Maddox was associated with Andersen where she became a Senior Manager and served
in the Energy Group for ten years.

On November 14, 2002, Molly M. Sample was appointed as the Vice President
and General Counsel. Previously, Ms. Sample served as Vice President and General
Counsel of the General Partner beginning in February 2001. Prior to that, Ms.
Sample served as General Counsel from September 2000 to January 2001. Ms. Sample
served in various legal positions with EOTT beginning January 1993.

Mr. J. Robert Chambers was appointed as a Director of the EOTT LLC Board and
Chairman of the EOTT LLC Compensation Committee on March 7, 2003. Mr. Chambers
is currently a Managing Director at Lehman Brothers Inc., where he manages the
Lehman Energy Fund portfolio. From 1994 to 2002, Mr. Chambers was a fixed income
analyst in Lehman's High Yield Department, covering the energy sector.

Ms. Julie H. Edwards was appointed as a Director of the EOTT LLC Board and a
member of the Compensation Committee on March 7, 2003. Ms. Edwards has been
Executive Vice President - Finance & Administration for Frontier Oil Corporation
since April 2000. At Frontier Oil Corporation, Ms. Edwards also

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served as Senior Vice President - Finance and Chief Financial Officer from
August 1994 to April 2000 and as Vice President - Secretary & Treasurer from
March 1991 through August 1994.

Mr. Robert Ogle was appointed as a Director of the EOTT LLC Board and member
of the Audit Committee on March 7, 2003. Mr. Ogle is a director in the Corporate
Advisory Services practice for Huron Consulting Group, focusing on corporate
restructuring. Mr. Ogle joined Andersen in 1985 and was a partner with Andersen
from November 1990 until July 2002.

Mr. S. Wil VanLoh, Jr. was appointed as a Director of the EOTT LLC Board and
member of the Audit Committee on March 7, 2003. Mr. VanLoh serves as President
and is a co-founder and Managing Partner of Quantum Energy Partners. Mr. VanLoh
currently serves as Director/Manager of a number of Quantum portfolio companies,
including Saxet Energy Ltd., Pointwest Energy Inc., Meritage Energy Partners,
LLC, EnSight Energy Partners, LP, Cougar Hydrocarbons Inc., Tri-C Energy, LP and
Rockford Energy Partners, LLC. He is a former Director/Manager of Texoil, Inc.,
Crown Oil Partners, LP, and Parks & Luttrell Energy Partners, LP. Prior to
co-founding Quantum in 1998, Mr. VanLoh co-founded Windrock Capital, Ltd., an
energy investment banking firm specializing in raising private equity and
providing merger, acquisition and divestiture advice for energy companies.

Mr. Daniel J. Zaloudek was appointed as a Director of the EOTT LLC Board and
member of the Compensation Committee on March 7, 2003. Mr. Zaloudek founded and
manages IMEDIA, Inc., an international multimedia content company, and has
engaged in business consulting from 1995 to the present. Mr. Zaloudek has
provided mediation services for both small and large firms in the Tulsa area
since October 2001. At Koch Industries in Wichita, Kansas, from 1978 to 1995,
Mr. Zaloudek held several key executive positions with responsibility for all
aspects of Koch's international oil and gas business. Mr. Zaloudek served on the
Board of Directors for the Avista Corporation located in Spokane, Washington,
from November 1998 to May 2002.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires certain of the
executive officers and all the directors and persons who own more than ten
percent of a registered class of our equity securities to file reports of
ownership and changes in ownership with the SEC and the New York Stock Exchange
and to furnish to the General Partner copies of all Section 16(a) forms filed.
Based solely on our review of the copies of such reports received, or written
representations from certain reporting persons that no Forms 5 were required for
those persons, we believe that during 2002 all affected reporting persons for
the MLP complied with all applicable filing requirements in a timely manner,
with one exception. George Wasaff was elected as a director of the General
Partner on May 30, 2002, but did not file a Form 3 until August 4, 2002. Mr.
Wasaff, however, did not buy, sell or own any of the MLP's units while he was
one of our directors.

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ITEM 11. EXECUTIVE COMPENSATION

The following table summarizes certain information regarding compensation
paid or accrued by the General Partner, during each of the last three fiscal
years to the Chief Executive Officer and each of the General Partner's four
other most highly compensated executive officers (the "Named Officers"):

EOTT ENERGY CORP.
SUMMARY COMPENSATION TABLE

(1) Reported bonus amounts in 2002 are payable in full no later than March 31,
2003.

(2) Includes perquisites and other personal benefits if value is greater than
the lesser of $50,000 or 10% of reported salary and bonus. Also, Enron
maintained three deferral plans for key employees under which payment of
base salary, annual bonus and long-term incentive awards may be deferred to
a later specified date. Mr. Gibbs is a participant in the 1994 Deferral
Plan. Beginning January of 1996, the 1994 Deferral Plan credits interest
based on fund elections chosen by participants. Since earnings on deferred
compensation invested in third-party investment vehicles, comparable to
mutual funds, need not be reported, no interest has been reported as Other
Annual Compensation under the 1994 Deferral Plan during 2000. During 2001,
Mr. Gibbs elected a distribution of his deferred compensation subject to a
10% penalty. Administrative expenses in the amount of $4,998 under Mr.
Gibbs' deferred compensation distribution are not included.

(3) The amounts shown include payouts under the EOTT Energy Corp. Long Term
Incentive Plan.

(4) The amounts shown include the value as of year end 2000, 2001, and 2002 of
Enron common stock allocated during those years to employees' special
subaccounts under the Enron Corp. Employee Stock Ownership plan and 2000 and
2001 matching contributions on employees' Enron Corp. Savings Plan account.
The amounts shown in 2002 include the matching cash contribution made in
lieu of Enron common stock. Mr. Clayton received a separation payment under
the terms of his employment agreement in the amount of $225,000 paid in
September 2002.

(5) Mr. Clayton resigned in September 2002.

74

Stock Option/SAR Grants During 2002

No unit options were granted during 2002 under the EOTT Energy Corp. Unit
Option Plan. No stock options were granted during 2002 under Enron's 1994 Stock
Plan ("1994 Plan"). No stock appreciation rights ("SAR") units were granted
during 2002, and none are outstanding.

AGGREGATED OPTIONS/SAR EXERCISES DURING 2002 AND OPTION/SAR
VALUES AT DECEMBER 31, 2002

No options were exercised under the Enron or EOTT Energy Corp. Option Plans.
The following table sets forth information with respect to the Named Officers
concerning the exercise of options under any Enron or EOTT Energy Corp. option
plans during the last fiscal year and unexercised options and SARs held as of
the end of the fiscal year:

(1) The dollar value for Mr. Gibbs in this column for options was calculated by
assuming the subordinated unit option converts to an option to purchase
common units and determining the difference between the fair market value of
the common units and the exercise value of the option at the end of the
fiscal year. The value of the MLP's common units at year-end 2002 was $0.14
and the subordinated unit grant price is $5.57. These options on
subordinated units are under Special Compensation Agreements between Mr.
Gibbs and Enron.

The dollar value for Ms. Coombe in this column for options was calculated by
assuming the subordinated unit option converts to an option to purchase
common units and determining the difference between the fair market value of
the common units and the exercise value of the option at the end of the
fiscal year. The value of the MLP's common units at year-end 2002 was $0.14
and the subordinated unit grant price is $15.00. These options were granted
under the EOTT Energy Unit Option Plan.

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LONG TERM INCENTIVE PLAN AWARDS IN 2002

In October 1997, the Board of Directors of the General Partner adopted the
EOTT Energy Corp. Long Term Incentive Plan. The Incentive Plan is intended to
provide key employees with Phantom Appreciation Rights ("PAR"), which are rights
to receive cash based on the performance of the Partnership prior to the time
the PAR is redeemed. The Incentive Plan had a five-year term beginning January
1, 1997 and PAR awards vest in 25% increments over a four-year period following
the grant year. No Named Officer received an award in 2002.

BENEFIT PLANS

Like other employees of EOTT, the Named Officers were eligible to
participate in certain Enron sponsored plans during 2002. In connection with our
Restructuring Plan and the Enron Settlement Agreement, the General Partner
withdrew from the Enron Corp. Cash Balance Plan on December 31, 2002.

Retirement and Supplemental Benefit Plans

Enron maintains the Enron Corp. Cash Balance Plan (the "Cash Balance Plan"),
which is a noncontributory defined benefit pension plan to provide retirement
income for employees of Enron and its subsidiaries. Through December 31, 1994,
participants in the Cash Balance Plan with five years or more of service were
entitled to retirement benefits in the form of an annuity based on a formula
that uses a percentage of final average pay and years of service. In 1995,
Enron's Board of Directors adopted an amendment to and restatement of the Cash
Balance Plan changing the plan's name from the Enron Corp. Retirement Plan to
the Enron Corp. Cash Balance Plan. In connection with a change to the retirement
benefit formula, all employees became fully vested in retirement benefits earned
through December 31, 1994. The formula in place prior to January 1, 1995 was
suspended and replaced with a benefit accrual in the form of a cash balance of
5% of eligible annual base pay beginning January 1, 1996. Effective January 1,
2003, Enron suspended future 5% benefit accruals under the Cash Balance Plan.
Each employee's accrued benefit will continue to be credited with interest based
on ten-year Treasury Bond yields. Effective December 2, 2001, Enron no longer
maintains a Supplemental Retirement Plan.

Enron also maintained a noncontributory employee stock ownership plan
("ESOP"), which was merged into the Enron Corp. Savings Plan effective August
30, 2002 and covered all eligible employees. Allocations to individual
employee's retirement accounts within the ESOP offset a portion of benefits
earned under the Cash Balance Plan prior to December 31, 1994. December 31, 1993
was the final date on which ESOP allocations were made to employee's retirement
accounts.

The following table sets forth the estimated annual benefits payable under
normal retirement age 65, assuming current remuneration levels without any
salary or bonus projections and participation until normal retirement at age 65,
with respect to the Named Officers under the provisions of the foregoing
retirement plans.

Note: The estimated annual benefits payable are based on the straight life
annuity form without adjustment for any offset applicable to a participant's
retirement subaccount in Enron's Employee Stock Ownership Plan.

76

SEVERANCE PLANS

During 2002, the EOTT Energy Corp. Severance Pay Plan provided for the
payment of benefits to employees who are terminated for failing to meet
performance objectives and standards, or who are terminated due to
reorganization or economic factors. The amount of benefits payable for
performance related terminations is based on length of service and may not
exceed six weeks' pay in the event such employee signs a waiver and release of
claims agreement. For those terminated as the result of reorganization or
economic circumstances, the benefit is based on length of service with one
week's pay per year of service up to an amount of a maximum payment of 26 weeks
of base pay. If the employee signs a waiver and release of claims agreement, the
severance pay benefits are doubled. The plan provides a grandfather provision
for those employees whose employment date is prior to January 1, 1993. This
provision provides severance benefits equal to two weeks of base pay multiplied
by the number of full or partial years of service, plus two weeks of base pay
for each $10,000 (or portion of $10,000) included in the employee's annual base
pay, provided the employee signs a waiver and release of claims agreement. In
the event of an unapproved change of control of the Company, any employee who is
involuntarily terminated within two years following the change of control will
be eligible for severance benefits equal to two weeks of base pay multiplied by
the number of full or partial years of service, plus two weeks of base pay for
each $10,000 (or portion of $10,000) included in the employee's annual base pay.
Under no circumstances will the total severance pay benefit exceed 52 weeks of
pay.

Effective January 1, 2003, the EOTT Energy LLC Severance Pay Plan provides
for the payment of benefits to employees who are terminated for failing to meet
performance objectives or standards, or who are terminated due to reorganization
or economic factors. The amount of benefits payable for performance related
terminations is two weeks of base pay in the event such employee signs a waiver
and release of claims agreement. For those terminated as the result of
reorganization or economic circumstances, the benefit is based on length of
service with two week's pay per each full or partial year of service up to an
amount of a maximum payment of 26 weeks of base pay, if the employee signs a
waiver and release of claims agreement.

EMPLOYMENT AGREEMENTS

Mr. Gibbs entered into a new employment agreement with the General Partner
on July 1, 2000 for a term of three years. The agreement provides for an annual
base salary of not less than $250,000 and an annual incentive plan target of
100%. The agreement provides for post employment noncompete obligations in the
event of termination. Severance arrangements for Mr. Gibbs include an
involuntary termination provision pursuant to the executive officers' employment
agreement. An involuntary termination includes (a) termination without cause;
and (b) a termination within 90 days after the happening of one of the following
events without the approval of the executive officer: (i) a substantial and/or
material reduction in the nature or scope of the executive officer's duties
and/or responsibilities, which results in the executive officer no longer having
an officer status and results in an overall material and substantial reduction
from the duties and stature of the officer position he presently holds, which
reduction remains in place and uncorrected for 30 days following written notice
of such breach to the Employer by the executive officer, (ii) a reduction in the
executive officer's base pay or an exclusion from a benefit plan or program
(except the executive officer may be subject to exclusion from a benefit plan or
program as part of a general cutback for all employees or officers) or (iii) a
change in the location for the primary performance of the executive officer's
services under the agreement to a city which is more than 100 miles away from
such location. The "confidentiality information" provision continues beyond the
term of the agreement following such termination and the "noncompete" provision
will continue for a period of six months following such termination.

Ms. Coombe entered into a new employment agreement with the General Partner
on October 1, 2002 for a term of 15 months. The agreement provides for an annual
base salary of not less than $170,000. Ms. Coombe's agreement provides for
severance benefits of two years' base salary in the event of involuntary
termination and includes confidentiality and non-compete provisions for a period
of one year following such termination. Severance arrangements for Ms. Coombe
include an involuntary termination provision pursuant to the executive officers'
employment agreement. An involuntary termination includes (a) termination
without

77

cause; and (b) a termination within 90 days after the happening of one of the
following events without the approval of the executive officer: (i) a
substantial and/or material reduction in the nature or scope of the executive
officer's duties and/or responsibilities, which results in the executive officer
no longer having an officer status and results in an overall material and
substantial reduction from the duties and stature of the officer position he
presently holds, which reduction remains in place and uncorrected for 30 days
following written notice of such breach to the Employer by the executive
officer, (ii) a reduction in the executive officer's base pay or an exclusion
from a benefit plan or program (except the executive officer may be subject to
exclusion from a benefit plan or program as part of a general cutback for all
employees or officers) or (iii) a change in the location for the primary
performance of the executive officer's services under the agreement to a city
which is more than 100 miles away from such location. The "confidentiality
information" provision continues beyond the term of the agreement following such
termination and the "noncompete" provision will continue for a period of one
year following such termination.

Ms. Maddox entered into her employment agreement with the General Partner in
2001. Ms. Maddox's agreement is for a term of two years. The agreement provides
for an annual base salary of not less than $160,000. Ms. Maddox's agreement
provides for severance benefits of two years' base salary in the event of
involuntary termination and includes confidentiality and noncompete provisions
for a period of one year following such termination. The employment agreement
was amended in September 2002 extending the term to December 31, 2003 and
adjusting the annual base salary to $180,000. Severance arrangements for Ms.
Maddox include an involuntary termination provision pursuant to the executive
officers' employment agreement. An involuntary termination includes (a)
termination without cause; and (b) a termination within 90 days after the
happening of one of the following events without the approval of the executive
officer: (i) a substantial and/or material reduction in the nature or scope of
the executive officer's duties and/or responsibilities, which results in the
executive officer no longer having an officer status and results in an overall
material and substantial reduction from the duties and stature of the officer
position he presently holds, which reduction remains in place and uncorrected
for 30 days following written notice of such breach to the Employer by the
executive officer, (ii) a reduction in the executive officer's base pay or an
exclusion from a benefit plan or program (except the executive officer may be
subject to exclusion from a benefit plan or program as part of a general cutback
for all employees or officers) or (iii) a change in the location for the primary
performance of the executive officer's services under the agreement to a city
which is more than 100 miles away from such location. The "confidentiality
information" provision continues beyond the term of the agreement following such
termination and the "noncompete" provision will continue for a period of one
year following such termination.

Ms. Sample entered into her employment agreement with the General Partner on
December 1, 2000. Ms. Sample's agreement is for a term of two years. The
agreement provides for annual base salary of not less than $130,000. Ms.
Sample's agreement provides for severance benefits of two years' base salary in
the event of involuntary termination and includes confidentiality and
non-compete provisions for a period of one year following such termination. The
employment agreement was amended in July 2002 extending the term to December 31,
2003 and adjusting the annual base salary to $165,000. Severance arrangements
for Ms. Sample includes an involuntary termination provision pursuant to the
executive officers' employment agreement. An involuntary termination includes
(a) termination without cause; and (b) a material breach of any major provision
of the agreement which remains uncorrected for 30 days following written notice
of such breach to the Employer. The "confidentiality information" provision
continues beyond the term of the agreement following such termination and the
"noncompete" provision will continue for a period of one year following such
termination.

Effective January 1, 2003, the employment agreements of Mr. Gibbs, Ms.
Coombe, Ms. Maddox, and Ms. Sample have been assumed by EOTT LLC.

78

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Board of Directors of the General Partner established the Compensation
Committee, which is responsible for developing and administering compensation
policy. John M. Duncan served on the Compensation Committee until his
resignation from the Board of Directors of the General Partner on February 13,
2002. On April 10, 2002, Messrs. Matthews, Tidwell and Lovett were elected to
serve on the Compensation Committee of the General Partner. None of these
directors had a relationship requiring disclosure under this caption,
"Compensation Committee Interlocks and Insider Participation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SECURITY HOLDER MATTERS

We know of no one who beneficially owned in excess of five percent of the
common units of the MLP except as set forth in the table below. Upon the
effective date of our Restructuring Plan, the MLP common units were converted to
limited liability company units and the subordinated units and API's were
extinguished.

(1) Based upon information provided by Enron Corp., these securities are held of
record by Timber I, LLC, an entity whose managing member is an indirect
subsidiary of Enron Corp. Enron Corp. retains the power to vote the
securities. Enron Corp. cannot unilaterally dispose of these securities and
therefore retains shared investment power over these securities under Rule
13d-3 of the Securities Exchange Act of 1934.

(2) The reporting of the APIs shall not be deemed to be a concession that such
interest represents a security.

Pursuant to the Restructuring Plan (i) we have issued 369,520 units,
representing 3% of our LLC units, to the former common unitholders of the MLP in
connection with the extinguishment of the MLP's common units; (ii) we are in the
process of determining the pro rata allocation of 11,947,820 units, representing
97% of our LLC units, to former senior noteholders and the holders of allowed
general unsecured claims; and (iii) we cancelled the subordinated units and
additional partnership interests. The exact pro rata allocation of these limited
liability company units cannot be determined until the precise amount of each
allowed claim is determined. This process is underway in the EOTT Bankruptcy
Court as part of our Restructuring Plan and is expected to be completed no
sooner than August 2003. Until this process is complete, while we know
11,947,820 units will be issued, we cannot report the exact beneficial ownership
of the units.

79

The following table sets forth certain information as of February 19, 2003,
regarding the beneficial ownership of (i) the common units and (ii) the common
stock of Enron, the parent company of our General Partner, by all directors of
the General Partner, each of the named executive officers and all directors and
executive officers as a group.

- ----------

* Less than 1 percent

(1) The above table includes subordinated units of the Partnership which are
subject to conversion into common units and which are presently vested:
Ms. Coombe, 60,000 units; Mr. Dana Gibbs, 80,000 units; and all directors
and executive officers as a group, 140,000 units. The above table also
includes shares of common stock of Enron which are subject to stock
options exercisable within 60 days as follows: Mr. Clayton, 5,935 shares;
Ms. Coombe, 56,370 shares; Mr. Gibbs, 61,151 shares; Mr. Hayslett, 79,527
shares; Mr. Horton, 368,412 shares; Mr. Lovett, 37 shares; Ms. Maddox,
13,335 shares; Ms. Sample, 8,300 shares; Mr. Wasaff, 226,331 shares and
all directors and executive officers as a group, 819,398 shares.

The table also includes shares owned by certain members of the families of the
directors or executive officers, including shares in which pecuniary interest
may be disclaimed.

80

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS WITH MANAGEMENT AND OTHERS

Since January 1, 2002, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which we were or are to be
a party in which the amount involved exceeds $60,000 and in which any current
director, executive officer or holder of more than 5% of our equity units had or
will have a direct or indirect interest other than (1) compensation arrangements
with the Named Executive Officers, which are described where required under Item
11. "Executive Compensation" and (2) the transactions described below.

EMPLOYMENT AGREEMENTS AND OTHER COMPENSATION ARRANGEMENTS

In February 2003, we entered into a letter agreement with Thomas M.
Matthews, our Chairman of the Board and Chief Executive Officer. Pursuant to the
agreement, Mr. Matthews is an employee at will. Mr. Matthew's base salary is
$30,000 per month, subject to increase or decrease at the discretion of the
Compensation Committee.

In January 2003, we entered into a letter agreement with H. Keith Kaelber,
our Executive Vice President and Chief Financial Officer. Pursuant to the
agreement, Mr. Kaelber is an employee at will. Mr. Kaelber's base salary is
$20,000 per month. Mr. Kaelber will be eligible for an initial targeted bonus of
fifty percent of his annual base salary if he and EOTT LLC meet certain
performance objectives.

TRANSACTIONS WITH ENRON AND AFFILIATES

SUMMARY OF OUR SETTLEMENT AGREEMENT WITH ENRON

The General Partner and EOTT entered into a settlement agreement dated
October 8, 2002 (the "Enron Settlement Agreement") with Enron, Enron North
America Corp., Enron Energy Services, Inc., Enron Pipeline Services Company
("EPSC"), EGP Fuels Company ("EGP Fuels") and Enron Gas Liquids, Inc. ("EGLI")
(collectively, the "Enron Parties"). As part of the Enron Settlement Agreement,
Enron consented to the filing of our bankruptcy in the Southern District of
Texas, and Enron waived its rights of first refusal with respect to the sale of
the Morgan's Point Facility, Mont Belvieu Facility and other assets we purchased
pursuant to the Purchase and Sale Agreement dated June 29, 2001 between Enron
and us ("Purchase Agreement"). In connection with the settlement of outstanding
claims between the Enron Parties and us, the Enron Settlement Agreement provides
for the parties to enter into the following agreements:

o We entered into an Employee Transition Agreement with EPSC, which
provided for the transfer to us of certain employees of subsidiaries of
Enron which perform pipeline operations services for us, effective
January 1, 2003.

o The General Partner and EPSC entered into a Termination Agreement on
October 8, 2002, which provided for the termination of the EPSC
Corporate Services Agreement.

o The General Partner, the MLP, and Subsidiary Entities and Enron entered
into a Termination Agreement on October 8, 2002, which provided for the
termination of the Corporate Services Agreement.

o The General Partner and EGP Fuels entered into a Termination Agreement
on October 8, 2002, which provided for the termination of the
Transition Services Agreement.

o At December 31, 2002, we executed a promissory note payable to Enron in
the initial principal amount of $6.2 million that is guaranteed by our
subsidiaries (the "EOTT Note"). The EOTT Note is secured by an
irrevocable letter of credit and bears interest at 10% per annum.

81

o The employees, former employees and their covered spouses and
dependents of the General Partner continued to participate in the Enron
retirement and welfare benefit plans until December 31, 2002.

As additional consideration and as a compromise of certain claims, we paid
Enron $1,250,000 ("EOTT Cash Payment") on the effective date of our
Restructuring Plan.

We agreed, among other things, to assume obligations in our bankruptcy cases
and cure defaults under the Operation and Service Agreement with EPSC whereby
EPSC provided certain pipeline operation services to us. We also agreed to
indemnify EPSC against claims arising from the General Partner's failure to
perform its duties under the Operation and Services Agreement or the General
Partner's refusal to approve EPSC recommended items or modifications in the
budgets.

We and the Enron Parties also mutually released each other for any and all
claims except those expressly reserved in the Enron Settlement Agreement,
including as follows:

o All of the parties to the Enron Settlement Agreement retained any
rights to payments with regard to EGLI's inventory at the Mont Belvieu
Facility pursuant to the Stipulation entered by the Enron Bankruptcy
Court on April 2, 2002, rejecting the Toll Conversion and Storage
Agreements.

o The Enron Parties did not release the EOTT Parties for claims with
respect to the EOTT Note or any undisputed amounts owed to EPSC
pursuant to the Operation and Service Agreement for the period
beginning August 1, 2002.

The following is a summary of the net Enron Settlement amount recorded in
Reorganization Items in the Consolidated Statement of Operations (in millions)
as discussed in Note 1 to the Consolidated Financial Statements:

Forgiveness of Payable to Enron and affiliates $ 38.5
Forgiveness of Performance Collateral from Enron 15.8
Note issued to Enron (EOTT Note) (6.2)
EOTT Cash Payment to Enron for certain claims (1.2)
Final EOTT contribution to Enron Cash Balance Plan (1.4)
------
Total $ 45.5
======

TRANSACTIONS WITH ENRON AND AFFILIATES

There were no sales or purchase transactions with Enron and affiliates
during 2002 except under the Stipulation discussed further below. Sales to
affiliates in 2001 consist primarily of sales of crude oil to Enron Reserve
Acquisition Corp. and conversion, storage and transportation fees from EGLI.
Purchases from affiliates consist primarily of crude oil and condensate
purchases from Enron Reserve Acquisition Corp. and Enron North America Corp.
These transactions in our opinion are no more or less favorable than can be
obtained from unaffiliated third parties.

Related party balances related to purchases and sales of goods and services
have been classified as payables to Enron and affiliates, net. Related party
payables at December 31, 2002 were $8.8 million. The payables at December 31,
2002 primarily represent amounts owed to Enron under the Settlement Agreement.

Purchase and Sale Agreement - Liquids Assets. We acquired certain liquids
processing, storage and transportation assets in June 2001 from Enron. We paid
$117 million in cash to Enron and State Street Bank and Trust Company of
Connecticut, National Association, Trustee (the "Trustee"). See further
discussion in Note 5 to the Consolidated Financial Statements.

Concurrently with our acquisition of the Assets described above, we entered
into the ten-year Toll Conversion Agreement for the conversion of feedstocks
into products, on a take-or-pay basis and the ten-year

82

Storage Agreement for the use of a significant portion of the Mont Belvieu
Facility and pipeline grid system, on a take-or-pay basis. Both agreements were
with EGLI, a wholly-owned subsidiary of Enron, which is now in bankruptcy. See
further discussion of the terms of the Toll Conversion and Storage Agreements in
Note 5 to the Consolidated Financial Statements.

Rejection of Toll Conversion and Storage Agreements with EGLI. On April 2,
2002, the Bankruptcy Court entered a Stipulation, which became final and
non-appealable on April 12, 2002, rejecting the Toll Conversion and Storage
Agreements. As a result, we recorded a $29.1 million non-cash impairment in the
fourth quarter of 2001, which was our remaining investment in these contracts.
See further discussion concerning the impact of the rejection of the Agreements
in Note 5 to the Consolidated Financial Statements.

We have monetary damage claims against EGLI and Enron as a result of the
rejection of the agreements under the Stipulation. In addition, under both of
these agreements, EGLI was obligated to make certain mandatory payments to EOTT
through the full terms of the agreements. The claim filed against EGLI in the
Enron Bankruptcy Court on May 9, 2002 resulting from EGLI's rejection of the
Toll Conversion and Storage Agreements was $540.5 million. This claim was
withdrawn by us pursuant to the terms of the Enron Settlement Agreement. All of
the parties to the Enron Settlement Agreement retained any rights to payments
with regard to EGLI's inventory at Mont Belvieu Facility pursuant to the
Stipulation.

Enron guaranteed EGLI's performance under these agreements; however, its
guaranty was limited to $50 million under the Toll Conversion Agreement and $25
million under the Storage Agreement. Accordingly, the claim filed against Enron
in the Enron Bankruptcy Court resulting from EGLI's rejection of the agreements
was $75 million. We filed additional claims against numerous Enron affiliates on
October 15, 2002, totaling $213.5 million. These claims were also withdrawn by
us pursuant to the Enron Settlement Agreement.

Pursuant to our Restructuring Plan, we released Enron from all these claims
in exchange for a release by Enron of claims against us exceeding $50 million,
and other consideration. See further discussion of the impact of the agreements
in Note 5 to the Consolidated Financial Statements.

Performance Collateral from Enron. Enron guaranteed the payments by EGLI
under the Toll Conversion and Storage Agreements. Additionally, EGLI owed us
approximately $9 million under the Toll Conversion and Storage Agreements prior
to filing for bankruptcy. Pursuant to the Toll Conversion and Storage
Agreements, if Enron's credit rating dropped below certain defined levels
specified in these agreements, we could request within 5 days of this occurrence
for EGLI to post letters of credit. The letters of credit could be drawn upon by
us if EGLI failed to pay any amount owed to us under these agreements. The Toll
Conversion Agreement provides that the letter of credit would be in an amount
reasonably requested by us, not to exceed $25 million. The Storage Agreement
provides that the letter of credit would be in an amount as reasonably
requested, but no amount was specified. In late November 2001, Enron's credit
rating fell below the ratings specified in these agreements. Pursuant to these
agreements, on November 27, 2001, we requested that EGLI post two $25 million
letters of credit. In lieu of posting letters of credit, we received $25 million
from EGLI/Enron, against which we recouped $9 million of outstanding invoices to
EGLI. We applied the remaining sum, approximately $16 million, to recoup against
or seek offset of a portion of our damages resulting from EGLI's rejection of
the Toll Conversion and Storage Agreements. The $16 million was reflected as
Performance Collateral from Enron in Current Liabilities on the Consolidated
Balance Sheet. Pursuant to our Restructuring Plan, Enron released us of any
claim to the $25 million deposit/performance collateral.

SERVICE CONTRACTS AND ADMINISTRATIVE CONTRACTS

Operations and General and Administrative Services. As is commonly the case
with publicly traded partnerships, we did not directly employ any persons
responsible for managing or operating EOTT for providing services relating to
day-to-day business affairs. The General Partner provided such services or
obtained such services from third parties and EOTT is responsible for
reimbursing the General Partner for

83

substantially all of its direct and indirect costs and expenses. The General
Partner, through the MLP Partnership Agreement, provided services to us under a
Corporate Services Agreement which included liability and casualty insurance and
certain data processing services and employee benefits. Those costs were $1.9
million for the year ended December 31, 2002 and are included in operating
expense. We believe that the charges were reasonable.

The General Partner entered into a Corporate Services Agreement with EPSC,
to provide certain operating and administrative services relating to the
operation of the Partnership's pipelines, effective October 1, 2000. The
agreement provides that the General Partner will reimburse EPSC for its costs
and expenses in rendering the services. The General Partner will in turn be
reimbursed by us. EOTT LLC took over these services effective January 1, 2003.
The Corporate Service Agreement was terminated effective December 31, 2002. The
costs incurred related to these services for the year ended December 31, 2002
were $24.6 million.

In connection with the acquisition of Liquids assets in June 2001, the
General Partner entered into a Transition Services Agreement with EGP Fuels to
provide transition services through December 31, 2001 for the processing of
invoices and payments to third parties related to the Morgan's Point Facility
and Mont Belvieu Facility. The agreement provided that the General Partner would
reimburse EGP Fuels for these direct costs and we would reimburse the General
Partner. The agreement was terminated effective December 31, 2002 pursuant to
the Enron Settlement Agreement.

Pursuant to the Restructuring Plan and the Settlement Agreement with Enron,
amounts due under these agreements were forgiven at December 31, 2002, the
claims under these agreements were released and discharged, the employees who
provide these services were transferred to us and the Operation and Service,
Transition Services and Corporate Services Agreements were terminated.

DISTRIBUTION SUPPORT

Under the support agreement with Enron, Enron committed to provide total
cash distribution support in an amount necessary to pay the minimum quarterly
distribution to our unitholders, with respect to quarters ending on or before
December 31, 2001, in an amount up to an aggregate of $29.1 million in exchange
for APIs. Our distribution for the fourth quarter of 2001 of $0.25 per common
unit was lower than the intended minimum quarterly distribution amount of $0.475
per common unit. During the first quarter of 2002, we requested distribution
support from Enron under the terms of the support agreement in connection with
payment of the minimum quarterly distribution for the fourth quarter of 2001.
Enron did not pay the fourth quarter distribution shortfall of $0.225 per common
unit. A claim for the distribution support in the amount of $4.2 million was
made in the Enron bankruptcy proceedings. The claim was withdrawn pursuant to
the Enron Settlement Agreement.

CERTAIN BUSINESS RELATIONSHIPS

As a result of our Restructuring Plan, six of our seven directors were
selected by our former senior noteholders who signed the Restructuring
Agreement. One of our new directors chosen as a result of this process is J.
Robert Chambers, who is currently a Managing Director of Lehman Brothers Inc.
Lehman Brothers Inc., was a party to the Restructuring Agreement described
herein, as well as a party to the Term Loan Agreement. Lehman Brothers Inc. held
the principal amount of $41.5 million, or approximately 18%, of our 11% senior
unsecured notes prior to our emergence from bankruptcy. As a former senior
unsecured noteholder, Lehman Brothers Inc. will receive its pro rata share of
the $104 million of 9% senior unsecured notes and its pro rata share of
11,947,820 limited liability company units of EOTT LLC.

Additionally, in connection with the settlement in bankruptcy of several
lawsuits against us, Lehman Brothers Inc. agreed to purchase the allowed claims
of certain of these unsecured creditors at a discount. The amount of these
allowed claims is approximately $4.8 million.

84

We have several previous and current business relationships with Lehman
Brothers Inc. and its affiliate, Lehman Commercial Paper Inc. Lehman Brothers
Inc. served as the agent for our $75 million DIP Term Loan Agreement, and
presently serves as the agent for our $75 million Term Loan Agreement that is
part of our exit credit facilities. Further, Lehman Brothers Inc. may receive
compensation for future business conducted with EOTT, and Mr. Chambers may
indirectly share in such compensation through payments he may receive for
managing a fund that currently does and may from time to time hold investment
interests in EOTT. Since October 2002, we have paid Lehman and Lehman Commercial
in the aggregate approximately $4.8 million, which is primarily related to
interest and facility fees on the DIP Term Loans and the new Term Loans.

Julie H. Edwards, also one of our new directors, is the Executive Vice
President - Finance & Administration for Frontier Oil Corporation, one of our
customers. In 2002, Frontier paid us approximately $5.0 million for crude oil
purchases. This amount is less than 5% of our gross consolidated revenues, and
less than 5% of Frontier's gross consolidated revenues.

ITEM 14. CONTROLS AND PROCEDURES

Our principal executive officer and principal financial officer have
evaluated our disclosure controls and procedures within 90 days prior to the
date of filing of this Annual Report on Form 10-K for the year ending December
31, 2002. They believe that our current internal controls and procedures are
effective and designed to ensure that information required to be disclosed by us
in our periodic reports is recorded, processed, summarized and reported, within
the appropriate time periods specified by the SEC and that such information is
accumulated and communicated to our principal executive officer and principal
financial officer as appropriate to allow timely decisions to be made regarding
required disclosure. Subsequent to the date of the evaluation, there were no
significant corrective actions taken by us or other changes made to these
internal controls. Management does not believe there were changes in other
factors that could significantly affect these controls subsequent to the date of
the evaluation. We will, however, formally evaluate the disclosure controls and
procedures on no less than a quarterly basis and will consider implementation of
enhancements to our disclosure controls and procedures as may be desirable or
necessary from time to time.

85

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K

(a)(1) AND (2) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

See "Index to Financial Statements" set forth on page F-1.

(a)(3) EXHIBITS

2.1 -- Third Amended Joint Chapter 11 Plan of the Debtors
(incorporated by reference to Exhibit 2.1 to current report on
Form 8-K/A for EOTT Energy Partners, L.P. dated December 17,
2002)

2.2 -- Supplement/Amendment to Third Amended Joint Chapter 11 Plan of
the Debtors and Glossary of Defined Terms (incorporated by
reference to Exhibit 2.2 to current report on Form 8-K for
EOTT Energy Partners, L.P. dated March 4, 2003)

2.3 -- Third Amended Disclosure Statement Under 11 U.S.C. Section
1125 In Support of the Joint Chapter 11 Plan of the Debtors
(incorporated by reference to Exhibit 2.2 to current report on
Form 8-K/A for EOTT Energy Partners, L.P. dated December 17,
2002)

*3.1 -- Certificate of Formation of EOTT Energy LLC, dated as of
November 13, 2002

*3.2 -- Amended and Restated Limited Liability Company Agreement of
EOTT Energy LLC, dated as of March 1, 2003

*3.3 -- Certificate of Merger of EOTT Energy Partners, L.P. into EOTT
Energy Operating Limited Partnership, filed on March 4, 2003

3.4 -- Form of Amended and Restated Agreement of Limited Partnership
of EOTT Energy Operating Limited Partnership (incorporated by
reference to Exhibit 10.11 to Registration Statement for EOTT
Energy Partners, L.P., File No. 33-73984)

3.5 -- Amendment No. 1 dated as of September 1, 1999, to Amended and
Restated Agreement of Limited Partnership of EOTT Energy
Operating Limited Partnership (incorporated by reference to
Exhibit 3.2 to current report on Form 8-K for EOTT Energy
Partners, L.P. dated September 29, 1999)

3.6 -- Amendment No. 2 dated as of August 29, 2001, to Amended and
Restated Agreement of Limited Partnership of EOTT Energy
Operating Limited Partnership (incorporated by reference to
Exhibit 3.10 to Current Report on Form 8-K/A for EOTT Energy
Partners, L.P. dated August 30, 2001)

3.7 -- Form of Amended and Restated Agreement of Limited Partnership
of EOTT Energy Pipeline Limited Partnership (incorporated by
reference to Exhibit 3.8 to Registration Statement for EOTT
Energy Partners, L.P., File No. 33-82269)

3.8 -- Amendment No. 1 dated as of September 1, 1999, to Amended and
Restated Agreement of Limited Partnership of EOTT Energy
Pipeline Limited Partnership (incorporated by reference to
Exhibit 3.3 to current report on Form 8-K dated September 29,
1999)

3.9 -- Amendment No. 2 dated as of August 29, 2001, to Amended and
Restated Agreement of Limited Partnership of EOTT Energy
Pipeline Limited Partnership (incorporated by reference to
Exhibit 3.11 to Current Report on Form 8-K/A for EOTT Energy
Partners, L.P. dated August 30, 2001)

86

3.10 -- Amended and Restated Agreement of Limited Partnership of EOTT
Energy Canada Limited Partnership (incorporated by reference
to Exhibit 3.9 to Registration Statement for EOTT Energy
Partners, L.P., File No. 33-82269)

3.11 -- Amendment No. 1 dated as of September 1, 1999, to Amended and
Restated Agreement of Limited Partnership of EOTT Energy
Canada Limited Partnership (incorporated by reference to
Exhibit 3.2 to current report on Form 8-K for EOTT Energy
Partners, L.P. dated September 29, 1999)

3.12 -- Amendment No. 2 dated as of August 29, 2001, to Amended and
Restated Agreement of Limited Partnership of EOTT Energy
Canada Limited Partnership (incorporated by reference to
Exhibit 3.12 to Current Report on Form 8-K/A for EOTT Energy
Partners, L.P. dated August 30, 2001)

3.13 -- Agreement of Limited Partnership dated as of June 28, 2001 of
EOTT Energy Liquids, L.P. (incorporated by reference to
Exhibit 3.13 to Quarterly Report on Form 10-Q for EOTT Energy
Partners, L.P. for the Quarter Ended September 30, 2001)

3.14 -- Limited Liability Company Agreement dated as of June 27, 2001
of EOTT Energy General Partner, L.L.C. (incorporated by
reference to Exhibit 3.14 to Quarterly Report on Form 10-Q for
EOTT Energy Partners, L.P. for the Quarter Ended September 30,
2001)

3.15 -- Amendment No. 1 dated as of August 29, 2001, to the Limited
Liability Company Agreement of EOTT Energy General Partner,
L.L.C. (incorporated by reference to Exhibit 3.15 to Quarterly
Report on Form 10-Q for EOTT Energy Partners, L.P. for the
Quarter Ended September 30, 2001)

4.1 -- Indenture among EOTT Energy LLC, the Subsidiary Guarantors and
the Bank of New York, as trustee, for 9% Senior Notes due
2010, dated March 1, 2003 (incorporated by reference to
Exhibit T3C to Amendment No. 1 to EOTT Energy LLC's
Application for Qualification of Indenture on Form T-3 dated
April 4, 2003)

*4.2 -- Form of Warrant Agreement, dated as of March 1, 2003

*4.3 -- Form of Registration Rights Agreement, by and between EOTT
Energy LLC and Unitholders, dated as of March 1, 2003

10.01 -- Form of Corporate Services Agreement between Enron Corp. and
EOTT Energy Corp. (incorporated by reference to Exhibit 10.08
to Registration Statement for EOTT Energy Partners, L.P., File
No. 33-73984)

10.02 -- Form of Contribution and Closing Agreement between EOTT Energy
Corp. and EOTT Energy Partners, L.P. (incorporated by
reference to Exhibit 10.09 to Registration Statement for EOTT
Energy Partners, L.P., File No. 33-73984)

10.03 -- Form of Ancillary Agreement by and among Enron Corp., EOTT
Energy Partners, L.P., EOTT Energy Operating Limited
Partnership, EOTT Energy Pipeline Limited Partnership, EOTT
Energy Canada Limited Partnership, and EOTT Energy Corp.
(incorporated by reference to Exhibit 10.10 to Registration
Statement for EOTT Energy Partners, L.P., File No. 33-73984)

10.04 -- EOTT Energy Corp. Annual Incentive Plan (incorporated by
reference to Exhibit 10.14 to Registration Statement for EOTT
Energy Partners, L.P., File No. 33-73984)

10.05 -- EOTT Energy Corp. 1994 Unit Option Plan and the related Option
Agreement (incorporated by reference to Exhibit 10.15 to
Registration Statement for EOTT Energy Partners, L.P., File
No. 33-73984)

87

10.06 -- EOTT Energy Corp. Severance Pay Plan (incorporated by
reference to Exhibit 10.16 to Registration Statement for EOTT
Energy Partners, L.P., File No. 33-73984)

10.07 -- EOTT Energy Corp. Long Term Incentive Plan (incorporated by
reference to Exhibit 10.19 to Quarterly Report on Form 10-Q
for EOTT Energy Partners, L.P. for the Quarter Ended September
30, 1997)

10.08 -- Support Agreement dated September 21, 1998 between EOTT Energy
Partners, L.P., EOTT Energy Operating Limited Partnership and
Enron Corp. (incorporated by reference to Exhibit 10.22 to
Quarterly Report on Form 10-Q for the Quarter Ended September
30, 1998)

***10.09 -- Crude Oil Supply and Terminalling Agreement dated as of
December 1, 1998 between Koch Oil Company and EOTT Energy
Operating Limited Partnership (incorporated by reference to
Exhibit 10.23 to Annual Report on Form 10-K for EOTT Energy
Partners, L.P. for the Year Ended December 31, 1998)

10.10 -- Amended and Restated Credit Agreement as of December 1, 1998
between EOTT Energy Operating Limited Partnership, as
Borrower, and Enron Corp., as Lender (incorporated by
reference to Exhibit 10.24 to Annual Report on Form 10-K for
EOTT Energy Partners, L.P. for the Year Ended December 31,
1998)

10.11 -- Amendment dated March 17, 1999 to the Amended and Restated
Credit Agreement as of December 1, 1998 between EOTT Energy
Operating Limited Partnership, as Borrower, and Enron Corp.,
as Lender (incorporated by reference to Exhibit 10.26 to
Annual Report on Form 10-K for EOTT Energy Partners, L.P. for
the Year Ended December 31, 1998)

***10.12 -- Amendment dated December 1, 1998 to the Crude Oil Supply and
Terminalling Agreement dated as of December 1, 1998 between
Koch Oil Company and EOTT Energy Operating Limited Partnership
(incorporated by reference to Exhibit 10.28 to Annual Report
on Form 10-K for EOTT Energy Partners, L.P. for the Year Ended
December 31, 1998)

10.13 -- Amendment dated August 11, 1999 to the Amended and Restated
Credit Agreement as of December 1, 1998 between EOTT Energy
Operating Limited Partnership, as Borrower, and Enron Corp.,
as Lender (incorporated by reference to Exhibit 10.30 to
Quarterly Report on Form 10-Q for EOTT Energy Partners, L.P.
for the Period Ended June 30, 1999)

***10.14 -- Letter Agreement dated September 14, 2000 amending Crude Oil
Supply and Terminalling Agreement (incorporated by reference
to Exhibit 10.34 to Quarterly Report on Form 10-Q for EOTT
Energy Partners, L.P. for the Period Ended September 30, 2000)

***10.15 -- Letter Agreement dated February 6, 2001 amending Crude Oil
Supply and Terminalling Agreement dated December 1, 1998
(incorporated by reference to Exhibit 10.37 to Annual Report
on Form 10-K for EOTT Energy Partners, L.P. for the year ended
December 31, 2000)

**10.16 -- Letter Agreement dated May 17, 2002 amending Crude Oil Supply
and Terminalling Agreement dated December 1, 1998

**10.17 -- Letter Agreement dated May 17, 2002 amending Crude Oil Supply
and Terminalling Agreement dated December 1, 1998

**10.18 -- Letter Agreement dated June 26, 2002 amending Crude Oil Supply
and Terminalling Agreement dated December 1, 1998

88

**10.19 -- Letter Agreement dated October 3, 2002 amending Crude Oil
Supply and Terminalling Agreement dated December 1, 1998

10.20 -- Purchase and Sale Agreement between Enron Corp. and EOTT
Energy Partners, L.P., dated June 29, 2001, with list of
omitted schedules and agreement to furnish omitted schedules
supplementally to the Securities and Exchange Commission upon
request (incorporated by reference to Exhibit 10.38 to Current
Report on Form 8-K for EOTT Energy Partners, L.P. dated July
13, 2001)

10.21 -- Mont Belvieu Storage Capacity Purchase Agreement Dated as of
June 29, 2001 between EOTT Energy Liquids, L.P. and Enron Gas
Liquids, Inc. (incorporated by reference to Exhibit 10.21 to
Amendment No. 1 to Annual Report on Form 10-K/A for EOTT
Energy Partners, L.P. for the year ended December 31, 2001)

10.22 -- Toll Conversion Agreement dated as of June 29, 2001 between
EOTT Energy Liquids, L.P. and Enron Gas Liquids, Inc.
(incorporated by reference to Exhibit 10.22 to Amendment No. 1
to Annual Report on Form 10-K/A for EOTT Energy Partners, L.P.
for the year ended December 31, 2001)

10.23 -- Administrative Services Agreement dated as of June 29, 2001
between EOTT Energy Corp. and EOTT Energy General Partner,
L.L.C. (incorporated by reference to Exhibit 10.41 to Annual
Report on Form 10-K/A for EOTT Energy Partners, L.P. or the
year ended December 31, 2001)

****10.24 -- Letter Agreement dated June 27, 2001, amending Crude Oil
Supply and Terminalling Agreement dated December 1, 1998
(incorporated by reference to Exhibit 10.24 to Annual Report
on Form 10-K for EOTT Energy Partners, L.P. for the year ended
December 31, 2001)

****10.25 -- Letter Agreement dated August 23, 2001, amending Crude Oil
Supply and Terminalling Agreement dated December 1, 1998
(incorporated by reference to Exhibit 10.25 to Annual Report
on Form 10-K for EOTT Energy Partners, L.P. for the year ended
December 31, 2001)

10.26 -- Letter Agreement dated December 18, 2001, amending Crude Oil
Supply and Terminalling Agreement dated December 1, 1998
(incorporated by reference to Exhibit 10.26 to Annual Report
on Form 10-K for EOTT Energy Partners, L.P. for the year ended
December 31, 2001)

****10.27 -- Letter Agreement dated January 9, 2002, amending Crude Oil
Supply and Terminalling Agreement dated December 1, 1998
(incorporated by reference to Exhibit 10.27 to Annual Report
on Form 10-K for EOTT Energy Partners, L.P. for the year ended
December 31, 2001)

10.28 -- Commodity Repurchase Agreement, dated as of February 28, 1998,
between EOTT Energy Operating Limited Partnership and Standard
Chartered Trade Service Corporation (incorporated by reference
to Exhibit 10.28 to Annual Report on Form 10-K for EOTT Energy
Partners, L.P. for the year ended December 31, 2001)

10.29 -- Receivable(s) Purchase Agreement, dated as of October 19,
1999, between EOTT Energy Operating Limited Partnership and
Standard Chartered Trade Services Corporation (incorporated by
reference to Exhibit 10.29 to Annual Report on Form 10-K for
EOTT Energy Partners, L.P. for the year ended December 31,
2001)

10.30 -- First Amendment to the Receivable(s) Purchase Agreement, dated
as of January 12, 2000, by and between EOTT Energy Operating
Limited Partnership and Standard Chartered Trade Services
Corporation (incorporated by reference to Exhibit 10.30 to
Annual Report on Form 10-K for EOTT Energy Partners, L.P. for
the year ended December 31, 2001)

89

****10.31 -- Second Amended and Restated Reimbursement, Loan and Security
Agreement, dated as of April 23, 2002, by and between EOTT
Energy Operating Limited Partnership, et al. and Standard
Chartered Bank (incorporated by reference to Exhibit 10.31 to
Annual Report on Form 10-K for EOTT Energy Partners, L.P. for
the year ended December 31, 2001)

10.32 -- Letter Agreement, dated as of April 23, 2002, regarding
Commodity Repurchase Agreement and Receivable(s) Purchase
Agreement (incorporated by reference to Exhibit 10.32 to
Annual Report on Form 10-K for EOTT Energy Partners, L.P. for
the year ended December 31, 2001)

10.33 -- Standard Chartered Bank Limited Forbearance Letter, dated
August 13, 2002 (incorporated by reference to Exhibit 10.1 to
Quarterly Report on Form 10-Q for EOTT Energy Partners, L.P.
for the period ended June 30, 2002)

10.34 -- Standard Chartered Bank Limited Forbearance Letter dated
August 27, 2002 (incorporated by reference to Exhibit 10.1 to
Quarterly Report on Form 10-Q for EOTT Energy Partners, L.P.
for the period ended September 30, 2002)

10.35 -- Settlement Agreement by and among EOTT Energy Partners, L.P.
and certain of its subsidiaries and Enron Corp. and certain of
its affiliates, dated as of October 8, 2002 (incorporated by
reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for
EOTT Energy Partners, L.P. for the period ended September 30,
2002)

10.36 -- Restructuring Agreement by and among EOTT Energy Partners,
L.P. and certain of its subsidiaries and Enron Corp. and
certain of its affiliates, Standard Chartered Bank PLC,
Standard Chartered Trade Services Corporation, Lehman
Commercial Paper, Inc., and Certain Holders of the Company's
11% Senior Notes Due 2009, dated as of October 7, 2002
(incorporated by reference to Exhibit 10.3 to Quarterly Report
on Form 10-Q for EOTT Energy Partners, L.P. for the period
ended September 30, 2002)

10.37 -- Debtor-In-Possession Letter of Credit Agreement among EOTT
Energy Operating Limited Partnership, EOTT Energy Canada
Limited Partnership, EOTT Energy Liquids, L.P., and EOTT
Energy Pipeline Limited Partnership, as debtors and
debtors-in-possession and as joint and several Borrowers, EOTT
Energy Partners, L.P. and EOTT Energy General Partner, L.L.C.,
as debtors and debtors-in-possession and as Guarantors,
Standard Chartered Bank, as LC Agent, LC Issuer, and
Collateral Agent and the LC Participants hereto, dated as of
October 18, 2002 (incorporated by reference to Exhibit 10.4 to
Quarterly Report on Form 10-Q for EOTT Energy Partners, L.P.
for the period ended September 30, 2002)

10.38 -- Debtor-In-Possession Term Loan Agreement among EOTT Energy
Operating Limited Partnership, EOTT Energy Canada Limited
Partnership, EOTT Energy Liquids, L.P. and EOTT Energy
Pipeline Limited Partnership, as debtors and
debtors-in-possession and as joint and several Borrowers, EOTT
Energy Partners, L.P. and EOTT Energy General Partner, L.L.C.
as debtors and debtors-in-possession and as Guarantors, Lehman
Brothers- Inc., as Term Lender Agent and the Term Lenders
hereto, dated as of October 18, 2002 (incorporated by
reference to Exhibit 10.5 to Quarterly Report on Form 10-Q for
EOTT Energy Partners, L.P. for the period ended September 30,
2002)

10.39 -- Amended and Restated Commodities Repurchase Agreement, by and
among EOTT Energy Operating Limited Partnership, Standard
Chartered Trade Services Corporation, Standard Chartered Bank,
as collateral agent, dated as of October 18, 2002
(incorporated by reference to Exhibit 10.6 to Quarterly Report
on Form 10-Q for EOTT Energy Partners, L.P. for the period
ended September 30, 2002)

90

10.40 -- Amended and Restated Receivables Purchase Agreement, by and
among EOTT Energy Operating Limited Partnership, Standard
Chartered Trade Services Corporation, Standard Chartered Bank,
as collateral agent, dated as of October 18, 2002
(incorporated by reference to Exhibit 10.7 to Quarterly Report
on Form 10-Q for EOTT Energy Partners, L.P. for the period
ended September 30, 2002)

10.41 -- Intercreditor and Security Agreement, among EOTT Energy
Operating Limited Partnership, EOTT Energy Canada Limited
Partnership, EOTT Energy Liquids, L.P., and EOTT Energy
Pipeline Limited Partnership, as debtors and
debtors-in-possession and as joint and several Borrowers, and
EOTT Energy Partners, L.P. and EOTT Energy General Partner,
L.L.C. as debtors and debtors-in-possession and as joint and
several Guarantors, and Standard Chartered Bank, Lehman
Brothers, Inc., and Standard Chartered Trade Services
Corporation and various other Secured Parties and Standard
Chartered Bank, as collateral agent, dated as of October 18,
2002 (incorporated by reference to Exhibit 10.8 to Quarterly
Report on Form 10-Q for EOTT Energy Partners, L.P. for the
period ended September 30, 2002)

**10.42 -- Letter of Credit Agreement among EOTT Energy Operating Limited
Partnership, EOTT Energy Canada Limited Partnership, EOTT
Energy Liquids, L.P., and EOTT Energy Pipeline Limited
Partnership, as joint and several Borrowers, EOTT Energy LLC
and EOTT Energy General Partner, L.L.C., as Guarantors,
Standard Chartered Bank, as LC Agent, LC Issuer, and
Collateral Agent and the LC Participants hereto, dated as of
February 11, 2003

**10.43 -- Term Loan Agreement among EOTT Energy Operating Limited
Partnership, EOTT Energy Canada Limited Partnership, EOTT
Energy Liquids, L.P. and EOTT Energy Pipeline Limited
Partnership, as joint and several Borrowers, EOTT Energy LLC
and EOTT Energy General Partner, L.L.C. as Guarantors, Lehman
Brothers Inc., as Term Lender Agent and the Term Lenders
hereto, dated as of February 11, 2003

* 10.44 -- Second Amended and Restated Commodities Repurchase Agreement,
by and among EOTT Energy Operating Limited Partnership,
Standard Chartered Trade Services Corporation, Standard
Chartered Bank, as collateral agent, dated as of February 11,
2003

* 10.45 -- Second Amended and Restated Receivables Purchase Agreement, by
and among EOTT Energy Operating Limited Partnership, Standard
Chartered Trade Services Corporation, Standard Chartered Bank,
as collateral agent, dated as of February 11, 2003

* 10.46 -- Intercreditor and Security Agreement, among EOTT Energy
Operating Limited Partnership, EOTT Energy Canada Limited
Partnership, EOTT Energy Liquids, L.P., and EOTT Energy
Pipeline Limited Partnership, as joint and several Borrowers,
and EOTT Energy LLC and EOTT Energy General Partner, L.L.C. as
joint and several Guarantors, and Standard Chartered Bank,
Lehman Brothers, Inc., and Standard Chartered Trade Services
Corporation and various other Secured Parties and Standard
Chartered Bank, as collateral agent, dated as of March 1, 2003

10.47 -- Form of Executive Employment Agreement between EOTT Energy
Corp. and Dana R. Gibbs (incorporated by reference to Exhibit
10.32 to Quarterly Report on Form 10-Q for the Period Ended
September 30, 2000)

10.48 -- Form of Executive Employment Agreement between EOTT Energy
Corp. and Lori Maddox (incorporated by reference to Exhibit
10.36 to Annual Report on Form 10-K for the year ended
December 31, 2000)

10.49 -- Form of Executive Employment Agreement between EOTT Energy
Corp. and Molly Sample (incorporated by reference to Exhibit
10.35 to Annual Report on Form 10-K for the year ended
December 31, 2000)

91

* 10.50 -- Form of Executive Employment Agreement between EOTT Energy
Corp. and Mary Ellen Coombe effective as of October 1, 2002

* 10.51 -- Form of First Amendment to Executive Employment Agreement
between EOTT Energy Corp. and Lori L. Maddox effective as of
September 26, 2002

* 10.52 -- Form of First Amendment to Executive Employment Agreement
between EOTT Energy Corp. and Molly M. Sample effective as of
July 29, 2002

* 10.53 -- Letter of Offering from EOTT Energy LLC to Thomas M. Matthews
dated February 27, 2003

* 10.54 -- Letter of Offering from EOTT Energy LLC to H. Keith Kaelber
dated February 27, 2003

* 21.1 -- Subsidiaries of the Registrant

* 99.1 -- Section 906 Certification for Thomas M. Matthews

* 99.2 -- Section 906 Certification for H. Keith Kaelber

* Filed herewith.

** Filed herewith, but confidential treatment has been requested
with respect to certain portions of this exhibit.

*** Certain portions of this exhibit have been treated
confidentially.

**** Confidential treatment has been requested with respect to
certain portions of this exhibit.

(b) Reports on Form 8-K

Current Report on Form 8-K filed by EOTT Energy Partners, L.P. on
October 10, 2002 pursuant to Item 3. Bankruptcy or Receivership
regarding our bankruptcy filing, and Item 5. Other Events regarding its
two press releases dated October 9, 2002.

Current Report on Form 8-K filed by EOTT Energy Partners, L.P. on
October 25, 2002 pursuant to Item 3. Bankruptcy or Receivership
regarding the General Partner's bankruptcy filing, and Item 5. Other
Events regarding its press release dated October 24, 2002.

Current Reports on Forms 8-K and 8-K/A filed by EOTT Energy Partners,
L.P. on December 17, 2002 pursuant to Item 3. Bankruptcy or
Receivership regarding updates of events in our bankruptcy filing and
its press release dated December 12, 2002.

Current Report on Form 8-K filed by EOTT Energy Partners, L.P. on
January 27, 2003 pursuant to Item 5. Other Events regarding its press
release dated January 27, 2003.

Current Report of Form 8-K filed by EOTT Energy Partners, L.P. on March
4, 2003 pursuant to Item 1. Change of Control and Item 3. Bankruptcy or
Receivership regarding confirmation of our reorganization plan.

92

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized on the 15th day of
April, 2003.

EOTT ENERGY LLC
(A Delaware Limited Liability Company)

By: /s/ THOMAS M. MATTHEWS
--------------------------
Thomas M. Matthews
Chairman of the Board and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.

93

CERTIFICATIONS

I, Thomas M. Matthews, certify that:

1. I have reviewed this annual report on Form 10-K of EOTT Energy LLC;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: April 15, 2003

/s/ THOMAS M. MATTHEWS
-----------------------------------------
Thomas M. Matthews
Chairman of the Board and Chief Executive
Officer

94

I, H. Keith Kaelber, certify that:

1. I have reviewed this annual report on Form 10-K of EOTT Energy LLC;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: April 15, 2003

/s/ H. KEITH KAELBER
-----------------------------
H. Keith Kaelber
Executive Vice President and
Chief Financial Officer

95

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
INDEX TO FINANCIAL STATEMENTS

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To EOTT Energy Partners, L.P.:

In our opinion, the accompanying consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of EOTT Energy Partners, L.P. and its subsidiaries (the Partnership) at
December 31, 2002 and December 31, 2001, and the results of their operations and
their cash flows for each of the two years in the period ended December 31, 2002
in conformity with accounting principles generally accepted in the United States
of America. In addition, in our opinion, the financial statement schedule listed
in the accompanying index presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and the financial
statement schedule are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audit. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

The accompanying consolidated financial statements have been prepared assuming
that the Partnership will continue as a going concern. As discussed in Note 1 to
the consolidated financial statements, the Partnership filed for reorganization
under Chapter 11 of the Federal Bankruptcy Code on October 8, 2002, which raises
substantial doubt about its ability to continue as a going concern. Effective
March 1, 2003, the Partnership emerged from Chapter 11 and management's plans in
regard to this are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

As discussed in Note 2 to the consolidated financial statements, the Partnership
adopted the provisions of Emerging Issues Task Force No. 02-03 "Accounting for
Contracts Involved in Energy Trading and Risk Management Activities", in 2002.

As discussed in Note 2 to the consolidated financial statements, the Partnership
adopted the provisions of Statement of Financial Accounting Standard No. 133,
"Accounting for Derivative Instruments and Hedging Activities", as of January 1,
2001.

PRICEWATERHOUSECOOPERS LLP

Houston, Texas
April 4, 2003

F-2

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Unit Amounts)

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

F-3

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
CONSOLIDATED BALANCE SHEETS
(In Thousands)

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

F-4

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

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

F-5

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(In Thousands)

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

F-6

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. REORGANIZATION PROCEEDINGS AND BASIS OF PRESENTATION

We are a Delaware limited liability company that was formed on November 14,
2002 as EOTT Energy LLC ("EOTT LLC") in anticipation of assuming and continuing
the business formerly directly owned by EOTT Energy Partners, L.P. (the "MLP"),
which, as described below, filed for Chapter 11 reorganization with its wholly
owned subsidiaries on October 8, 2002. We became the successor registrant to the
MLP on March 1, 2003, upon the effective date of the Third Amended Joint Chapter
11 Plan of Reorganization, as supplemented ("Restructuring Plan"). Until EOTT
LLC became the successor to the MLP's business, the MLP operated principally
through four affiliated operating limited partnerships, EOTT Energy Operating
Limited Partnership, EOTT Energy Canada Limited Partnership, EOTT Energy
Pipeline Limited Partnership, and EOTT Energy Liquids L.P., each of which is a
Delaware limited partnership. In 1999, EOTT Energy Finance Corp. was formed in
connection with a debt offering to facilitate certain investors' ability to
purchase our senior notes. In 2001, we formed EOTT Energy General Partner,
L.L.C., which serves as the general partner for our four affiliated operating
limited partnerships. Until our emergence from bankruptcy, EOTT Energy Corp.
(the "General Partner"), a Delaware corporation and a wholly-owned subsidiary of
Enron Corp. ("Enron"), served as the general partner of the MLP and owned an
approximate 1.98% general partner interest in the MLP. The General Partner also
filed for bankruptcy on October 21, 2002. Prior to March 1, 2003, based upon
information provided by Enron, Enron beneficially owned approximately 37% of our
total units outstanding because it retained voting power and shared investment
power over the securities. Unless the context otherwise requires, the terms "we"
and "EOTT" refer to EOTT Energy LLC and our four affiliated limited operating
partnerships, EOTT Energy Finance Corp., and EOTT Energy General Partner, L.L.C.
(the "Subsidiary Entities"), and for periods prior to our emergence from
bankruptcy in March 2003, "we" and "EOTT" refer to EOTT Energy Partners, L.P.
and its sole general partner EOTT Energy Corp., as well as the Subsidiary
Entities.

BANKRUPTCY PROCEEDINGS AND RESTRUCTURING PLAN

On October 8, 2002 (the "Petition Date"), the MLP and the Subsidiary
Entities filed pre-negotiated voluntary petitions for reorganization under
Chapter 11 of the United States Bankruptcy Code (the "EOTT Bankruptcy"). The
filing was made in the United States Bankruptcy Court for the Southern District
of Texas, Corpus Christi Division (the "EOTT Bankruptcy Court"). Additionally,
the General Partner filed a voluntary petition for reorganization under Chapter
11 on October 21, 2002 in the EOTT Bankruptcy Court in order to join in the
voluntary, pre-negotiated Restructuring Plan filed on October 8, 2002. On
October 24, 2002, the EOTT Bankruptcy Court administratively consolidated, for
distribution purposes, the General Partner's bankruptcy filing with the
previously filed cases. We operated as debtors-in-possession under the
Bankruptcy Code, which means we continued to remain in possession of our assets
and properties and continued our day-to-day operations.

The EOTT Bankruptcy Court confirmed our Restructuring Plan on February 18,
2003, and it became effective on March 1, 2003. The Restructuring Plan and
related disclosure statement were filed with the SEC on December 17, 2002, as
part of a Form 8-K/A filing concerning the filing of the Restructuring Plan with
the EOTT Bankruptcy Court and supplemented as part of a Form 8-K filed on March
4, 2003, concerning the confirmation of the Restructuring Plan.

Restructuring Plan

We entered into an agreement, dated October 7, 2002, with Enron, Standard
Chartered Bank ("Standard Chartered"), Standard Chartered Trade Services
Corporation ("SCTS"), Lehman Commercial Paper Inc. ("Lehman Commercial") and
holders of approximately 66% of the outstanding principal amount of our senior
notes (the "Restructuring Agreement"). Under this Restructuring Agreement,
Enron, Standard Chartered,

F-7

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SCTS, Lehman Commercial and approximately 66% of our senior note holders agreed
to vote in favor of the Restructuring Plan, and to refrain from taking actions
not in support of the Restructuring Plan.

The Restructuring Plan, however, was subject to the approval of the EOTT
Bankruptcy Court, and the proposed settlement agreement with Enron, discussed
further below, was subject to the additional approval of the United States
Bankruptcy Court for the Southern District of New York (the "Enron Bankruptcy
Court"), where Enron and certain of its affiliates filed for Chapter 11
bankruptcy protection. The EOTT Bankruptcy Court approved the settlement
agreement with Enron on November 22, 2002, and the Enron Bankruptcy Court
approved the settlement agreement on December 5, 2002. The major provisions of
the Restructuring Plan, which became effective March 1, 2003, are as follows:

o Enron has no further affiliation with us or the General Partner. The
General Partner will be liquidated as soon as reasonably possible.

o We consummated the settlement agreement with Enron, described further
below.

o EOTT was converted to a limited liability company structure and EOTT
LLC became the successor registrant to the MLP. The MLP was merged into
EOTT Energy Operating Limited Partnership. EOTT LLC manages the current
operating limited partnerships.

o We are now managed by a seven-member Board of Directors. One of the
directors is the chief executive officer of EOTT LLC, and the remaining
six directors were selected by the former senior noteholders who signed
the Restructuring Agreement at the confirmation hearing for our
Restructuring Plan.

o We cancelled our outstanding $235 million of 11% senior unsecured
notes. Our former senior unsecured noteholders and holders of allowed
general unsecured claims will receive a pro rata share of $104 million
of 9% senior unsecured notes and a pro rata share of 11,947,820 limited
liability company units of EOTT LLC representing 97% of the newly
issued units. See further discussion in Note 6 and Note 8.

o We cancelled the MLP's publicly traded common units, and the former
holders of the MLP's common units received 369,520 limited liability
company units of EOTT LLC representing 3% of newly issued units and
957,981 warrants to purchase an additional 7% of the new units. We
cancelled the subordinated units and additional partnership interests.
See Note 6.

o We are authorized and intend to implement a management incentive plan
for certain key employees and our directors. The incentive plan may
reserve up to approximately 10% of EOTT LLC's authorized units for
issuance to certain key employees and directors.

o We will issue various notes for payment for certain classes of
creditors in accordance with the Restructuring Plan.

o We closed an exit credit facility with Standard Chartered, Lehman
Brothers Inc. ("Lehman"), and other lenders on February 28, 2003. The
Term Loan Agreement and Letter of Credit Agreement under this facility
have a term of 18 months post-bankruptcy under substantially the same
terms as the debtor in possession facilities discussed in Note 8, with
the inclusion of financial covenants. The inventory repurchase and
trade receivables financing arrangements with SCTS under this exit
credit facility each have an initial term of 6 months. We have the
option to extend these arrangements for an additional 12 months subject
to the payment of extension fees in the amount of 1% per annum of the

F-8

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

maximum commitment under these arrangements and an increase in the
interest rate of LIBOR plus 3% to LIBOR plus 7%. See further discussion
in Note 8.

Basis of Presentation

Generally, the Chapter 11 filing imposed an automatic stay on actions to
enforce or otherwise effect payment of liabilities arising prior to the Petition
Date. However, upon our motions as the debtors in the Chapter 11 filing, the
EOTT Bankruptcy Court permitted us to pay or otherwise honor certain unsecured
pre-petition claims, including employee salaries and benefits and customer
claims in the normal course of business, subject to certain limitations. Under
the applicable provisions of the Bankruptcy Code, debtors may elect to assume or
reject real estate leases, employment contracts, personal property leases,
service contracts and other pre-petition executory contracts, subject to
bankruptcy court approval. We reviewed all leases and executory contracts to
determine whether to seek the assumption or rejection of such leases and
contracts. Assumption of such leases and contracts will require us to cure
existing defaults, and rejection of such leases or contracts could result in
additional liabilities. As a result of the Chapter 11 filing, the outstanding
principal of, and accrued interest on, our long-term debt became immediately due
and payable.

Financial statements for periods subsequent to the Chapter 11 filing are
prepared in accordance with the American Institute of Certified Public
Accountant's Statement of Position No. 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7"). Pursuant to SOP 90-7
income and expense items including professional fees and interest income
associated with the Chapter 11 filing are recognized as incurred and reported as
Reorganization Items in the Consolidated Statement of Operations. Also, interest
expense of $5.9 million relating to our 11% Senior Notes was not accrued in the
fourth quarter of 2002 because this interest was not an allowed claim under our
Restructuring Plan. Certain liabilities which existed as of the Chapter 11
filing date are subject to compromise or other treatment under the Restructuring
Plan. For financial reporting purposes, those liabilities and obligations have
been segregated and classified as Liabilities Subject to Compromise on the
Consolidated Balance Sheet.

The following is a summary of reorganization items recorded during the
fourth quarter of 2002, which were specifically related to the EOTT Bankruptcy
and a summary of liabilities subject to compromise at December 31, 2002.

Reorganization items (in thousands):

Legal and professional fees $ 7,103
Adjustment to reflect allowed claim amount of
Senior Notes (1) 5,072
Enron settlement, net gain (Note 9) (45,539)
Other 517
--------
Total $(32,847)
========

(1) Write-off of deferred financing costs to reflect the allowed claim
amount for the $235 million principal amount of 11% Senior Notes.

F-9

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Estimated liabilities subject to compromise at December 31, 2002 are as
follows (in thousands):

11% Senior Notes $235,000
Interest payable - 11% Senior Notes 13,481
Accounts payable and suspense payable 34,876
Allowed claims for environmental settlements and contingencies 7,970
Other 1,500
--------
Total $292,827
========

The financial statements presented herein have been prepared on a "going
concern" basis in accordance with generally accepted accounting principles. The
"going concern" basis of presentation assumes that we will continue in operation
for the foreseeable future and will be able to realize our assets and discharge
our liabilities in the normal course of business.

In connection with the confirmation of our Restructuring Plan, we will adopt
fresh start reporting on March 1, 2003. In connection with the confirmation of
our Restructuring Plan, the enterprise value of EOTT, inclusive of working
capital was determined to be in the range of $365 million to $395 million. We
have arranged for independent valuations to be performed to assist in the
allocation of reorganization value (enterprise value before liabilities) as of
March 1, 2003 to the assets and liabilities of EOTT in proportion to their
relative fair value; however, these valuations have not been completed. The
adoption of fresh start reporting will be reflected in EOTT's first quarter Form
10-Q filing for 2003. See Note 17 for an unaudited pro forma balance sheet as of
December 31, 2002, assuming the Restructuring Plan was effective December 31,
2002.

We are not a taxable entity for federal income tax purposes. As such, we do
not directly pay federal income tax. Our taxable income or loss, which may vary
substantially from the net income or net loss we report in our consolidated
statement of operations, is includable in the federal income tax returns of our
unitholders. The aggregate difference in the basis of our net assets for
financial and tax reporting purposes cannot be readily determined as we do not
have access to information about each unitholder's tax attributes in EOTT.

The accompanying consolidated financial statements and related notes present
the financial position as of December 31, 2002 and 2001 for the MLP, and the
results of its operations, cash flows and changes in partners' capital for the
years ended December 31, 2002, 2001 and 2000. For the years ended December 31,
2002, 2001 and 2000, traditional net income (loss) and comprehensive income
(loss) are the same.

Certain reclassifications have been made to prior period amounts to conform
with the current period presentation. See further discussion in Note 2.

In August 2001, we reorganized the ownership of our three original operating
partnerships, EOTT Energy Operating Limited Partnership, EOTT Energy Pipeline
Limited Partnership and EOTT Energy Canada Limited Partnership, to make all of
our operating partnerships 100% owned subsidiaries of the MLP. In the
reorganization, EOTT Energy Corp. exchanged its 1% general partner interests in
each of the three subsidiary partnerships for an additional 0.98% general
partner interest in the MLP. The reorganization had no material impact on the
MLP or its unitholders because the interests contributed to EOTT by the General
Partner were at least equal in value to the additional 0.98% general partner
interest in the MLP issued in consideration for the contribution based on the
following: (1) since the formation of the MLP, the General Partner owned 1%
general partner interests in each of the three operating limited partnerships
and was entitled to 1% of all distributions of Available Cash from each
operating limited partnership, (2) to date, distributions of Available

F-10

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash have only been made from the MLP and one of the operating limited
partnerships, and (3) prior to the reorganization, the General Partner received
1.99% of all distributions and post reorganization, the General Partner's
distribution is 1.98%.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation. We own and operate our assets through our
operating limited partnerships. The accompanying financial statements reflect
the consolidated accounts of the MLP and the operating limited partnerships
after elimination of intercompany transactions.

Nature of Operations. Through our affiliated limited partnerships, EOTT
Energy Operating Limited Partnership, EOTT Energy Canada Limited Partnership,
EOTT Energy Pipeline Limited Partnership, and EOTT Energy Liquids, L.P., we are
engaged in the purchasing, gathering, transporting, trading, storage and resale
of crude oil and refined petroleum products, natural gas liquids ("NGLs") and
related activities. We are also engaged in the operation of a hydrocarbon
processing plant (the "Morgan's Point Facility") and a natural gas liquids
storage facility (the "Mont Belvieu Facility"). Our principal business segments
are North American Crude Oil - East of Rockies crude oil gathering and marketing
operations, Pipeline Operations, Liquids Operations, and West Coast Operations.

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

Cash Equivalents. We record as cash equivalents all highly liquid short-term
investments having original maturities of three months or less.

Inventories. Inventories are summarized as follows (in thousands):

Prior to the rescission of Emerging Issues Task Force ("EITF") Issue 98-10,
discussed further in Note 2, crude oil and refined products inventories used in
our trading and marketing operations were valued at fair value. As a result of
the rescission of EITF Issue 98-10, all inventory purchased after October 25,
2002 has been valued at average cost. Crude oil inventory in our Pipeline
Operations, and natural gas liquids inventory for all periods presented are
valued at average cost. Materials and supplies, which consist of spare parts
used at our Morgan's Point Facility, are also valued at average cost.

F-11

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property, Plant and Equipment ("PP&E"). The components of PP&E, at cost, are
as follows (in thousands):

Normal maintenance and repairs are charged to expense as incurred while
significant improvements which extend the life of the asset are capitalized.
Upon retirement or sale of an asset, the asset and the related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
reflected in the results of operations.

Costs incurred in connection with planned major maintenance activities at
our Morgan's Point Facility (turnaround costs) are deferred when incurred and
amortized on a straight-line basis over the period of time estimated to lapse
until the next turnaround occurs. These costs include repairing, restoring or
replacing processing equipment. Turnaround activities are anticipated to occur
every four years, with the most recent turnaround having been completed during
the first quarter of 2002.

Impairment of Assets. We evaluate impairment of our long-lived assets in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," and would
recognize an impairment when estimated undiscounted future cash flows associated
with an asset or group of assets are less than the asset carrying amount.
Long-lived assets are subject to factors which could affect future cash flows.
These factors include competition, regulation, environmental matters,
consolidation in the industry, refinery demand for specific grades of crude oil,
area market price structures and continued developmental drilling in certain
areas of the United States. We continuously monitor these factors and pursue
alternative strategies to maintain or enhance cash flows associated with these
assets; however, no assurances can be given that we can mitigate the effects, if
any, on future cash flows related to any changes in these factors. See Note 7
for further discussion of asset impairments.

Depreciation. Depreciation is provided by applying the straight-line method
to the cost basis of property, plant, and equipment, less estimated salvage
value, over the estimated useful lives of the assets. Asset lives are 15 to 20
years for barging, terminaling, gathering and pipeline facilities, 5 to 10 years
for transportation equipment, 20 to 25 years for the Morgan's Point Facility and
the Mont Belvieu Facility and 3 to 20 years for other buildings and equipment.

Amortization of Goodwill. Effective January 1, 2002, we adopted SFAS No.
142, "Goodwill and Other Intangible Assets." SFAS No. 142 requires entities to
discontinue the amortization of goodwill, allocate all existing goodwill among
its reporting segments based on criteria set by SFAS No. 142 and perform initial
impairment tests by applying a fair value-based analysis on the goodwill in each
reporting segment. Goodwill is to be tested for impairment annually or more
frequently if circumstances indicate a possible impairment. In

F-12

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2002, no impairment of goodwill was required. Goodwill has been allocated to the
North-American Crude Oil-East of Rockies segment.

The following reconciliation shows the effect of goodwill amortization in
prior periods as follows (in thousands, except per unit amounts):

Pipeline Linefill. Pipeline linefill, which consists of minimum operating
requirements, is recorded at cost. Total minimum operating linefill requirements
held in third party pipelines and our pipelines at December 31, 2002 and 2001
were 2.9 million barrels at a cost of $50.2 million and 3.2 million barrels at a
cost of $52.9 million, respectively. Minimum linefill requirements in third
party pipelines at December 31, 2002 and 2001 were valued at $8.8 million and
$13.6 million, respectively, and classified as Other Current Assets on the
balance sheet. Minimum linefill requirements held in our pipelines at December
31, 2002 and 2001, were valued at $41.4 million and $39.3 million, respectively,
and classified as Property, Plant and Equipment on the balance sheet.

Energy Trading and Derivative Activities.

At January 1, 1999, we adopted EITF Issue 98-10, "Accounting for Contracts
Involved in Energy Trading and Risk Management Activities." EITF Issue 98-10
required energy trading contracts (as defined) to be recorded at fair value in
the balance sheet with changes in fair value included in earnings.

Effective January 1, 2001, we began reporting derivative activities in
accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended. SFAS No. 133 requires that derivative instruments be
recorded in the balance sheet as either assets or liabilities measured at fair
value. SFAS No. 133 requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results from the hedged item in the income statement,
and requires that a company formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting. We have not
designated any derivatives as hedging instruments. Under SFAS No. 133, we are
required to "mark-to-fair value" all of our derivative instruments at the end of
each reporting period. This contrasts with previous accounting principles which
generally only required our transactions designated as energy trading activities
to be marked-to-fair value. At the date of the initial adoption of SFAS 133, the
difference between the fair value of derivative instruments and the previous
carrying amount of those derivatives was recorded as the cumulative effect of a
change in accounting principle. The cumulative effect of adopting SFAS No. 133
effective January 1, 2001 was a $1.3 million ($0.05 per diluted unit) increase
in income.

F-13

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in the market value of transactions designated as energy trading
activities in accordance with EITF Issue 98-10, and derivative instruments
accounted for under SFAS No. 133, are recorded in revenues every period as
unrealized gains or losses. The related price risk management assets and
liabilities are recorded in other current or non-current assets and liabilities,
as applicable, on the balance sheet. The fair value of transactions designated
as energy-trading activities is determined primarily based on forward prices of
the commodity, adjusted for certain transaction costs associated with the
transactions. For the year ended December 31, 2002, we had net unrealized gains
of $1.8 million, and for the years ended December 31, 2001 and 2000 we had net
unrealized losses of $2.5 million (which includes $2.6 million of income related
to the changes in fair value of inventory), and $3.6 million, respectively.

In October 2002, the EITF reached a consensus in EITF Issue 02-03, "Issues
Involved in Accounting for Derivative Contracts Held for Trading Purposes and
Contracts Involved in Energy Trading and Risk Management Activities." The EITF
reached a consensus to rescind Issue 98-10, and related interpretive guidance,
and preclude mark to market accounting for energy trading contracts that are not
derivative instruments pursuant to SFAS 133. The consensus requires that gains
and losses (realized and unrealized) on all derivative instruments held for
trading purposes be shown net in the income statement, whether or not the
instrument is settled physically. The consensus to rescind Issue 98-10
eliminated EOTT's basis for recognizing physical inventories at fair value. With
the rescission of Issue 98-10, inventories purchased after October 25, 2002,
have been valued at average cost. See further discussion in Note 14.

Revenue Recognition. Prior to the rescission of EITF Issue 98-10,
substantially all of our current gathering, marketing and trading activities
were accounted for on a fair value basis with changes in fair value included in
earnings. Qualifying derivative instruments are accounted for pursuant to SFAS
No. 133 with the remaining energy trading activities accounted for pursuant to
EITF Issue 98-10. We recognize revenue on the accrual method, for non-energy
trading activities and non-derivative instruments, based on the right to receive
payment for goods and services delivered to third parties.

Certain estimates were made in determining the fair value of contracts. We
have determined these estimates using available market data and valuation
methodologies. Judgment is required in interpreting market data, and the use of
different market assumptions or estimation methodologies may affect the
estimated fair value amounts.

Consistent with standard crude oil industry practice, we utilize "buy/sell"
contracts to facilitate our delivery obligations and to limit our overall risk.
We utilize buy/sell contracts to price the relative values of crude oil that we
seek to exchange between locations. The economic objective is to exchange one
barrel of crude oil for another barrel of crude oil that has a different
attribute such as, but not limited to, quality, location or delivery period. The
primary objective of pricing both sides of a buy/sell contract at prices
reflective of the crude oil's relative values is to allow for volume variances
which occur between the estimated scheduled volumes and actual deliveries. If
all volumes on these crude oil purchase contracts were exactly as forecast each
month, such contracts could be handled by exchange contracts, with simply a
location and quality differential. However, volumes are frequently (almost
always in the case of lease production) different than scheduled. Both parties
to the transaction are protected against volume variances by using the current
month's market price for each grade, location or delivery period associated with
the different barrels of crude oil.

F-14

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following amounts have been recorded in Operating Revenue on the
Consolidated Income Statement for buy/sell contracts (in millions):

Operating Revenues. In connection with adopting EITF Issue 02-03, revenues
and cost of sales related to our crude oil and refined product marketing and
trading activities have been presented on a net basis and we have reclassified
previously reported amounts. Gross revenues and purchase costs that have been
netted are as follows (in thousands):

Cost of Sales and Operating Expenses. Cost of sales includes the cost of
product such as crude oil, refined products, natural gas, natural gas liquids,
and feedstocks for the Morgan's Point Facility and associated transportation
costs. Operating expenses consist of plant, field and pipeline expenses,
including payroll and benefits, utilities, telecommunications, fuel and power,
environmental expenses and property taxes.

Other (Income) Expense. The components of other (income) expense are as
follows (in thousands):

F-15

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other, Net. The components of other, net, are as follows (in thousands):

SFAS No. 140 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities - A Restatement of FASB Statement No. 125" was
effective March 31, 2001. Under SFAS No. 140, transfers of accounts receivable
under our receivables agreement, discussed further in Note 8, are accounted for
as financings. Previously, these transfers were accounted for as sales in
accordance with the provisions of SFAS No. 125. Under SFAS No. 125, the
transferred receivables were removed from the balance sheet and costs associated
with the transfers were included in "Other, net" on the income statement. Under
SFAS No. 140, the transferred receivables and the related receivable financing
remain on the balance sheet and costs associated with the transfers are
classified as "Interest Expense and Related Charges" on the Consolidated Income
Statement.

Foreign Currency Transactions. Canadian operations represent all of our
foreign activities. The U.S. dollar is the functional currency. Foreign currency
transactions are initially translated into U.S. dollars. The resulting gains and
losses are included in the determination of net income (loss) in the period in
which the exchange rate changes.

Environmental. Expenditures for ongoing compliance with environmental
regulations that relate to current operations are expensed or capitalized as
appropriate. Estimated liabilities are recorded when environmental assessments
indicate that remedial efforts are probable and the costs can be reasonably
estimated. Estimates of the liability and insurance recovery, if any, are based
upon currently available facts, existing technology and presently enacted laws
and regulations.

Unit Based Compensation Plans. We accounted for unit-based compensation
using the intrinsic value recognition previsions of APB No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. If we had elected to
recognize compensation cost based on the fair value recognition provisions of
SFAS No. 123, "Accounting for Stock Based Compensation", net income (loss) and
net income (loss) per unit would be unchanged for 2002 and 2001 and pro forma
net income in 2000 was $14.2 million compared to actual net income of $13.8
million.

3. PRIOR YEAR UNAUDITED FINANCIAL INFORMATION

In connection with a proxy filing submitted to the Securities and Exchange
Commission ("SEC") in the fall of 2001 concerning our planned recapitalization,
which was subsequently terminated due to the Enron bankruptcy, the SEC has been
reviewing our 1934 Act filings. We have received a series of comments from the
SEC to which we either have responded or are in the process of responding. In
response to the SEC's comments regarding unauthorized trading activities,
disclosed in our previous SEC filings, we restated prior year financial results
in connection with our 2001 Form 10-K to reflect the fair value impact of these
transactions over the periods during which the contracts were outstanding. The
restatement resulted in a decrease in net income for the year 1998 of $1.0
million ($0.05 per diluted unit) and a corresponding increase

F-16

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

in net income for the year 1999 of $1.0 million ($0.04 per diluted unit). The
effect of the restatement in 2000 only related to the quarterly periods.

On February 5, 2002, Arthur Andersen LLP ("Andersen") withdrew as our
independent accountants. We were informed that Andersen's withdrawal related to
Andersen's professional standard concerns, including auditor independence
issues, related to events involving Enron. The restatement of our financial
statements for the years 1998 and 1999, and the quarterly periods in 1999 and
2000, requires the issuance of a new audit opinion covering the years 1999 and
2000. PricewaterhouseCoopers LLP ("PwC"), our current independent accountants,
has verbally agreed to perform re-audits of our financial statements for the
years 1999 and 2000. In connection with our Restructuring Plan, a new Board of
Directors and Audit Committee have been formed; however, the new Board of
Directors and Audit Committee have not yet completed their review of this matter
or formally engaged PwC to conduct the re-audits. Because the re-audits have not
been performed, we are filing unaudited financial statements for the year 2000
with this Annual Report.

4. CHANGE IN ACCOUNTING PRINCIPLE

In the first quarter of 2001, we changed our method of accounting for
inventories used in our energy trading activities from the average cost method
to the fair value method. The cumulative effect of the change in accounting for
inventories as of January 1, 2001 was $0.2 million ($0.01 per diluted unit) and
is reported as a decrease in net income for 2001. The change in accounting for
inventories increased reported net income in 2001 by approximately $2.6 million.
See Note 2 for information regarding the rescission of EITF Issue 98-10 and the
related impact on valuing inventory.

5. ACQUISITION AND DISPOSITIONS OF ASSETS

Acquisition of Liquids Operations

Assets Acquired/Long-Term Contracts. Effective June 30, 2001, we purchased
certain liquids processing, storage and transportation assets located in the
Texas Gulf Coast region. We paid $117 million in cash to Enron and State Street
Bank and Trust Company of Connecticut, National Association, Trustee (the
"Trustee"). The assets held by the Trustee were held under a lease financing
arrangement with Enron. Immediately prior to the acquisition, all of the assets
were operated by EGP Fuels Company, a Delaware corporation and wholly-owned
subsidiary of Enron ("EGP Fuels").

This acquisition included (i) the Morgan's Point Facility, located in
Morgan's Point, Texas, which processes approximately 16,000 barrels per day and
is currently being used for the production of isobutylene and methyl tertiary
butyl ether ("MTBE"), (ii) the Mont Belvieu Facility, a natural gas liquids
storage facility, located in Mont Belvieu, Texas, that consists of ten active
storage wells with a total capacity of approximately ten million barrels, (iii)
a liquids pipeline grid system used for the transportation of natural gas
liquids and other products to and from the Mont Belvieu Facility and the
Morgan's Point Facility and other distribution points and (iv) loading,
unloading and transportation facilities that are associated with the foregoing
(collectively, the "Assets").

We acquired the Assets pursuant to the terms of a purchase and sale
agreement between the Partnership and Enron (the "Agreement"). The Agreement
contained representations and warranties of the parties and certain indemnity
agreements.

Concurrently with the acquisition of the Assets described above, we entered
into a ten-year tolling agreement for the conversion of feedstocks into
products, on a take-or-pay basis ("Toll Conversion Agreement"), and a ten-year
storage and transportation agreement for the use of a significant portion of the

F-17

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Mont Belvieu Facility and pipeline grid system, on a take-or-pay basis ("Storage
Agreement"). Both agreements were with Enron Gas Liquids, Inc. ("EGLI"), a
wholly-owned subsidiary of Enron, which is now in bankruptcy. Under these
agreements EGLI retained all existing third party commodity, transportation and
storage contracts associated with these facilities. These agreements were the
principle basis for determining the desirability of the transaction and the
purchase price of the Assets.

The purchase price of $117 million was based upon the estimated value of the
Assets and the associated long-term contracts. Allocation of the purchase price
to the acquired Assets in accordance with Accounting Principles Board Opinion
No. 16 resulted in an increase in property, plant and equipment and materials
and supplies of approximately $82 million and $5 million respectively. See
discussion of impairments in Note 7. Approximately $30 million of the purchase
price was allocated to the long-term contracts (see further discussion regarding
impairment of the contract value in Note 7). We financed the purchase price
through short-term borrowings from SCTS available under inventory and receivable
financing facilities.

As more fully explained in Note 10, on December 3, 2001, EGLI was included
in Enron's bankruptcy filing. Due to the non-performance by EGLI under the Toll
Conversion Agreement in late November 2001, we began to operate the Morgan's
Point Facility as a merchant operation in the spot market. We were unable to
enter into third party spot or term contracts until the Storage Agreement was
rejected by EGLI.

On April 2, 2002, the Bankruptcy Court entered a stipulation and agreed
order rejecting the Toll Conversion and Storage Agreements (the "Stipulation"),
which order became final and non-appealable on April 12, 2002. Rejection of the
Storage Agreement with EGLI resulted in the loss of the buyer of the fixed
throughput and storage capacity at the Mont Belvieu Facility. However, the
rejection allowed us to directly seek new customers and pursue long-term
contracts for the Mont Belvieu Facility to replace the long-term and continuous
stream of revenue we expected under the Storage Agreement with EGLI. Although we
expect to use some of our storage capacity in our operations and marketing
activities related to the Morgan's Point Facility, we expect to market the
majority of the storage capacity to third parties, preferably those with a
presence in Mont Belvieu, Texas. We are currently in the process of building our
customer base and have recaptured approximately 50% of historically normal
storage and throughput levels.

As a result of the rejection of the Toll Conversion Agreement, our operation
of the Morgan's Point Facility has been converted to a merchant operation, which
means that we take title to feedstocks and sell products directly to third
parties, as opposed to providing tolling services to EGLI. This means that we
bear the risk of physical loss associated with storing these feedstocks and
products. We are also subject to a significant increase in commodity price risk
for feedstocks and marketing and commodity price risk associated with owning and
selling MTBE and other end products, which may vary based on factors beyond our
control. We are continuing to operate the assets and are examining long-term
options for their operation which could include sales of these facilities. See
discussion of impairments in Note 7.

Disposition

Effective June 1, 2002, we sold our West Coast refined products marketing
operations to Trammo Petroleum Inc. The sales price was not significant.

Effective June 30, 2001, we sold our West Coast crude oil gathering and
blending operations to Pacific Marketing and Transportation LLC ("Pacific") for
$14.3 million. We could be required to repay up to $1.5 million of the sale
price, subject to a two-year look-back provision regarding average operating
results during the period July 1, 2001 through June 30, 2003. Such amount is
reflected in Liabilities Subject to Compromise and Other Long-Term Liabilities,
respectively, in the Consolidated Balance Sheet at December

F-18

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2002 and 2001. In addition, we also provided customary indemnifications to
Pacific with a maximum aggregate exposure of $3.7 million, whose terms expire
between June 2002 through June 2006.

6. EARNINGS PER UNIT

Basic earnings per unit includes the weighted average impact of outstanding
units of EOTT (i.e., it excludes unit equivalents). Diluted earnings per unit
considers the impact of all potentially dilutive securities (including the
conversion of subordinated units into common units). As previously discussed,
under the Restructuring Plan, the common and subordinated units were cancelled.
Holders of common units received 369,520 EOTT LLC units and 957,981 warrants to
purchase additional EOTT LLC units. Holders of the MLP's former 11% senior notes
due 2009 and general unsecured creditors with allowed claims will receive their
pro rata allocation of 11,947,820 EOTT LLC units. The allocation of the
11,947,820 units cannot be determined until the precise amount of each allowed
claim is determined. This process is underway in the EOTT Bankruptcy Court as
part of our Restructuring Plan and is expected to be completed no sooner than
August 2003.

Net income (loss) shown in the table below excludes the approximate two
percent interest of the General Partner. Earnings (loss) per unit are calculated
as follows (in thousands, except per unit amounts):

(1) Net income (loss), excluding the approximate two percent General
Partner interest, has been apportioned to each class of unitholder
based on the ownership of total units outstanding in accordance with
the Partnership Agreement. Net losses are not allocated to the common
and subordinated unitholders to the extent that such allocations would
cause a deficit capital account balance or increase any existing
deficit capital account balance. Any remaining losses are allocated to
the General Partner.

(2) The diluted earnings (loss) per unit calculation assumes the conversion
of subordinated units into common units. The disproportionate income
(loss) allocation between the unitholders has no effect on the diluted
computation.

Net income and per unit information related to the net income before
cumulative effect of accounting changes for the year ended December 31, 2001 is
as follows:

F-19

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. ASSET IMPAIRMENT AND OTHER

In connection with the development of our exit strategy from bankruptcy, the
Morgan's Point Facility, Mont Belvieu Facility and natural gas liquids assets on
the West Coast were identified as non-strategic assets. As a result, we are
evaluating our options with regard to these assets which could include continued
operation of these assets, sale to a third party, modification of certain assets
to produce alternative products or a potential shutdown at some point in the
future. At December 31, 2002, we have written down these assets to their
estimated fair values determined based upon their expected discounted cash
flows. The following is a summary of the impairments recorded (in millions):

Morgan's Point Facility $20.2
Mont Belvieu Facility 33.0
Natural Gas Liquids assets 22.9
-----
$76.1
=====

During the second quarter of 2002, we recorded a $1.2 million impairment of
a marine facility. The marine facility provided transportation services to a
single customer under a contract that expired in June 2002.

As previously discussed, concurrently with the purchase of the liquids
assets, we entered into the Toll Conversion and Storage Agreements with EGLI.
Subsequently, in December 2001, EGLI was included in Enron's bankruptcy filing,
and in April 2002, the Bankruptcy Court entered a stipulation and agreed order
rejecting the two agreements. As a result of EGLI's non-performance under the
contracts, we recorded a $29.1 million impairment in the fourth quarter of 2001
representing our total remaining investment in the contracts. See Note 10 for
further discussion of the impact of Enron's bankruptcy on EOTT.

During 2000, we filed an insurance claim to recover the losses related to
the theft of NGL product and received $2.5 million. In addition, we recorded
additional charges of $1.9 million primarily related to severance charges for a
former officer and the closing of the remaining contract for mid-continent NGL
activities.

8. CREDIT RESOURCES AND LIQUIDITY

Summary of Pre-Bankruptcy Financing

Until December 31, 2001, we had an unsecured credit facility with Enron to
provide credit support in the form of guarantees, letters of credit and working
capital loans through December 31, 2001. The total amount of the Enron facility
was $1.0 billion, and it contained sublimits of $100 million for working capital
loans and $900 million for guarantees and letters of credit. Letter of credit
fees were based on actual charges by the banks which range from .20% to .375%
per annum. Interest on outstanding loans was charged at LIBOR plus 250 basis
points per annum.

F-20

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On November 30, 2001, we entered into an interim credit facility with
Standard Chartered, our primary lender, for the purpose of replacing our
existing credit facility with Enron. This interim facility provided for the
issuance through March 2002 of up to $150 million of letters of credit. On
December 21, 2001, we increased this interim credit facility to $300 million,
which included a $40 million limit for working capital loans, and the facility
was extended to April 30, 2002.

Additionally, we had an agreement with SCTS, which provided for the
financing of purchases of crude oil inventory up to an aggregate amount of $100
million utilizing forward commodity repurchase agreements. We also had an
agreement with SCTS which provided for the transfer of up to an aggregate amount
of $100 million of certain trade receivables outstanding at any one time. These
transactions do not qualify as sales under SFAS No. 140 and therefore are
accounted for as financings.

Effective April 23, 2002, we amended and extended our credit facility with
Standard Chartered as well as our inventory repurchase agreement and trade
receivables agreement with SCTS to February 2003. These facilities provided up
to an aggregate of $500 million of working capital loans, letters of credit,
trade receivables financing and inventory commodity repurchase funding comprised
of the following:

(i) up to $300 million of letter of credit and working capital financing
with a working capital loan sublimit of $40 million;

(ii) up to $100 million of receivables financing under a trade
receivables financing agreement with SCTS; and

(iii) up to $100 million of commodity repurchase financing under an
inventory repurchase agreement with SCTS.

We paid an arrangement fee of 2% of these amended credit facilities. The
amended inventory repurchase and trade receivables agreements bore interest at
LIBOR plus 3%. Following our Chapter 11 filing, these facilities were replaced
by our Debtor In Possession financing arrangements discussed below.

At June 30, 2002, and September 30, 2002, we were in violation of the
negative covenants under our financing arrangements relating to consolidated net
income, consolidated earnings before interest, taxes and depreciation and
consolidated net worth. The violation of these covenants was principally due to
the lower operating income associated with our crude marketing and
transportation business, lower operating income from the Morgan's Point Facility
and higher corporate costs. On August 13, 2002, Standard Chartered agreed to a
limited forbearance until September 16, 2002, which allowed time for us to
discuss with Standard Chartered possible modifications of the credit facility.
On August 27, 2002 Standard Chartered agreed to extend the limited forbearance
until October 30, 2002.

F-21

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summary of Debtor in Possession ("DIP") Financing

On October 18, 2002, we entered into agreements with Standard Chartered,
SCTS and other lending institutions for $575 million in DIP financing
facilities. The DIP facilities provided (i) $400 million of working capital
facilities, which included up to $325 million for letters of credit and $75
million of term loans, and (ii) $175 million of inventory repurchase/accounts
receivable financing. The credit facilities were secured by a first-priority
lien on all or substantially all of our real and personal property. As of
December 31, 2002, we had outstanding approximately $274.0 million of letters of
credit, $75 million of term loans, $125 million of inventory repurchase/accounts
receivable financing and cash and short-term investments of approximately $16
million. The DIP financing facilities contained certain restrictive covenants
that, among other things, limited distributions, other debt, and certain asset
sales. The DIP financing facilities had a maturity date of the earlier of March
31, 2003 or the date we emerged from bankruptcy. The major terms of the DIP
financing facilities were as follows:

DIP Letter of Credit Facility

On October 18, 2002, we entered into an agreement as debtors-in-possession
and guarantors with Standard Chartered, which provided a letter of credit
facility not to exceed at any one time outstanding $325 million ("DIP Letter of
Credit Facility").

The DIP Letter of Credit Facility was subject to defined borrowing base
limitations. The borrowing base was the sum of (i) cash equivalents, specified
percentages of eligible receivables, deliveries, fixed assets, inventory, margin
deposits and undrawn product purchase letters of credit, minus (as of the date
of determination) (ii) first purchase crude payables, other priority claims,
aggregate net amounts payable by the borrowers under all hedging contracts and
certain eligible receivables arising from future crude oil obligations, minus
(iii) the principal amount of loans outstanding and any accrued and unpaid fees
and expenses under the Term Loans, minus (iv) all outstanding amounts under the
Amended and Restated Commodities Repurchase Agreement and the Amended and
Restated Receivables Purchase Agreement, both dated as of October 18, 2002
("SCTS Purchase Agreements").

Under the DIP Letter of Credit Facility, letter of credit fees ranged from
2.25% to 2.75% per annum. The commitment fee was 0.5% per annum of the unused
portion of the DIP Letter of Credit Facility. Additionally, we agreed to a
fronting fee, which was the greater of 0.25% per annum times the face amount of
the letter of credit or $250. The arrangement fee was 1% per annum times the
average daily maximum facility amount, as defined in the DIP Letter of Credit
Facility. Additionally, distributions to unitholders were not permitted by us
under either the Term Loan Agreement or the DIP Letter of Credit Facility.

DIP Term Loan Agreement

We entered into an agreement as debtors-in-possession and guarantors on
October 18, 2002 with Lehman Brothers Inc. ("Lehman"), as Term Lender Agent, and
other lenders (collectively, "Term Lenders"), which provided term loans in the
aggregate amount of $75 million (the "Term Loans"). Pursuant to the conditions
of the Term Loans, the Term Lenders made a single advance to the borrowers on
October 18, 2002.

The financing included two term notes. The Tier-A Term Note was for $50
million with a 9% per annum interest rate. The Tier-B Term Note was for $25
million with a 10% per annum interest rate. Interest was payable monthly on both
notes. The arrangement fee was $100,000, which was to be reduced by the amounts
received by Lehman pursuant to the letter agreement dated September 30, 2002
between Lehman and EOTT Energy Operating Limited Partnership. We paid Lehman, on
behalf of each Term Lender, a facility fee in the aggregate amount of $750,000.
We agreed to pay a deferred financing fee in the aggregate amount of $2

F-22

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

million on, at our option, either (i) the closing date of the Term Loans, or,
(ii) the earlier to occur of the maturity date and the date the Term Loans were
paid in full. The deferred financing fee would be reduced to $1 million if we
prepaid the Term Loans and we were not in default.

SCTS Purchase Agreements

We also had an agreement with SCTS similar to our pre-bankruptcy inventory
repurchase agreement, which provided for the financing of purchases of crude oil
inventory utilizing a forward commodity repurchase agreement ("DIP Inventory
Repurchase Agreement"). The maximum commitment under the Amended Inventory
Repurchase Agreement was $75 million and the interest rate was LIBOR plus 3%.
The facility fee was 1% per annum times the average daily maximum facility
amount, as defined in the DIP Inventory Repurchase Agreement.

In addition, we also had an agreement with SCTS similar to our
pre-bankruptcy trade receivables agreement, which provided for the financing of
up to an aggregate amount of $100 million of certain trade receivables ("DIP
Trade Receivables Agreement") outstanding at any one time. The discount fee was
LIBOR plus 3% and the facility fee was 1% per annum times the average daily
maximum facility amount, as defined in the DIP Trade Receivables Agreement.

Intercreditor and Security Agreement

In connection with the DIP Letter of Credit Facility, the Term Loans and the
SCTS Purchase Agreements, we entered into the Intercreditor and Security
Agreement ("Intercreditor Agreement"), dated as of October 18, 2002, with
Standard Chartered, Lehman, SCTS and various other secured parties ("Secured
Parties") in order to provide for rights and distribution of the proceeds of the
collateral with respect to each Secured Party. Prior to a triggering event under
the Intercreditor Agreement, funds in our debt service payment account will be
paid in the manner and order of priority provided for in the agreement.

In addition, to the extent that drawings are made on any letters of credit,
Standard Chartered, as collateral agent, may distribute funds from our debt
service payment account to itself (as letter of credit issuer agent on behalf of
the letter of credit issuer) as needed to allow the debtors to reimburse
Standard Chartered, as letter of credit issuer, for such drawings.

Summary of Exit Credit Facilities

On February 11, 2003, we entered into our exit credit facilities with the
same lenders and under substantially the same terms as set forth above in the
DIP financing facilities. These new facilities were closed on February 28, 2003
and $2.9 million of facility and extension fees were paid in connection with
these new facilities.

The new Term Loan Agreement and Letter of Credit Facilities mature on the
earlier of eighteen calendar months from the closing date or August 30, 2004.
The STSC Purchase Agreements were extended for six months to August 30, 2003,
which we have the option to extend for an additional twelve months. The
extension fee is $750,000 under the Inventory Repurchase Agreement and $1
million under the Trade Receivables Agreement. In addition, if we elect to
extend these agreements, the interest rate under the Inventory Repurchase
Agreement and the discount fee under the Receivables Agreement will increase to
LIBOR plus 7%.

F-23

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The new Letter of Credit Agreement also included the following monthly
covenants:

o Minimum Earnings Before Interest, Depreciation and Amortization
("EBIDA");

o Minimum Interest coverage (EBIDA/cash interest expense);

o Minimum Current ratio (adjusted current assets/adjusted current
liabilities);

o Minimum adjusted consolidated tangible net worth.

Additionally, the exit credit facilities restricts the payment of distributions
or dividends by us.

Senior Notes

On October 1, 1999, we issued to the public $235 million of 11% senior
notes. The senior notes were due October 1, 2009, and interest was paid
semiannually on April 1 and October 1. The senior notes were fully and
unconditionally guaranteed by all of our operating limited partnerships but were
otherwise unsecured. On October 1, 2002, we did not make the interest payment of
$12.9 million on our $235 million 11% senior notes. These notes were cancelled
effective March 1, 2003 as a result of our Restructuring Plan and the holders of
these notes, along with our general unsecured creditors with allowed claims,
will receive a pro rata share of $104 million of 9% senior unsecured notes, plus
new EOTT LLC units.

The following is a summary of our long-term debt maturities at December 31,
2002 (in millions):

EOTT LLC Senior Notes 2010

In 2003, we issued $104 million of 9% senior unsecured notes to be allocated
to former holders of the 11% senior notes described above and our general
unsecured creditors with allowed claims. However, the exact pro rata allocation
of the senior notes cannot be determined until the precise amount of each
allowed claim is determined. This process is underway in the EOTT Bankruptcy
Court as part of our Restructuring Plan and is expected to be completed no
sooner than August 2003. The senior notes are due in March 2010, and interest
will be paid semiannually on September 1 and March 1. Under the terms of the
indenture governing our senior notes, we are allowed to pay interest payments in
kind by issuing additional senior notes on the first two interest payment dates.
If we make payments in kind, we must make the payments as if interest were being
charged at 10% per annum instead of 9% per annum. We may not optionally redeem
the notes. The notes are subject to mandatory redemption or sinking fund
payments if we sell assets and use the money for certain purposes or if we have
a change of control. Provisions of the indenture could limit additional
borrowings, sale and lease back transactions, affiliate transactions, purchases
of our own equity, payments on debt subordinated to the senior notes,
distributions to unitholders or merger, consolidation or sale of assets if
certain financial performance ratios are not met.

F-24

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9. SUMMARY OF OUR SETTLEMENT AGREEMENT WITH ENRON

The General Partner and EOTT entered into a settlement agreement dated
October 8, 2002 (the "Enron Settlement Agreement") with Enron, Enron North
America Corp., Enron Energy Services, Inc., Enron Pipeline Services Company
("EPSC"), EGP Fuels Company ("EGP Fuels") and Enron Gas Liquids, Inc. ("EGLI")
(collectively, the "Enron Parties"). As part of the Settlement Agreement, Enron
consented to the filing of our bankruptcy in the Southern District of Texas, and
Enron waived its rights of first refusal with respect to the sale of the
Morgan's Point Facility, Mont Belvieu Facility and other assets we purchased
pursuant to the Purchase and Sale Agreement dated June 29, 2001 between Enron
and us ("Purchase Agreement"). The EOTT Bankruptcy Court approved the Enron
Settlement Agreement on November 22, 2002, and the Enron Bankruptcy Court
approved the Enron Settlement Agreement on December 5, 2002. The Enron
Settlement Agreement was consummated on December 31, 2002. In connection with
the settlement of outstanding claims between the Enron Parties and us, the Enron
Settlement Agreement provides for the parties to enter into the following
agreements:

o We entered into an Employee Transition Agreement with EPSC, which
provides for the transfer to us of certain employees of subsidiaries of
Enron which perform pipeline operations services for us, effective
January 1, 2003.

o The General Partner and EPSC entered into a Termination Agreement on
October 8, 2002, which provided for the termination of the EPSC
Corporate Services Agreement.

o The General Partner, the MLP, and the Subsidiary Entities and Enron
entered into a Termination Agreement on October 8, 2002, which provided
for the termination of the Corporate Services Agreement.

o The General Partner and EGP Fuels entered into a Termination Agreement
on October 8, 2002, which provided for the termination of the
Transition Services Agreement.

o At December 31, 2002, we executed a promissory note payable to Enron in
the initial principal amount of $6.2 million that is guaranteed by our
subsidiaries (the "EOTT Note"). The EOTT Note is secured by an
irrevocable letter of credit and bears interest at 10% per annum.

o The employees, former employees and their covered spouses and
dependents of the General Partner continued to participate in the Enron
retirement and welfare benefit plans until December 31, 2002.

As additional consideration and as a compromise of certain claims, we paid
Enron $1,250,000 (the "EOTT Cash Payment") on the effective date of our
Restructuring Plan.

We agreed, among other things, to assume obligations in our bankruptcy cases
and cure defaults under the Operation and Service Agreement with EPSC whereby
EPSC provided certain pipeline operation services to us. We also agreed to
indemnify EPSC against claims arising from the General Partner's failure to
perform its duties under the Operation and Services Agreement or the General
Partner's refusal to approve EPSC recommended items or modifications in the
budgets.

We and the Enron Parties also mutually released each other for any and all
claims except those expressly reserved in the Enron Settlement Agreement,
including as follows:

F-25

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

o All of the parties to the Enron Settlement Agreement retained any
rights to payments with regard to EGLI's inventory at the Mont Belvieu
Facility pursuant to the Stipulation entered by the Enron Bankruptcy
Court on April 2, 2002, rejecting the Toll Conversion and Storage
Agreements.

o The Enron Parties did not release us for claims with respect to the
EOTT Note or any undisputed amounts owed to EPSC pursuant to the
Operation and Service Agreement for the period beginning August 1,
2002. We have disputed certain amounts billed in a final invoice from
EPSC related to the Operation and Service Agreement and are working to
resolve the dispute.

The following is a summary of the net Enron Settlement amount recorded in
Reorganization Items in the Consolidated Statement of Operations (in millions)
as discussed in Note 1:

Forgiveness of Payable to Enron and affiliates $38.5
Forgiveness of Performance Collateral from Enron 15.8
Note issued to Enron (EOTT Note) (6.2)
EOTT Cash Payment to Enron for certain claims (1.2)
Final EOTT contribution to Enron Cash Balance Plan (1.4)
-----
Total $45.5
=====

10. IMPACT OF ENRON BANKRUPTCY AND TRANSACTIONS WITH ENRON AND RELATED PARTIES

IMPACT OF ENRON BANKRUPTCY

Beginning on December 2, 2001, Enron, along with certain of its
subsidiaries, filed to initiate bankruptcy proceedings under Chapter 11 of the
Federal Bankruptcy Code. Because of our contractual relationships with Enron and
certain of its subsidiaries, the bankruptcy significantly impacted us in various
ways as discussed below.

Rejection of Agreements; Claims Against Enron's Bankruptcy Estate. We were
adversely impacted as a result of the inclusion of EGLI in Enron's bankruptcy.
We had in place ten-year Toll Conversion and Storage Agreements with EGLI. On
April 2, 2002, the Enron Bankruptcy Court entered the Stipulation rejecting the
Toll Conversion and Storage Agreements, which Stipulation became final and
non-appealable on April 12, 2002. As a result of EGLI's non-performance under
these agreements, we recorded a $29.1 million non-cash impairment, which was our
remaining investment in these long-term contracts, at December 31, 2001. We had
a monetary damage claim against EGLI and Enron as a result of the rejection of
the agreements under the Stipulation. Accordingly, we filed claims against EGLI
in the Enron Bankruptcy Court on May 12, 2002, resulting from EGLI's rejection
of the Toll Conversion and Storage Agreements, in the amount of $540.5 million.

In addition, Enron guaranteed EGLI's performance under the EGLI agreements;
however, its guarantee was limited to $50 million under the Toll Conversion
Agreement and $25 million under the Storage Agreement. Accordingly, we filed a
claim against Enron in the Enron Bankruptcy Court resulting from EGLI's
rejection of the agreements in the amount of $75 million. We filed additional
claims against numerous Enron affiliates on October 15, 2002 totaling $213.5
million. Under the terms of the Enron Settlement Agreement, we withdrew all
claims filed by us in the Enron Bankruptcy Court upon the effective date of our
Restructuring Plan.

Performance Collateral from Enron. As discussed above, Enron guaranteed
payments under the Toll Conversion and Storage Agreements. In addition, EGLI
owed us approximately $9 million under the Toll Conversion and Storage
Agreements prior to filing for bankruptcy. Pursuant to the Toll Conversion and

F-26

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Storage Agreements, if Enron's credit rating dropped below certain defined
levels specified in these agreements, we could request within five days of this
occurrence for EGLI to post letters of credit. The letters of credit could be
drawn upon if EGLI failed to pay any amount owed to us under these agreements.
The Toll Conversion Agreement provided that the letter of credit would be in an
amount reasonably requested by us, not to exceed $25 million. The Storage
Agreement provided that the letter of credit would be in an amount as reasonably
requested, but no amount is specified. In late November 2001, Enron's credit
rating fell below the ratings specified in these agreements. Accordingly, on
November 27, 2001, we requested that EGLI post two $25 million letters of
credit. In lieu of posting letters of credit, we received a $25 million
deposit/performance collateral from EGLI/Enron, against which we recouped the $9
million of outstanding invoices. We applied the remaining sum, approximately $16
million, to recoup or offset a portion of our damages as a result of EGLI's
rejection of the Toll Conversion and Storage Agreements. Our Restructuring Plan
resulted in a release by Enron of any claim to the $25 million
deposit/performance collateral.

Tax and Environmental Indemnities. We also had indemnities from Enron for
certain ad valorem taxes, possible environmental expenditures and title defects
relating to the Morgan's Point Facility and the Mont Belvieu Facility. The total
indemnity amount provided for under the Purchase Agreement was $25 million and
we had made no claims under the indemnities through December 31, 2002. Under the
terms of the Enron Settlement Agreement, we released Enron from these
indemnities.

Cost and Availability of Credit. As a result of Enron's bankruptcy, we
incurred higher costs in obtaining credit than we had in the past. In addition,
our trade creditors were less willing to extend credit to us on an unsecured
basis and the amount of letters of credit we were required to post for our
marketing activities increased significantly, contributing to the necessity of
our Chapter 11 filing. See further discussion in Note 8.

Pension Plan Underfunding Issues. The Enron Settlement Agreement provided
that we withdraw from the defined benefit pension plan known as the Enron Corp.
Cash Balance Plan (the "Cash Balance Plan") on December 31, 2002.

We understand, based on information provided by Enron, that the assets of
the Cash Balance Plan are currently less than the present value of all accrued
benefits on both a SFAS No. 87 (Employers' Accounting for Pensions) basis and a
plan termination basis, with approximately 48 percent of that underfunded amount
attributable to members of the Enron "controlled group" that are not in
bankruptcy. By statute, the Pension Benefits Guaranty Corporation (the "PBGC")
has the right to terminate pension plans due to their failure to meet minimum
funding standards and for other reasons set forth in 29 U.S.C. Section 1342. The
PBGC filed proofs of claim in our bankruptcy proceedings to address concerns
about the Cash Balance Plan, and also an objection to our Restructuring Plan
("PBGC/EOTT Claim").

To address the issues raised by the PBGC, as well as the objections we filed
to the PBGC's proofs of claim, a Stipulation and Order Regarding EOTT Chapter 11
Proceedings and Settlement Among the Enron Parties, us and the PBGC (the "PBGC
Stipulation") was executed and entered by the Enron Bankruptcy Court on February
27, 2003, plus the PBGC Stipulation was attached as an exhibit to the Order
confirming our Restructuring Plan.

The PBGC Stipulation set forth the following:

1. Enron will continue to hold, subject to the terms of the PBGC
Stipulation, the EOTT Note, the letter of credit securing the EOTT Note, any
payments thereunder, and the EOTT Cash Payment (collectively, the "EOTT
Settlement Proceeds") on behalf of the Enron Parties.

F-27

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Any claim of the PBGC against us for liabilities (if any) arising from
the Cash Balance Plan will attach to the EOTT Settlement Proceeds with the same
effect (if any) that such claim (if any) now has as against us and such claim
will be subject to the claims and defenses of the Enron Parties and the Enron
Creditors' Committee with respect thereto. The PBGC's rights regarding the EOTT
Settlement Proceeds will constitute the sole basis for the PBGC to seek to
enforce its claims (if any) against us for the PBGC/EOTT Claims.

3. The PBGC will: (a) withdraw, with prejudice only as to us, all proofs of
claim filed in our bankruptcy proceedings and we will withdraw, with prejudice,
our objection to any such proofs of claim; (b) release us from the underfunded
benefit liability and premium claims asserted in the proofs of claim related to
an event other than a "standard termination" of the Cash Balance Plan; and (c)
withdraw, with prejudice, all objections the PBGC has filed to the confirmation
of our Restructuring Plan. The foregoing will not affect the validity of the
PBGC's interest, if any, in the EOTT Settlement Proceeds.

4. Except as explicitly provided for in the PBGC Stipulation, the PBGC
Stipulation does not constitute a waiver or admission by the Enron Parties, us
or the PBGC with respect to the PBGC's allegations, the PBGC/EOTT Claim, or the
nature of the Enron Parties' or PBGC's entitlement to the EOTT Settlement
Proceeds.

TRANSACTIONS WITH ENRON AND AFFILIATES

Revenue and Cost of Sales. A summary of transactions with Enron and its
affiliates follows (in thousands):

In 2002, there were no crude sales or purchase transactions with Enron or
its affiliates. Sales to affiliates in 2001 and 2000 consist primarily of sales
of crude oil to Enron Reserve Acquisition Corp. and conversion, storage and
transportation fees from EGLI. Purchases from affiliates consist primarily of
crude oil and condensate purchases from Enron Reserve Acquisition Corp. and
Enron North America Corp. These transactions in our opinion were no more or less
favorable than can be obtained from unaffiliated third parties.

At December 31, 2002, we have current payables to Enron of $3.6 million,
which is primarily comprised of certain amounts owed to Enron under the Enron
Settlement Agreement. In addition, we have $5.2 million of long-term liabilities
owed to Enron, which is the long-term portion of the note issued in connection
with the Enron Settlement Agreement.

Due to the Enron bankruptcy, collectibility of certain receivables from
Enron and its affiliates totaling $0.6 million at December 31, 2001 was
uncertain and therefore such receivables were written off against the allowance
for bad debts for related party transactions. Related party receivables at
December 31, 2001 were $0.5 million. Related party payables at December 31, 2001
were $2.1 million and primarily represent amounts owed by EOTT on the purchase
of feedstocks from EGLI.

Operations and General and Administrative Services. As is commonly the case
with publicly traded partnerships, we did not directly employ any persons
responsible for managing or operating EOTT or for providing services relating to
day-to-day business affairs prior to January 1, 2003. The General Partner

F-28

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

provided such services or obtained such services from third parties and we were
responsible for reimbursing the General Partner for substantially all of its
direct and indirect costs and expenses. The General Partner, through the MLP
Partnership Agreement, provided services to us under a Corporate Services
Agreement which included liability and casualty insurance and certain data
processing services and employee benefits. Those costs were $1.9 million, $2.5
million, and $3.6 million for the years ended December 31, 2002, 2001 and 2000,
respectively.

The General Partner had an Operation and Services Agreement with EPSC, to
provide certain operating and administrative services to the General Partner,
effective October 1, 2000. The agreement provided that the General Partner would
reimburse EPSC for its costs and expenses in rendering the services. The General
Partner would in turn be reimbursed by us. EOTT LLC took over these services
effective January 1, 2003. The costs incurred related to these services for the
years ended December 31, 2002 and 2001 and for the three months ended December
31, 2000 were $24.6 million, $56.7 million and $6.3 million, respectively.

In connection with the acquisition of Liquids assets in June 2001, the
General Partner entered into a Transition Services Agreement with EGP Fuels to
provide transition services through December 31, 2001 for the processing of
invoices and payments to third parties related to the Morgan's Point Facility
and Mont Belvieu Facility. The agreement provided that the General Partner will
reimburse EGP Fuels for these direct costs and we will reimburse the General
Partner. Costs related to these services were $12.3 million for the six months
ended December 31, 2001.

The agreements described above were terminated and the amounts due under
these agreements were forgiven effective December 31, 2002 under the terms of
the Enron Settlement Agreement. See further discussion in Note 9.

Credit Facility. We had a credit facility with Enron to provide credit
support in the form of guarantees, letters of credit and working capital loans
through December 31, 2001. See further discussion in Note 8.

Purchase and Sale Agreement. We acquired certain liquids processing, storage
and transportation assets in June 2001 from Enron. See further discussion in
Note 5.

Additional Partnership Interests. On May 14, 1999 and February 14, 2000,
Enron paid $2.5 million and $6.8 million, respectively, in support of our first
and fourth quarter 1999 distributions to our common unitholders and received
APIs. APIs have no voting rights and do not receive distributions. In connection
with the Restructuring Plan, the API's were cancelled.

11. EMPLOYEE BENEFIT AND RETIREMENT PLANS

Through December 31, 2002, employees of the General Partner were covered by
various retirement, stock purchase and other benefit plans of Enron. In April
1993, the General Partner adopted welfare benefit plans providing medical,
dental, life, accidental death and dismemberment and long-term disability
coverage to employees, with all related premiums and costs being incurred by the
General Partner. Total benefit costs for 2002 were $8.9 million, including $6.3
million in costs attributable to health and welfare benefit plans. Total benefit
costs for 2001 were $6.7 million, including $4.6 million in costs attributable
to health and welfare benefit plans. Total benefit costs for 2000 were $9.4
million, including $5.8 million in costs attributable to health and welfare
benefit plans.

The General Partner maintained a variable pay plan based on EOTT's earnings
before interest and depreciation and amortization pursuant to which $3.6 million
and $3.8 million was recorded in 2001 and 2000,

F-29

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

respectively. In 2002, the General Partner accrued $2.1 million in connection
with guaranteed bonuses and retention payments.

As discussed in Note 10, the General Partner was a participating employer in
the Cash Balance Plan until the consummation of the Enron Settlement Agreement
on December 31, 2002. Reference is made to Note 10 for further discussion
regarding issues raised by the PBGC concerning this plan and an agreed
stipulation executed between the PBGC, the Enron Parties and us.

The General Partner provided certain postretirement medical, life insurance
and dental benefits to eligible employees who retired after January 1, 1994.
Benefits were provided under the provisions of contributory defined dollar
benefit plans for eligible employees and their dependents. EOTT terminated its
participation in this plan effective December 31, 2002. These postretirement
benefit costs were accrued over the service lives of employees expected to be
eligible to receive such benefits. Enron retained liability for former employees
of the General Partner who retired prior to January 1, 1994. In connection with
the termination, curtailment and settlement gains of $1.5 million were recorded
in 2002. The accumulated postretirement benefit obligation ("APBO") existing at
December 31, 2002 and 2001 totaled $0 million and $1.1 million, respectively.
The measurement of the APBO assumes a 6.5% and 7.0% discount rate in 2002 and
2001.

The following table sets forth information related to changes in the benefit
obligations, changes in plan assets, a reconciliation of the funded status of
the plans and components of the expense recognized related to postretirement
benefits provided by the General Partner (in thousands):

F-30

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The General Partner provides unemployment, severance and disability-related
benefits or continuation of benefits such as health care and life insurance and
other postemployment benefits. SFAS No. 112 requires the cost of those benefits
to be accrued over the service lives of the employees expected to receive such
benefits. At December 31, 2002 and 2001, the liability accrued was $1.2 million
and $0.9 million, respectively.

EOTT Energy Corp. Unit Option Plan. In February 1994, the Board of Directors
of the General Partner adopted the 1994 EOTT Energy Corp. Unit Option Plan (the
"Unit Option Plan"), which is a variable compensatory plan. To date, no
compensation expense has been recognized under the Unit Option Plan. Under the
Unit Option Plan, selected employees of the General Partner were granted options
to purchase subordinated units at a price of $15.00 per unit as determined by
the Compensation Committee of the Board of Directors of the General Partner.
Options granted under the Unit Option Plan vested to the employees over a
five-year service period and will expire on the tenth anniversary of the date of
grant. Under the Restructuring Plan, the Unit Option Plan will be terminated.

The following table sets forth the Unit Option Plan activity for the years
ended December 31, 2002, 2001 and 2000:

EOTT Energy Corp. Long-Term Incentive Plan. In October 1997, the Board of
Directors adopted the EOTT Energy Corp. Long Term Incentive Plan ("Plan"), which
is a variable compensatory plan. Under the Plan, selected key employees are
awarded Phantom Appreciation Rights ("PAR"). Each PAR is a right to receive cash
based on our performance prior to the time the PAR is redeemed. Our performance
is measured primarily by calculating the change in the average of Earnings
Before Interest on Debt related to acquisitions, Depreciation and Amortization
("EBIDA"), for each of the three consecutive fiscal years immediately preceding
the grant date of the PAR and the exercise date of the PAR. The Plan has a
five-year term beginning January 1, 1997, and PAR awards vest in 25% increments
in the four-year period following the grant year. Under the Restructuring Plan,
the Long Term Incentive Plan will be terminated.

F-31

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth the Long-Term Incentive Plan activity for the
years ended December 31, 2002, 2001, and 2000:

Note: PARs are not available for grant after December 31, 2001 as the term
of the plan expired December 31, 2001.

12. COMMITMENTS AND CONTINGENCIES

Operating Leases. We lease certain real property, equipment, and operating
facilities under various operating leases. Future non-cancelable commitments
related to these items at December 31, 2002, are as follows (in thousands):
years ending December 31, 2003 - $6,017; 2004 - $4,659; 2005 - $3,646; 2006 -
$2,732; 2007 - $488; thereafter - $559.

Total lease expense incurred was $8.9 million, $9.4 million and $9.1 million
for the years ended December 31, 2002, 2001 and 2000, respectively.

Litigation. We are, in the ordinary course of business, a defendant in
various lawsuits, some of which are covered in whole or in part by insurance. We
believe that the ultimate resolution of litigation, individually and in the
aggregate, will not have a materially adverse impact on our financial position
or results of operations. Generally, as a result of our bankruptcy, all pending
litigation against us was stayed while we continued our business operations as
debtors in possession. For matters where the parties negotiated a settlement
during our bankruptcy proceedings, the settlement amount was recorded at
December 31, 2002 as an allowed general unsecured claim in "Other income
(expense)" in the Consolidated Statement of Operations. Subsequent to year end
and in connection with our Restructuring Plan, general unsecured creditors with
allowed claims will receive a pro rata share of $104 million of 9% senior
unsecured notes and a pro rata share of 11,947,820 EOTT LLC units. Prior to the
commencement of our bankruptcy proceeding, various legal actions arose in the
ordinary course of business, the most significant of which are discussed below.

State of Texas Royalty Suit. We were served on November 9, 1995, with a
petition styled The State of Texas, et al. vs. Amerada Hess Corporation, et al.
The matter was filed in District Court in Lee County, Texas and involves several
major and independent oil companies and marketers as defendants. The plaintiffs
are attempting to put together a class action lawsuit alleging that the
defendants acted in concert to buy oil owned by members of the plaintiff class
in Lee County, Texas, and elsewhere in Texas, at "posted" prices, which the
plaintiffs allege were lower than true market prices. There is not sufficient
information in the petition to fully quantify the allegations set forth in the
petition, but we believe that any such claims against us will prove to be
without merit. There has been no activity on this matter in several years. This
case will no longer be reported.

The State of Texas, et al. vs. Amerada Hess Corporation, et al., Cause No.
97-12040; In the 53rd Judicial District Court of Travis County, Texas (Common
Purchaser Act Suit). This case was filed on October 3, 1997, in Austin by the
Texas Attorney General's office and involves several major and independent

F-32

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

oil companies and marketers as defendants. We were served on November 18, 1997.
The petition states that the State of Texas brought this action in its sovereign
capacity to collect statutory penalties recoverable under the Texas Common
Purchaser Act, arising from defendants' alleged willful breach of statutory
duties owed to royalty, overriding royalty and working interest owners of crude
oil sold to defendants, as well as alleged breach of defendants' common law and
contractual duties. The plaintiffs also allege that the defendants have engaged
in discriminatory pricing of crude oil. This case appears to be similar to the
State of Texas Royalty Suit filed by the State of Texas on November 9, 1995. We
recorded a $0.4 million litigation reserve related to this suit in 1998. We and
several of the defendants reached a settlement with the State in the Common
Purchaser Act Suit in a Settlement Agreement dated August 5, 1999. The
settlement was funded to an escrow account in July 1999. Settlement amounts for
each defendant were confidential. This settlement disposed of any claims the
State may have in the State of Texas Royalty Suit, discussed above, but did not
dismiss that case, or fully dismiss the Common Purchaser Act Suit. Also, any
severance tax claims the State may have were specifically excluded from this
settlement. However, no severance tax claims were asserted in the petition filed
by the plaintiffs. There has been no activity on this matter in several years.
This case will no longer be reported.

Assessment for Crude Oil Production Tax from the Comptroller of Public
Accounts, State of Texas. We received a letter from the Comptroller's Office
dated October 9, 1998, assessing us for severance taxes the Comptroller's Office
alleges are due based on a difference the Comptroller's Office believes exists
between the market value of crude oil and the value reported on our crude oil
tax report for the period of September 1, 1994 through December 31, 1997. The
letter states that the action, based on a desk audit of our crude oil production
reports, is partly to preserve the statute of limitations where crude oil
severance tax may not have been paid on the true market price of the crude oil.
The letter further states that the Comptroller's position is similar to claims
made in several lawsuits, including the State of Texas Royalty Suit, in which
the Partnership is a defendant. The amount of the assessment, including penalty
and interest, is approximately $1.1 million. We believe we should be without
liability in this or related matters. There has been no action on this matter
since early 1999.

Export License with United States Department of Commerce. We have applied
for and maintained Export Licenses through the U.S. Department of Commerce
("DOC") since 1994. These licenses authorized us to export crude oil to Canada.
Each license provided an applicable license quantity and value of merchandise as
authorized by the DOC to be exported. The licenses generally covered either a
one or a two year period. In early 1999, as we were preparing a new license
application, we discovered that we had exported more barrels and value than had
been authorized by the DOC under our current (and prior) license. Pursuant to
Section 764.5 of the Export Administration Regulations, we filed a Voluntary
Disclosure with the DOC on February 5, 1999, giving the DOC notice of these
license overruns. We negotiated a monetary settlement with the DOC of $508,000
and have accrued the settlement amount. The settlement was signed on July 15,
2002, and requires the monetary settlement to be paid in five installments. The
first installment was paid on August 1, 2002, and the final installment is due
on October 15, 2003. In addition, the settlement agreement with the DOC was
reaffirmed by the EOTT Bankruptcy Court.

John H. Roam, et al. vs. Texas-New Mexico Pipe Line Company and EOTT Energy
Pipeline Limited Partnership, Cause No. CV43296, In the District Court of
Midland County, Texas, 238th Judicial District (Kniffen Estates Suit). The
Kniffen Estates Suit was filed on March 2, 2001, by certain residents of the
Kniffen Estates, a residential subdivision located outside of Midland, Texas.
The allegations in the petition state that free crude oil products were
discovered in water wells in the Kniffen Estates area, on or about October 3,
2000. The plaintiffs claim that the crude oil products are from a 1992 release
from a pipeline then owned by the Texas-New Mexico Pipe Line Company ("Tex-New
Mex"). We purchased that pipeline from Tex-New Mex in 1999. The plaintiffs have
alleged that Tex-New Mex was negligent, grossly negligent, and malicious in
failing to accurately report and remediate the spill. With respect to us, the
plaintiffs are seeking

F-33

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

damages arising from any contamination of the soil or groundwater since we
acquired the pipeline in question. No specific amount of money damages was
claimed in the Kniffen Estate Suit, but the plaintiffs did file proofs of claim
in our bankruptcy proceeding totaling $62 million. In response to the Kniffen
Estates Suit, we filed a cross-claim against Tex-New Mex. In the cross-claim, we
claim that, in relation to the matters alleged by the plaintiffs, Tex-New Mex
breached the Purchase and Sale Agreement between the parties dated May 1, 1999,
by failing to disclose the 1992 release and by failing to undertake the defense
and handling of the toxic tort claims, fair market value claims, and remediation
claims arising from the release. Additionally, we are asserting claims of gross
negligence, fraud, and specific performance and are seeking monetary and
equitable relief sufficient to (i) reimburse us for expenses incurred by us to
date for remediation associated with this pipeline, (ii) enable us to examine
the condition of selected portions of the pipeline to determine if additional
repair work or remediation may be necessary, and (iii) reimburse us for any
future repair work or remediation necessary because of the maintenance of the
pipeline before we acquired it. On April 5, 2002, we filed an amended
cross-claim which alleges that Tex-New Mex defrauded us as part of Tex-New Mex's
sale of the pipeline systems to us in 1999. The amended cross-claim also alleges
that various practices employed by Tex-New Mex in the operation of its pipelines
constitute gross negligence and willful misconduct and void our obligation to
indemnify Tex-New Mex for remediation of releases that occurred prior to May 1,
1999. In the Purchase and Sale Agreement, we agreed to indemnify Tex-New Mex
only for certain remediation obligations that arose before May 1, 1999, unless
these obligations were the result of the gross negligence or willful misconduct
of Tex-New Mex prior to May 1, 1999. EOTT Energy Pipeline Limited Partnership
("PLP") and the plaintiffs agreed to a settlement during our bankruptcy
proceedings. The settlement provides for the plaintiffs' release of their claims
filed against PLP in this proceeding and in the bankruptcy proceedings, in
exchange for an allowed general unsecured claim in our bankruptcy of $3,252,800
(as discussed above, the plaintiffs filed proofs of claim in our bankruptcy
proceedings totaling $62 million). The general unsecured claim has been accrued
at December 31, 2002. The plaintiffs and PLP continue to pursue their claims
against Tex-New Mex. On April 1, 2003, we filed a second amended cross claim in
this matter. In addition to the claims filed in the previous cross claims, EOTT
requested (i) injunctive relief for Tex-New Mex's refusal to honor its indemnity
obligations; (ii) injunctive relief requiring Tex-New Mex to identify,
investigate and remediate sites where the conduct alleged in our cross-claim
occurred; and (iii) restitution damages of over $125,000,000. Tex-New Mex also
filed a motion to compel arbitration of these issues, to which we objected. A
hearing on the motion to compel arbitration was held on April 11, 2003. The
arbitration motion filed by Tex-New Mex was denied. Tex-New Mex has indicated
that they may appeal that ruling. At the April 11, 2003 hearing, the court
severed into a separate action EOTT's cross-claims against Tex-New Mex that
extend beyond the crude oil release and ground water contamination in the
Kniffen Estates subdivision ("EOTT's Over-Arching Claim"). Our motion for
summary judgement on certain issues is set for hearing on May 5, 2003. Discovery
is ongoing in this matter. A trial date of June 9, 2003 is set for the
plaintiff's claims against Tex-New Mex and EOTT's original cross claim against
Tex-New Mex arising from their crude oil release and ground water contamination
in the Kniffen Estates subdivision (the "Original Claims"). The court has
indicated that it will schedule a trial of EOTT's Over-Arching Claim after the
Original Claims are tried.

Bankruptcy Issues related to Claims Made by Texas New Mexico Pipeline
Company and its affiliates. Tex-New Mex, Shell Oil Company and Equilon filed
proofs of claim in our bankruptcy, each filing the same claim in the amount of
$112 million. Equilon Pipeline Company LLC guaranteed, under certain
circumstances, the obligations of Tex-New Mex under the Purchase and Sale
Agreement dated May 1, 1999. According to Shell Oil Company's 2002 Annual
Report, in 2002, Shell became the sole owner of Equilon, which was merged into
Shell Oil Products US. The three claims filed each included the same supporting
information, consisting of indemnity claims under the Purchase and Sale
Agreement. In essence, there is only one claim of $112 million filed by three
entities and we have objected in the bankruptcy court to having the same claim
filed three times. The amount of the $112 million claim is equivalent to the sum
of the total amount of the proofs of claim filed in our bankruptcy proceedings
by owners of property on which the Tex-New Mex system is located and the
attorneys fees incurred by Tex-New Mex in defending the Kniffen Estates Suit and
other lawsuits (including our bankruptcy proceedings) with respect to the
Tex-New Mex system. The majority of the owners are plaintiffs in the Kniffen
Estates Suit and a group of New Mexico environmental claimants, with whom we
settled during our bankruptcy proceeding and accrued the allowed general
unsecured claim at December 31, 2002. A hearing on our objection to these claims
was scheduled for March 18, 2003, but the parties stipulated and agreed to delay
the hearing to allow the Kniffen Estates Suit to proceed. A final determination
of the extent of the allowance of this claim, if any, will be made after and
considering the outcome of this lawsuit.

Jerry W. Holmes and Barbara I. Holmes v. EOTT Energy Pipeline Limited
Partnership and Texas-New Mexico Pipe Line Company, Cause No. CV43800, In the
District Court of Midland County, Texas, 385th Judicial District. This lawsuit
was filed on June 21, 2002. The plaintiffs in this suit are the owners of a home

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EOTT ENERGY PARTNERS, L.P.
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PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

in the Kniffen Estates who allege that their water well was contaminated by
crude oil. The plaintiffs claim that the alleged crude oil contamination of
their water well resulted from the 1992 crude oil release that is the subject of
the Kniffen Estates Suit. The plaintiffs claim $1,000,000 in damages. EOTT filed
a motion to consolidate this lawsuit with the Kniffen Estates Suit, which motion
was granted on October 16, 2002. EOTT and the plaintiffs agreed to a settlement
during our bankruptcy proceedings. The settlement provided for the plaintiffs'
release of their claims against EOTT in exchange for an allowed general
unsecured claim in our bankruptcy in the amount of $300,000. The general
unsecured claim amount has been accrued at December 31, 2002. The plaintiffs and
EOTT continue to pursue their claims against Tex-New Mex in this matter.

Bernard Lankford and Bette Lankford vs. Texas-New Mexico Pipe Line Company
and EOTT Energy Pipeline Limited Partnership Cause No. CC11176, In the County
Court at Law of Midland County, Texas. This lawsuit was filed on January 15,
2002. The plaintiffs in this lawsuit own property that is located to the north
of the Kniffen Estates subdivision. The plaintiff's allegations are virtually
identical to the allegations of the plaintiffs in the Kniffen Estates Suit. The
plaintiffs have asserted strict liability, nuisance, negligence, gross
negligence, trespass, and intentional infliction of emotional distress causes of
action. The plaintiffs are seeking unspecified actual damages and punitive
damages. The plaintiffs in this case joined in the settlement of the Kniffen
Estates Suit described above. That settlement provides for the plaintiff's
release of their claims against PLP and the allocation to the plaintiffs of a
portion of the general unsecured claim in our bankruptcy proceeding in the
amount of $3,252,800 that is discussed in the description of the Kniffen Estate
Suit.

Jimmie B. Cooper and Shryl S. Cooper v. Texas-New Mexico Pipeline Company,
Inc., EOTT Energy Pipeline Limited Partnership and Amerada Hess Corporation,
Case No. CIV 01-1321 M/JHG, In the United States District Court for the District
of New Mexico. Plaintiffs in this lawsuit, filed on October 5, 2001, are surface
interest owners of certain property located in Lea County, New Mexico. The
plaintiffs allege that aquifers underlying their property and water wells
located on their property have been contaminated as a result of spills and leaks
from a pipeline running across their property that is or was owned by Tex-New
Mex and us. The plaintiffs also allege that oil and gas operations conducted by
Amerada Hess Corporation resulted in leaks or spills of pollutants that
ultimately contaminated the plaintiffs' aquifers and water wells. Our initial
investigation of this matter indicated that the alleged contamination of the
aquifers underlying the plaintiffs' property was not caused by leaks from the
pipeline now owned by us that traverses the plaintiffs' property. EOTT and the
plaintiffs have agreed to the terms of a settlement, whereby the plaintiffs will
release their claims against EOTT and receive an allowed general unsecured claim
in our bankruptcy in the amount of $300,000. The general unsecured claim has
been accrued at December 31, 2002. EOTT and the plaintiffs continue to pursue
their claims against Tex-New Mex.

Jimmie T. Cooper and Betty P. Cooper vs. Texas-New Mexico Pipeline Company,
Inc., EOTT Energy Pipeline Limited Partnership, and EOTT Energy Corp., Case No.
D-0101-CV-2002-02122, In the 1st Judicial District Court, Santa Fe County, New
Mexico. This lawsuit was filed on October 1, 2002. The plaintiffs in this
lawsuit are surface interest owners of certain property located in Lea County,
New Mexico. The plaintiffs are alleging that aquifers underlying their property
and water wells located on their property have been contaminated as a result of
spills and leaks from a pipeline running across their property that is or was
owned by Tex-New Mex and PLP. The plaintiffs do not specify when the alleged
spills and leaks occurred. The plaintiffs are seeking payment of costs that
would be incurred in investigating and remediating the alleged crude oil
releases and replacing water supplies from aquifers that have allegedly been
contaminated. The plaintiffs are also seeking damages in an unspecified amount
arising from the plaintiffs' alleged fear of exposure to carcinogens and the
alleged interference with the plaintiffs' quiet enjoyment of their property. The
plaintiffs are also seeking an unspecified amount of punitive damages. PLP and
the plaintiffs agreed to the terms of a settlement, whereby the plaintiffs will
release their claims against PLP and will receive an allowed general unsecured
claim in our bankruptcy in the amount of $1,027,000. The general unsecured claim
has

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EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

been accrued at December 31, 2002. PLP and the plaintiffs continue to pursue
their claims against Tex-New Mex in this matter.

Richard D. Warden and Nancy J. Warden v. EOTT Energy Pipeline Limited
Partnership and EOTT Energy Corp., Case No. CIV-02-370 L, In the United States
District Court for the Western District of Oklahoma. In this lawsuit, filed on
February 28, 2002, the plaintiffs are landowners, seeking damages allegedly
arising from a release of crude oil from a pipeline owned by us. Although we
undertook extensive remediation efforts with respect to the crude oil release
that is the subject of this lawsuit, plaintiffs allege that we did not properly
remediate the crude oil release and claim causes of action for negligence, gross
negligence, unjust enrichment, and nuisance. The plaintiffs filed a proof of
claim in our bankruptcy proceedings claiming damages of $500,000. This matter is
being evaluated in the claims reconciliation process in our bankruptcy. We do
not believe that we are liable for the damages asserted by the Plaintiffs and
therefore we have not recorded a contingent liability.

David A. Huettner, et al v. EOTT Energy Partners, L.P., et al, Case No. 1:02
CV-917, In the United States District Court, Northern District of Ohio, Eastern
Division ("Securities Suit"). This lawsuit was filed on May 15, 2002, for
alleged violations of the Securities and Exchange Act of 1934 and common law
fraud. The suit was brought by three of our former unitholders who claim that
the General Partner, certain of the officers and directors of Enron and the
General Partner and our previous independent accountants were aware of material
misstatements or omissions of information within various press releases, SEC
filings and other public statements, and failed to correct the alleged material
misstatements or omissions. Plaintiffs maintain that they were misled by our
press releases, SEC filings, and other public statements when purchasing our
common units and were financially damaged thereby. On June 28, 2002, the
Judicial Panel on Multidistrict Litigation issued a Conditional Transfer Order
that provides for the transfer of this case to the Southern District of Texas
for consolidated pretrial proceedings with other lawsuits asserting securities
claims against Enron and Arthur Andersen. On September 20, 2002, EOTT Energy
Partners, L.P. filed a motion to dismiss on the basis of the plaintiff's failure
to state a claim upon which relief can be granted. EOTT Energy Corp. joined in
that motion on October 11, 2002. The plaintiffs filed a motion to lift the stay,
which was denied by the bankruptcy court judge. Additionally, the plaintiffs
filed proofs of claim in the amount of $500,000 each. These claims are being
reviewed in our claims review process in our bankruptcy. Based on management's
current knowledge, we believe the allegations are without merit and therefore,
we have not recorded a contingent liability. We can provide no assurances
regarding the outcome of this lawsuit, but will continue to gather and analyze
new information as it becomes available.

Big Warrior Corporation v. Enron Transportation Services, Inc., EOTT Energy
Corp., REM Services, Inc., Enron Pipeline Services Company, et al., Case No.
2:02CV749PG, In the United States District Court for the Southern District of
Mississippi, Hattiesburg Division. This case was filed in the Circuit Court of
Jones County Mississippi on August 5, 2002. EOTT filed a Notice of Removal to
the United States District Court for the Southern District of Mississippi,
Hattiesburg Division, which was granted on September 11, 2002. In October 2001,
EPSC awarded a contract to Big Warrior Corporation ("Big Warrior") for the
construction of PLP's new ten-inch (10") crude oil pipeline that runs from
Lumberton, Mississippi to Eucutta, Mississippi. Big Warrior alleged that EOTT
Energy Corp. ratified and accepted the contract and other alleged agreements
associated therewith. In this lawsuit, Big Warrior was seeking payment (under
various theories) of unanticipated additional costs that allegedly resulted from
adjustments to the project work schedule and EPSC's alleged failure to timely
procure necessary rights of way and rights of ingress and egress. Big Warrior
asserted claims for breach of contract, quantum merit, fraud and
misrepresentation, tortious interference with contractual relations, civil
conspiracy, and negligence. Big Warrior was claiming actual and punitive damages
of up to $30 million. Big Warrior was also seeking the enforcement of mechanics'
and materialmens' liens it had filed against EOTT's pipeline. In connection with
our bankruptcy, this matter was settled in February of 2003 under the following
terms: (a) after execution of the settlement agreement, EOTT made a cash payment

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EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to Big Warrior in the amount of $1,764,700; (b) EOTT executed a note in the
original principal amount to Big Warrior of $2,700,000, secured by a second lien
position in the Lumberton-Eucutta Pipeline, with the note payable in quarterly
installments at an interest rate of six percent per annum with the first payment
to be made on June 1, 2003; (c) the note is to be amortized over seven years
with a balloon payment at the end of four years, with the final payment due
March 1, 2007; and (d) Big Warrior will dismiss us and EPSC from the lawsuit.
The Order in this matter was entered in the EOTT Bankruptcy Court on February 4,
2003. The settlement agreement was accrued as of December 31, 2002.

In re EOTT Energy Partners, L.P., Case No. 02-21730, EOTT Energy Finance
Corp., Case No. 02-21731, EOTT Energy General Partner, L.L.C., Case No.
02-21732, EOTT Energy Operating Limited Partnership, Case No. 02-21733, EOTT
Energy Canada Limited Partnership, Case No. 02-21734, EOTT Energy Liquids, L.P.,
Case No. 02-21736, EOTT Energy Corp., Case No. 02-21788, Debtors (Jointly
Administered under Case No. 02-21730), In the United State Bankruptcy Court for
the Southern District of Texas, Corpus Christi Division. On October 8, 2002, we
and all of our subsidiaries filed voluntary petitions for relief under Chapter
11 of the United States Bankruptcy Code in the United States Bankruptcy Court
for the Southern District of Texas (the "EOTT Bankruptcy Court") to facilitate
reorganization of our business and financial affairs for the benefit of us, our
creditors and other interested parties. Additionally, the General Partner filed
its voluntary petition for reorganization under Chapter 11 on October 21, 2002
in the EOTT Bankruptcy Court. The General Partner filed in order to join in our
voluntary, pre-negotiated restructuring plan filed on October 8, 2002. On
October 24, 2002, the EOTT Bankruptcy Court administratively consolidated, for
distribution purposes, the General Partner's bankruptcy filing with our
previously filed cases. Pursuant to the automatic stay provisions of the
Bankruptcy Code, all actions to collect pre-petition claims from us and to
interfere with our business as well as most other pending litigation against us,
were stayed. In addition, as debtor-in-possession, we had the right, subject to
the approval of the EOTT Bankruptcy Court, to assume or reject any pre-petition
executory contracts or unexpired leases. The EOTT Bankruptcy Court approved
payment of certain pre-petition liabilities, such as employee wages and
benefits, trust fund taxes in the ordinary course of business and certain
pre-petition claims of crude oil suppliers, critical vendors and foreign
vendors. In addition, the EOTT Bankruptcy Court allowed for the payment of the
certain bankruptcy professionals and retention of the professionals in the
ordinary course of business. Finally, the EOTT Bankruptcy Court extended the
time within which we must assume or reject any unexpired leases of
nonresidential property. We continued to operate our business and control our
assets as a debtor-in-possession, subject to the EOTT Bankruptcy Court's
supervision and orders until our Restructuring Plan was confirmed on February
18, 2003 and became effective on March 1, 2003. We, therefore, have emerged from
bankruptcy. The provisions of the Restructuring Plan are further described in
Note 1. Shell and Tex-New Mex filed a notice of appeal to our plan confirmation
on February 24, 2003. The Record on Appeal is being assembled. We intend to file
a motion to dismiss the appeal as being moot.

EPA Section 308 Request. Enron received a request for information from the
Environmental Protection Agency ("EPA") under Section 308 of the Clean Water
Act, requesting information regarding certain spills and releases from oil
pipelines owned or operated by Enron and its affiliated companies for the time
period July 1, 1998 to July 11, 2001. The only domestic crude oil pipelines
owned or operated by Enron at the time of the request were our pipelines. Our
pipelines were operated by either the General Partner, a wholly-owned subsidiary
of Enron, or EPSC, also an Enron subsidiary, for the time period in question. At
the time the EPA issued the Section 308 request to Enron, EPSC operated our
pipelines. The General Partner and EPSC retain operator liability for the time
period at issue. Enron responded to the EPA's Section 308 request in its
capacity as the operator of the pipelines actually owned by us. We retain all
liability for the pipelines for which an owner would be responsible. In addition
to the retention of ownership liability, we may also be required to indemnify
the General Partner and its Affiliates with regard to any environmental charges.
Under the terms of the Partnership Agreement, we are obligated to indemnify the
General Partner and its Affiliates (including Enron) for all losses associated
with activities undertaken on our behalf. This indemnification obligation is

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EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

limited to actions undertaken in good faith, and may only be satisfied from our
assets. Neither our bankruptcy nor Enron's bankruptcy affects our liability as
owner of the pipelines, nor does it affect our indemnification obligations under
the Partnership Agreement. While we cannot predict the outcome of the EPA's
Section 308 review, the EPA could seek to impose liability on us with respect to
the matters being reviewed. The outcome of the EPA 308 request is not yet known,
and we are unaware of any potential liability of us, Enron, or its affiliates.
However, we assume that we are fully responsible as owner for any environmental
claims or fines in relation to the pipelines (subject to insurance claims or
other third party claims to which we may be entitled). Our bankruptcy
proceedings did not relieve us from potential environmental liability.
Consequently, we do not believe either our bankruptcy or Enron's bankruptcy has
had material impact on our environmental liability.

Environmental. We are subject to extensive federal, state and local laws and
regulations covering the discharge of materials into the environment, or
otherwise relating to the protection of the environment, and which require
expenditures for remediation at various operating facilities and waste disposal
sites, as well as expenditures in connection with the construction of new
facilities. At the federal level, such laws include, among others, the Clean Air
Act ("CAA"), the Clean Water Act, the Oil Pollution Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, and the National Environmental Policy Act, as
each may be amended from time to time. Failure to comply with these laws and
regulations may result in the assessment of administrative, civil, and criminal
penalties or the imposition of injunctive relief.

The presence of MTBE in some water supplies in California and other states
due to gasoline leakage from underground and above-ground storage tanks,
automobile and tanker truck accidents, pipelines and certain other sources,
including operation of recreational watercraft on surface waters, has led to
public concern that MTBE has contaminated drinking water supplies, and thereby
resulted in a possible health risk. As a result, in 1999, the Governor of
California ordered the ban of the use of MTBE as a gasoline component by the end
of 2002. The Governor of California extended the deadline for the ban of the use
of MTBE in California to December 31, 2003, based on concerns about the
availability and cost of alternatives to MTBE.

As a part of the ongoing energy policy debate, both the U.S. House of
Representatives and the U.S. Senate introduced bills in 2002 which would have
had a significant impact on the MTBE market at the national level. The Senate
bill would have banned MTBE use a few years after enactment. Although these
bills were ultimately abandoned in late 2002, the concepts continue to be
considered as a part of comprehensive energy legislation. We cannot predict
whether similar legislation may be passed, but if a nationwide ban on the use of
MTBE was enacted, it would materially reduce demand for MTBE which could have a
material adverse effect on our financial results. If MTBE were to be restricted
or banned throughout the United States, we could modify the MTBE Plant to
produce other products. We believe that modifying our existing Morgan's Point
Facility to produce other gasoline blendstocks such as alkylates would require a
substantial capital investment and as a result of our restructuring, we may not
have the resources available to effect such a conversion. Further, we cannot
predict whether legislation will be passed, whether the federal government will
take steps to reverse California's ban on the use of MTBE as a gasoline
component, or if the federal government will provide monetary assistance for
conversion.

In 2001, expenses incurred for spill clean up and remediation costs related
to the assets purchased from Tex-New Mex increased significantly. Based on our
experience with these assets, we filed an amended cross-claim against Tex-New
Mex alleging contingent claims for potential remediation issues not yet known to
us. We allege that Tex-New Mex failed to report spills, underreported spills,
failed to properly respond to leaks in the pipeline and engaged in other
activities with regard to the pipeline that may result in future remediation
liabilities. We did not include any monetary amounts in our cross-claim. We
obtained $20 million in insurance coverage in connection with the acquisition
from Tex-New Mex believing that amount would be sufficient to

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EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

cover our remediation requirements along the pipeline for a ten-year period.
After three years into the term of the insurance policy, we have completely
exhausted the amount of insurance coverage.

In addition to costs associated with the assets acquired from Tex-New Mex,
the Partnership has also incurred spill clean up and remediation costs in
connection with other properties it owns in various locations throughout the
United States. The Partnership has also acquired insurance coverage to cover
clean up and remediation costs that may be incurred in connection with
properties not acquired from Tex-New Mex.

The following are summaries of environmental remediation expense, estimated
environmental liabilities, and amounts receivable under insurance policies for
the years ended December 31, 2002, 2001 and 2000 (in thousands):

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EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The environmental liability was classified in Other Current and Other
Long-term Liabilities and the insurance receivable was classified in Trade and
Other Receivables at December 31, 2002 and 2001.

We may experience future releases of crude oil into the environment or
discover releases that were previously unidentified. While an inspection program
is maintained on our pipelines to prevent and detect such releases, and
operational safeguards and contingency plans are in place for the operation of
our processing facilities, damages and liabilities incurred due to any future
environmental releases could affect our business. We believe that our operations
and facilities are in substantial compliance with applicable environmental laws
and regulations and that there are no outstanding potential liabilities or
claims relating to safety and environmental matters that we are currently aware
of the resolution of which, individually or in the aggregate, would have a
materially adverse effect on our financial position or results of operations.
However, we could be significantly adversely impacted by additional repair or
remediation costs related to the pipeline assets we acquired from Tex-New Mex if
the need for any additional repairs or remediation arises and we do not obtain
reimbursement for any such costs as a result of the pending litigation
concerning those assets. Our environmental expenditures include amounts spent on
permitting, compliance and response plans, monitoring and spill cleanup and
other remediation costs. In addition, we could be required to spend substantial
sums to ensure the integrity of our pipeline systems, and in some cases, we may
take pipelines out of service if we believe the costs of upgrades will exceed
the value of the pipelines.

No assurance can be given as to the amount or timing of future expenditures
for environmental remediation or compliance, and actual future expenditures may
be different from the amounts currently estimated. In the event of future
increases in costs, we may be unable to pass on those increases to our
customers.

13. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value. Fair value represents the amount at which a financial instrument
could be exchanged in a current transaction between willing parties. We have
determined the estimated fair value amounts using available market data and
valuation methodologies. Judgment is required in interpreting market data and
the use of different market assumptions or estimation methodologies may affect
the estimated fair value amounts.

As of December 31, 2002 and 2001, the carrying amounts of items comprising
current assets and current liabilities approximate fair value due to the
short-term maturities of these instruments. The carrying amounts of the variable
rate instruments in our credit facilities approximate fair value because the
interest rates fluctuate with prevailing market rates. The carrying amount of
our derivative instruments and energy trading activities approximate fair value
as these contracts are recorded on the balance sheet at their fair value under
SFAS 133 and EITF 98-10.

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EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The carrying amount and fair values of our financial instruments are as
follows (in millions):

It is not practicable to determine the fair value of our 11% senior
unsecured notes since we are not yet able to determine the fair value of the
consideration the senior unsecured noteholders will receive under the
Restructuring Plan. Under the terms of our Restructuring Plan, we cancelled our
11% senior notes and the former senior unsecured noteholders and holders of
allowed general unsecured claims will receive a pro rata share of $104 million
of 9% senior unsecured notes and a pro rata share of 11,947,820 EOTT LLC units.
However, the exact pro rata allocation of the senior notes cannot be determined
until the precise amount of each allowed claim is determined. This process is
underway as part of our Restructuring Plan. Excluding amounts included in
Liabilities Subject to Compromise, we believe that the carrying amounts of other
financial instruments are a reasonable estimate of their fair value, unless
otherwise noted.

Credit Risk. In the normal course of business, we extend credit to various
companies in the energy industry. Within this industry, certain elements of
credit risk exist and may, to varying degrees, exceed amounts recognized in the
accompanying consolidated financial statements, which may be affected by changes
in economic or other external conditions and may accordingly impact our overall
exposure to credit risk. Our exposure to credit loss in the event of
nonperformance is limited to the book value of the trade commitments included in
the accompanying Consolidated Balance Sheets. We manage our exposure to credit
risk through credit analysis, credit approvals, credit limits and monitoring
procedures. Further, we believe that our portfolio of receivables is well
diversified and that the allowance for doubtful accounts is adequate to absorb
any potential losses. We require collateral in the form of letters of credit for
certain of our receivables.

During 2002 and 2001, sales to Koch Supply & Trading L.P. accounted for
approximately 17% and 12% of our consolidated gross revenues. During 2000, no
single customer accounted for more than 10% of consolidated gross revenues.

Market Risk. Our trading and non-trading transactions give rise to market
risk, which represents the potential loss that can be caused by a change in the
market value of a particular commitment. We closely monitor and manage our
exposure to market risk to ensure compliance with our stated risk management
policies which are regularly assessed to ensure their appropriateness given our
objectives, strategies and current market conditions.

We enter into forward, futures and other contracts to hedge the impact of
market fluctuations on assets, lease crude oil purchases or other contractual
commitments. Changes in the market value of transactions designated as energy
trading activities or derivatives under SFAS 133 are recorded every period as
mark-to-market gains or losses.

14. NEW ACCOUNTING STANDARDS NOT YET ADOPTED

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This statement requires entities to record the fair value of a
liability for legal obligations associated with the

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EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

retirement obligations of tangible long-lived assets in the period in which it
is incurred. When the liability is initially recorded, a corresponding increase
in the carrying amount of the related long-lived asset would be recorded. Over
time, accretion of the liability is recognized each period, and the capitalized
cost is depreciated over the useful life of the related asset. Upon settlement
of the liability, an entity either settles the obligation for its recorded
amount or incurs a gain or loss on settlement. The standard is effective for
fiscal years beginning after June 15, 2002, with earlier application encouraged.
We believe the majority of our assets do not have an obligation to perform
removal activities when the asset is retired; however, we are still in the
process of reviewing all of our rights of way associated with our pipelines and
identifying any other legal obligations associated with our assets. As such, we
have not determined the effect of adopting this statement on our financial
position and results of operations; however, we will reflect the impact of
adoption in our 2003 first quarter Form 10-Q.

In October 2002, the EITF reached a consensus in EITF Issue 02-03, "Issues
Involved in Accounting for Derivative Contracts Held for Trading Purposes and
Contracts Involved in Energy Trading and Risk Management Activities." The EITF
reached a consensus to rescind Issue 98-10, and related interpretive guidance,
and preclude mark to market accounting for energy trading contracts that are not
derivative instruments pursuant to SFAS 133. The consensus requires that gains
and losses (realized and unrealized) on all derivative instruments held for
trading purposes be shown net in the income statement, whether or not the
instrument is settled physically. The consensus to rescind Issue 98-10
eliminated EOTT's basis for recognizing physical inventories at fair value. The
consensus to rescind Issue 98-10 is effective for all new contracts entered into
(and physical inventory purchased) after October 25, 2002. For energy trading
contracts and physical inventories that existed on or before October 25, 2002,
that remain at December 31, 2002, the consensus is effective January 1, 2003 and
will be reported as a cumulative effect of a change in accounting principle. The
cumulative effect of the accounting change on January 1, 2003 will be a loss of
approximately $2.0 million. With the rescission of Issue 98-10, inventories
purchased after October 25, 2002, have been valued at average cost.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". This statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies EITF Issue No. 94-3. This statement requires that a liability for
costs associated with exit or disposal activities be recognized when the
liability is incurred whereas under EITF Issue 94-3, a liability for an exit
cost was recognized at the date of an entity's commitment to an exit plan. This
statement also establishes that fair value will be used to initially determine
the liability. The provisions of this statement are effective for exit or
disposal activities that are initiated after December 31, 2002. We have not
initiated any exit or disposal activities that are subject to this statement.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." This Statement 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, this Statement amends the
disclosure requirements of Statement 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 148 is effective for financial statements for fiscal years ending
after December 15, 2002. Our General Partner had a Unit Option Plan (see Note
11) which will be terminated as part of the Restructuring Plan. There is no
effect from SFAS No. 148 because the General Partner did not voluntarily elect
the transition to the fair value based method of accounting.

In November 2002, the FASB issued Financial Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" ("FIN No. 45"). This
interpretation of FASB Statements No. 5, 57 and 107, and rescission of FIN No.
34 elaborates on

F-42

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. This interpretation incorporates, without change, the
guidance in FIN No. 34, "Disclosure of Indirect Guarantees of Indebtedness of
Others," which is being superceded. The initial recognition and initial
measurement provisions of FIN No. 45 are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002. The disclosure
requirements in this interpretation are effective for financial statements of
interim or annual periods after December 15, 2002. We have disclosed in Note 5,
indemnifications that we have provided in connection with certain purchase and
sale agreements.

In January 2003, the FASB issued Financial Interpretation No. 46,
"Consolidation of Variable Interest Entities - an interpretation of ARB No. 51"
("FIN 46"). FIN 46 is an interpretation of Accounting Research Bulletin 51,
"Consolidated Financial Statements", and addresses consolidation by business
enterprises of variable interest entities ("VIE's"). FIN 46 requires an
enterprise to consolidate a VIE if that enterprise has a variable interest that
will absorb a majority of the entity's expected losses if they occur, receive a
majority of the entity's expected residual returns if they occur, or both. This
guidance applies immediately to VIE's created after January 31, 2003, and to
VIE's in which an enterprise obtains an interest after that date. It applies in
the first fiscal year or interim period beginning after June 15, 2003, to VIE's
in which an enterprise holds a variable interest that it acquired before
February 1, 2003. We do not expect this statement to have any impact on our
financial statements since we do not own an interest in any VIE's.

15. BUSINESS SEGMENT INFORMATION

We have four reportable segments, which management reviews in order to make
decisions about resources to be allocated and assess its performance: North
American Crude Oil - East of Rockies, Pipeline Operations, Liquids Operations
and West Coast Operations. The North American Crude Oil - East of Rockies
segment is organized into five operating regions and primarily purchases,
gathers, transports and markets crude oil. For segment reporting purposes, these
five operating regions have been aggregated as one reportable segment due to
similarities in their operations as allowed by SFAS No. 131. The Pipeline
Operations segment operates approximately 7,200 miles of active common carrier
pipelines in 12 states. The Liquids Operations includes the Morgan's Point
Facility and the Mont Belvieu Facility. The West Coast Operations includes crude
oil gathering and marketing, refined products marketing and a natural gas
liquids business. Effective June 1, 2002, we sold our West Coast refined
products marketing operations. Effective June 30, 2001, we sold our crude oil
gathering and marketing operations on the West Coast.

The accounting policies of the segments are the same as those described in
the summary of significant accounting policies as discussed in Note 2. We
evaluate performance based on operating income (loss).

We account for intersegment revenue and transfers between North American
Crude Oil - East of Rockies and West Coast Operations as if the sales or
transfers were to third parties, that is, at current market prices. Intersegment
revenues for Pipeline Operations are based on published pipeline tariffs.

F-43

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

F-44

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(a) 2002 includes a $53.2 million impairment charge related to assets in
our Liquids Operations, a $22.9 million impairment charge related to
assets in our West Coast Operations and a net gain from reorganization
items of $32.8 million. See Notes 1 and 7.

(b) Corporate and Other also includes intersegment eliminations.

(c) Intersegment sales for North American Crude Oil - EOR and West Coast
Operations are made at prices comparable to those received from
external customers. Intersegment sales for Pipeline Operations are
based on published pipeline tariffs.

(d) In connection with the adoption of EITF Issue 02-03, we have presented
all purchase and sale transactions related to our crude oil and refined
product marketing and trading activities on a net basis and have
reclassified previously reported amounts.

(e) 2001 includes the $29.1 million impairment of the EGLI contracts. See
Note 7.

(f) 2000 includes nonrecurring income of $1.3 million related to
mid-continent NGL activities recorded in West Coast Operations and
nonrecurring severance charges of $0.7 million recorded in Corporate
and Other.

F-45

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. QUARTERLY FINANCIAL DATA (UNAUDITED)
(In Thousands, Except Per Unit Amounts)

(1) Fourth quarter 2002 amounts include asset impairment charges of $76.1
million and a net gain on reorganization items of $32.8 million. Fourth
quarter 2001 amounts include a $29.1 million impairment of our total
remaining investment in the 10 year Toll Conversion and Storage
Agreements. See further discussion in Note 1 and Note 7.

(2) Cash distributions are shown in the quarter paid and are based on the
prior quarter's earnings.

(3) In connection with the adoption of EITF Issue 02-03, we have presented
all purchase and sale transactions related to our crude oil and refined
product marketing and trading activities on a net basis and have
reclassified previously reported amounts for the first, second and
third quarters of 2002 and 2001. The previously reported amounts were
$103.0 million and $96.6 million for the three months ended September
30, 2002 and 2001, respectively, $1.4 billion and $2.3 billion for the
three months ended June 30, 2002 and 2001, respectively, and $1.2
billion and $2.5 billion for the three months ended March 31, 2002 and
2001, respectively.

(4) See Note 6 for discussion regarding the allocation of net income (loss)
to unitholders.

F-46

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17. FRESH START REPORTING - UNAUDITED PRO FORMA BALANCE SHEET

EOTT's emergence from Chapter 11 bankruptcy proceedings on March 1, 2003
will result in a new reporting entity and adoption of fresh start reporting as
of that date, in accordance with SOP 90-7. The financial statements as of
December 31, 2002 do not give effect to any adjustments in the carrying value of
assets or the amounts or classification of liabilities that will be recorded
upon implementation of the Reorganization Plan.

The following unaudited pro forma balance sheet reflects the implementation
of the Reorganization Plan as if the Reorganization Plan was effective on
December 31, 2002. Adjustments have been estimated in the pro forma balance
sheet to reflect the discharge of debt and fresh start reporting in accordance
with SOP 90-7. The estimated enterprise value of EOTT, inclusive of working
capital, of $380 million (based on the mid-point of a range of values) which
served as the basis for the Reorganization Plan as approved by the bankruptcy
court, has been used to determine the value allocated to assets and liabilities
in the pro forma balance sheet. Adjusting the enterprise value to include
liabilities results in a reorganization value of $815 million at December 31,
2002.

The enterprise value was determined by outside financial consultants using
discounted cash flow, comparable transaction and capital market comparison
analyses. We have arranged for independent valuations to be performed to assist
in the allocation of reorganization value as of March 1, 2003 to the assets and
liabilities of EOTT in proportion to their relative fair values in conformity
with SFAS No. 141, "Business Combinations". These valuations have not been
completed. The allocation of reorganization value to individual assets and
liabilities will change based on facts present at the actual effective date of
the Reorganization Plan, and will result in differences to the fresh start
adjustments and allocated values estimated in the pro forma balance sheet.

Implementation of fresh start reporting will have a material effect on our
financial statements. As such, the financial statements for periods following
the effective date of our Reorganization Plan will not be comparable to those
before the effective date of the Reorganization Plan.

F-47

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pro Forma Condensed Consolidated Balance Sheet
December 31, 2002
(In thousands)
(Unaudited)

Notes:

(a) Liabilities subject to compromise have been adjusted to reflect the
settlement of the claims and discharge of the 11% senior notes and
related accrued interest.

(b) To reflect the issuance of a 6 year, 6% interest bearing note to all
taxing authorities for accrued but unpaid ad valorem taxes in
connection with the Restructuring Plan.

(c) To reflect the issuance of $104 million, 9% senior unsecured notes to
all former senior noteholders and general unsecured creditors with
allowed claims in connection with the Restructuring Plan.

(d) To reflect the elimination of the additional partnership interests in
connection with the Restructuring Plan and to eliminate the accumulated
deficit.

(e) To reflect the reduction in long-term assets in an amount equal to the
excess of the net assets of EOTT over the reorganization value.

(f) To reflect the issuance of EOTT LLC units and warrants to former MLP
unitholders, and the issuance of EOTT LLC units to former senior
noteholders and general unsecured creditors with allowed claims in
connection with the Restructuring Plan.

F-48

EOTT ENERGY PARTNERS, L.P.
(DEBTORS-IN-POSSESSION)
PREDECESSOR TO EOTT ENERGY LLC
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(In Thousands)

================================================================================

S-1

INDEX TO EXHIBITS

3.11 -- Amendment No. 1 dated as of September 1, 1999, to Amended and
Restated Agreement of Limited Partnership of EOTT Energy
Canada Limited Partnership (incorporated by reference to
Exhibit 3.2 to current report on Form 8-K for EOTT Energy
Partners, L.P. dated September 29, 1999)

3.12 -- Amendment No. 2 dated as of August 29, 2001, to Amended and
Restated Agreement of Limited Partnership of EOTT Energy
Canada Limited Partnership (incorporated by reference to
Exhibit 3.12 to Current Report on Form 8-K/A for EOTT Energy
Partners, L.P. dated August 30, 2001)

3.13 -- Agreement of Limited Partnership dated as of June 28, 2001 of
EOTT Energy Liquids, L.P. (incorporated by reference to
Exhibit 3.13 to Quarterly Report on Form 10-Q for EOTT Energy
Partners, L.P. for the Quarter Ended September 30, 2001)

3.14 -- Limited Liability Company Agreement dated as of June 27, 2001
of EOTT Energy General Partner, L.L.C. (incorporated by
reference to Exhibit 3.14 to Quarterly Report on Form 10-Q for
EOTT Energy Partners, L.P. for the Quarter Ended September 30,
2001)

3.15 -- Amendment No. 1 dated as of August 29, 2001, to the Limited
Liability Company Agreement of EOTT Energy General Partner,
L.L.C. (incorporated by reference to Exhibit 3.15 to Quarterly
Report on Form 10-Q for EOTT Energy Partners, L.P. for the
Quarter Ended September 30, 2001)

4.1 -- Indenture among EOTT Energy LLC, the Subsidiary Guarantors and
the Bank of New York, as trustee, for 9% Senior Notes due
2010, dated March 1, 2003 (incorporated by reference to
Exhibit T3C to Amendment No. 1 to EOTT Energy LLC's
Application for Qualification of Indenture on Form T-3 dated
April 4, 2003)

*4.2 -- Form of Warrant Agreement, dated as of March 1, 2003

*4.3 -- Form of Registration Rights Agreement, by and between EOTT
Energy LLC and Unitholders, dated as of March 1, 2003

10.01 -- Form of Corporate Services Agreement between Enron Corp. and
EOTT Energy Corp. (incorporated by reference to Exhibit 10.08
to Registration Statement for EOTT Energy Partners, L.P., File
No. 33-73984)

10.02 -- Form of Contribution and Closing Agreement between EOTT Energy
Corp. and EOTT Energy Partners, L.P. (incorporated by
reference to Exhibit 10.09 to Registration Statement for EOTT
Energy Partners, L.P., File No. 33-73984)

10.03 -- Form of Ancillary Agreement by and among Enron Corp., EOTT
Energy Partners, L.P., EOTT Energy Operating Limited
Partnership, EOTT Energy Pipeline Limited Partnership, EOTT
Energy Canada Limited Partnership, and EOTT Energy Corp.
(incorporated by reference to Exhibit 10.10 to Registration
Statement for EOTT Energy Partners, L.P., File No. 33-73984)

10.04 -- EOTT Energy Corp. Annual Incentive Plan (incorporated by
reference to Exhibit 10.14 to Registration Statement for EOTT
Energy Partners, L.P., File No. 33-73984)

10.05 -- EOTT Energy Corp. 1994 Unit Option Plan and the related Option
Agreement (incorporated by reference to Exhibit 10.15 to
Registration Statement for EOTT Energy Partners, L.P., File
No. 33-73984)

10.06 -- EOTT Energy Corp. Severance Pay Plan (incorporated by
reference to Exhibit 10.16 to Registration Statement for EOTT
Energy Partners, L.P., File No. 33-73984)

10.07 -- EOTT Energy Corp. Long Term Incentive Plan (incorporated by
reference to Exhibit 10.19 to Quarterly Report on Form 10-Q
for EOTT Energy Partners, L.P. for the Quarter Ended September
30, 1997)

10.08 -- Support Agreement dated September 21, 1998 between EOTT Energy
Partners, L.P., EOTT Energy Operating Limited Partnership and
Enron Corp. (incorporated by reference to Exhibit 10.22 to
Quarterly Report on Form 10-Q for the Quarter Ended September
30, 1998)

***10.09 -- Crude Oil Supply and Terminalling Agreement dated as of
December 1, 1998 between Koch Oil Company and EOTT Energy
Operating Limited Partnership (incorporated by reference to
Exhibit 10.23 to Annual Report on Form 10-K for EOTT Energy
Partners, L.P. for the Year Ended December 31, 1998)

10.10 -- Amended and Restated Credit Agreement as of December 1, 1998
between EOTT Energy Operating Limited Partnership, as
Borrower, and Enron Corp., as Lender (incorporated by
reference to Exhibit 10.24 to Annual Report on Form 10-K for
EOTT Energy Partners, L.P. for the Year Ended December 31,
1998)

10.11 -- Amendment dated March 17, 1999 to the Amended and Restated
Credit Agreement as of December 1, 1998 between EOTT Energy
Operating Limited Partnership, as Borrower, and Enron Corp.,
as Lender (incorporated by reference to Exhibit 10.26 to
Annual Report on Form 10-K for EOTT Energy Partners, L.P. for
the Year Ended December 31, 1998)

***10.12 -- Amendment dated December 1, 1998 to the Crude Oil Supply and
Terminalling Agreement dated as of December 1, 1998 between
Koch Oil Company and EOTT Energy Operating Limited Partnership
(incorporated by reference to Exhibit 10.28 to Annual Report
on Form 10-K for EOTT Energy Partners, L.P. for the Year Ended
December 31, 1998)

10.13 -- Amendment dated August 11, 1999 to the Amended and Restated
Credit Agreement as of December 1, 1998 between EOTT Energy
Operating Limited Partnership, as Borrower, and Enron Corp.,
as Lender (incorporated by reference to Exhibit 10.30 to
Quarterly Report on Form 10-Q for EOTT Energy Partners, L.P.
for the Period Ended June 30, 1999)

***10.14 -- Letter Agreement dated September 14, 2000 amending Crude Oil
Supply and Terminalling Agreement (incorporated by reference
to Exhibit 10.34 to Quarterly Report on Form 10-Q for EOTT
Energy Partners, L.P. for the Period Ended September 30, 2000)

***10.15 -- Letter Agreement dated February 6, 2001 amending Crude Oil
Supply and Terminalling Agreement dated December 1, 1998
(incorporated by reference to Exhibit 10.37 to Annual Report
on Form 10-K for EOTT Energy Partners, L.P. for the year ended
December 31, 2000)

**10.16 -- Letter Agreement dated May 17, 2002 amending Crude Oil Supply
and Terminalling Agreement dated December 1, 1998

**10.17 -- Letter Agreement dated May 17, 2002 amending Crude Oil Supply
and Terminalling Agreement dated December 1, 1998

**10.18 -- Letter Agreement dated June 26, 2002 amending Crude Oil Supply
and Terminalling Agreement dated December 1, 1998

**10.19 -- Letter Agreement dated October 3, 2002 amending Crude Oil
Supply and Terminalling Agreement dated December 1, 1998

10.20 -- Purchase and Sale Agreement between Enron Corp. and EOTT
Energy Partners, L.P., dated June 29, 2001, with list of
omitted schedules and agreement to furnish omitted schedules
supplementally to the Securities and Exchange Commission upon
request (incorporated by reference to Exhibit 10.38 to Current
Report on Form 8-K for EOTT Energy Partners, L.P. dated July
13, 2001)

10.21 -- Mont Belvieu Storage Capacity Purchase Agreement Dated as of
June 29, 2001 between EOTT Energy Liquids, L.P. and Enron Gas
Liquids, Inc. (incorporated by reference to Exhibit 10.21 to
Amendment No. 1 to Annual Report on Form 10-K/A for EOTT
Energy Partners, L.P. for the year ended December 31, 2001)

10.22 -- Toll Conversion Agreement dated as of June 29, 2001 between
EOTT Energy Liquids, L.P. and Enron Gas Liquids, Inc.
(incorporated by reference to Exhibit 10.22 to Amendment No. 1
to Annual Report on Form 10-K/A for EOTT Energy Partners, L.P.
for the year ended December 31, 2001)

10.23 -- Administrative Services Agreement dated as of June 29, 2001
between EOTT Energy Corp. and EOTT Energy General Partner,
L.L.C. (incorporated by reference to Exhibit 10.41 to Annual
Report on Form 10-K/A for EOTT Energy Partners, L.P. or the
year ended December 31, 2001)

****10.24 -- Letter Agreement dated June 27, 2001, amending Crude Oil
Supply and Terminalling Agreement dated December 1, 1998
(incorporated by reference to Exhibit 10.24 to Annual Report
on Form 10-K for EOTT Energy Partners, L.P. for the year ended
December 31, 2001)

****10.25 -- Letter Agreement dated August 23, 2001, amending Crude Oil
Supply and Terminalling Agreement dated December 1, 1998
(incorporated by reference to Exhibit 10.25 to Annual Report
on Form 10-K for EOTT Energy Partners, L.P. for the year ended
December 31, 2001)

10.26 -- Letter Agreement dated December 18, 2001, amending Crude Oil
Supply and Terminalling Agreement dated December 1, 1998
(incorporated by reference to Exhibit 10.26 to Annual Report
on Form 10-K for EOTT Energy Partners, L.P. for the year ended
December 31, 2001)

****10.27 -- Letter Agreement dated January 9, 2002, amending Crude Oil
Supply and Terminalling Agreement dated December 1, 1998
(incorporated by reference to Exhibit 10.27 to Annual Report
on Form 10-K for EOTT Energy Partners, L.P. for the year ended
December 31, 2001)

10.28 -- Commodity Repurchase Agreement, dated as of February 28, 1998,
between EOTT Energy Operating Limited Partnership and Standard
Chartered Trade Service Corporation (incorporated by reference
to Exhibit 10.28 to Annual Report on Form 10-K for EOTT Energy
Partners, L.P. for the year ended December 31, 2001)

10.29 -- Receivable(s) Purchase Agreement, dated as of October 19,
1999, between EOTT Energy Operating Limited Partnership and
Standard Chartered Trade Services Corporation (incorporated by
reference to Exhibit 10.29 to Annual Report on Form 10-K for
EOTT Energy Partners, L.P. for the year ended December 31,
2001)

10.30 -- First Amendment to the Receivable(s) Purchase Agreement, dated
as of January 12, 2000, by and between EOTT Energy Operating
Limited Partnership and Standard Chartered Trade Services
Corporation (incorporated by reference to Exhibit 10.30 to
Annual Report on Form 10-K for EOTT Energy Partners, L.P. for
the year ended December 31, 2001)

****10.31 -- Second Amended and Restated Reimbursement, Loan and Security
Agreement, dated as of April 23, 2002, by and between EOTT
Energy Operating Limited Partnership, et al. and Standard
Chartered Bank (incorporated by reference to Exhibit 10.31 to
Annual Report on Form 10-K for EOTT Energy Partners, L.P. for
the year ended December 31, 2001)

10.32 -- Letter Agreement, dated as of April 23, 2002, regarding
Commodity Repurchase Agreement and Receivable(s) Purchase
Agreement (incorporated by reference to Exhibit 10.32 to
Annual Report on Form 10-K for EOTT Energy Partners, L.P. for
the year ended December 31, 2001)

10.33 -- Standard Chartered Bank Limited Forbearance Letter, dated
August 13, 2002 (incorporated by reference to Exhibit 10.1 to
Quarterly Report on Form 10-Q for EOTT Energy Partners, L.P.
for the period ended June 30, 2002)

10.34 -- Standard Chartered Bank Limited Forbearance Letter dated
August 27, 2002 (incorporated by reference to Exhibit 10.1 to
Quarterly Report on Form 10-Q for EOTT Energy Partners, L.P.
for the period ended September 30, 2002)

10.35 -- Settlement Agreement by and among EOTT Energy Partners, L.P.
and certain of its subsidiaries and Enron Corp. and certain of
its affiliates, dated as of October 8, 2002 (incorporated by
reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for
EOTT Energy Partners, L.P. for the period ended September 30,
2002)

10.36 -- Restructuring Agreement by and among EOTT Energy Partners,
L.P. and certain of its subsidiaries and Enron Corp. and
certain of its affiliates, Standard Chartered Bank PLC,
Standard Chartered Trade Services Corporation, Lehman
Commercial Paper, Inc., and Certain Holders of the Company's
11% Senior Notes Due 2009, dated as of October 7, 2002
(incorporated by reference to Exhibit 10.3 to Quarterly Report
on Form 10-Q for EOTT Energy Partners, L.P. for the period
ended September 30, 2002)

10.37 -- Debtor-In-Possession Letter of Credit Agreement among EOTT
Energy Operating Limited Partnership, EOTT Energy Canada
Limited Partnership, EOTT Energy Liquids, L.P., and EOTT
Energy Pipeline Limited Partnership, as debtors and
debtors-in-possession and as joint and several Borrowers, EOTT
Energy Partners, L.P. and EOTT Energy General Partner, L.L.C.,
as debtors and debtors-in-possession and as Guarantors,
Standard Chartered Bank, as LC Agent, LC Issuer, and
Collateral Agent and the LC Participants hereto, dated as of
October 18, 2002 (incorporated by reference to Exhibit 10.4 to
Quarterly Report on Form 10-Q for EOTT Energy Partners, L.P.
for the period ended September 30, 2002)

10.38 -- Debtor-In-Possession Term Loan Agreement among EOTT Energy
Operating Limited Partnership, EOTT Energy Canada Limited
Partnership, EOTT Energy Liquids, L.P. and EOTT Energy
Pipeline Limited Partnership, as debtors and
debtors-in-possession and as joint and several Borrowers, EOTT
Energy Partners, L.P. and EOTT Energy General Partner, L.L.C.
as debtors and debtors-in-possession and as Guarantors, Lehman
Brothers- Inc., as Term Lender Agent and the Term Lenders
hereto, dated as of October 18, 2002 (incorporated by
reference to Exhibit 10.5 to Quarterly Report on Form 10-Q for
EOTT Energy Partners, L.P. for the period ended September 30,
2002)

10.39 -- Amended and Restated Commodities Repurchase Agreement, by and
among EOTT Energy Operating Limited Partnership, Standard
Chartered Trade Services Corporation, Standard Chartered Bank,
as collateral agent, dated as of October 18, 2002
(incorporated by reference to Exhibit 10.6 to Quarterly Report
on Form 10-Q for EOTT Energy Partners, L.P. for the period
ended September 30, 2002)

10.40 -- Amended and Restated Receivables Purchase Agreement, by and
among EOTT Energy Operating Limited Partnership, Standard
Chartered Trade Services Corporation, Standard Chartered Bank,
as collateral agent, dated as of October 18, 2002
(incorporated by reference to Exhibit 10.7 to Quarterly Report
on Form 10-Q for EOTT Energy Partners, L.P. for the period
ended September 30, 2002)

10.41 -- Intercreditor and Security Agreement, among EOTT Energy
Operating Limited Partnership, EOTT Energy Canada Limited
Partnership, EOTT Energy Liquids, L.P., and EOTT Energy
Pipeline Limited Partnership, as debtors and
debtors-in-possession and as joint and several Borrowers, and
EOTT Energy Partners, L.P. and EOTT Energy General Partner,
L.L.C. as debtors and debtors-in-possession and as joint and
several Guarantors, and Standard Chartered Bank, Lehman
Brothers, Inc., and Standard Chartered Trade Services
Corporation and various other Secured Parties and Standard
Chartered Bank, as collateral agent, dated as of October 18,
2002 (incorporated by reference to Exhibit 10.8 to Quarterly
Report on Form 10-Q for EOTT Energy Partners, L.P. for the
period ended September 30, 2002)

**10.42 -- Letter of Credit Agreement among EOTT Energy Operating Limited
Partnership, EOTT Energy Canada Limited Partnership, EOTT
Energy Liquids, L.P., and EOTT Energy Pipeline Limited
Partnership, as joint and several Borrowers, EOTT Energy LLC
and EOTT Energy General Partner, L.L.C., as Guarantors,
Standard Chartered Bank, as LC Agent, LC Issuer, and
Collateral Agent and the LC Participants hereto, dated as of
February 11, 2003

**10.43 -- Term Loan Agreement among EOTT Energy Operating Limited
Partnership, EOTT Energy Canada Limited Partnership, EOTT
Energy Liquids, L.P. and EOTT Energy Pipeline Limited
Partnership, as joint and several Borrowers, EOTT Energy LLC
and EOTT Energy General Partner, L.L.C. as Guarantors, Lehman
Brothers Inc., as Term Lender Agent and the Term Lenders
hereto, dated as of February 11, 2003

* 10.44 -- Second Amended and Restated Commodities Repurchase Agreement,
by and among EOTT Energy Operating Limited Partnership,
Standard Chartered Trade Services Corporation, Standard
Chartered Bank, as collateral agent, dated as of February 11,
2003

* 10.45 -- Second Amended and Restated Receivables Purchase Agreement, by
and among EOTT Energy Operating Limited Partnership, Standard
Chartered Trade Services Corporation, Standard Chartered Bank,
as collateral agent, dated as of February 11, 2003

* 10.46 -- Intercreditor and Security Agreement, among EOTT Energy
Operating Limited Partnership, EOTT Energy Canada Limited
Partnership, EOTT Energy Liquids, L.P., and EOTT Energy
Pipeline Limited Partnership, as joint and several Borrowers,
and EOTT Energy LLC and EOTT Energy General Partner, L.L.C. as
joint and several Guarantors, and Standard Chartered Bank,
Lehman Brothers, Inc., and Standard Chartered Trade Services
Corporation and various other Secured Parties and Standard
Chartered Bank, as collateral agent, dated as of March 1, 2003

10.47 -- Form of Executive Employment Agreement between EOTT Energy
Corp. and Dana R. Gibbs (incorporated by reference to Exhibit
10.32 to Quarterly Report on Form 10-Q for the Period Ended
September 30, 2000)

10.48 -- Form of Executive Employment Agreement between EOTT Energy
Corp. and Lori Maddox (incorporated by reference to Exhibit
10.36 to Annual Report on Form 10-K for the year ended
December 31, 2000)

10.49 -- Form of Executive Employment Agreement between EOTT Energy
Corp. and Molly Sample (incorporated by reference to Exhibit
10.35 to Annual Report on Form 10-K for the year ended
December 31, 2000)

* 10.50 -- Form of Executive Employment Agreement between EOTT Energy
Corp. and Mary Ellen Coombe effective as of October 1, 2002

* 10.51 -- Form of First Amendment to Executive Employment Agreement
between EOTT Energy Corp. and Lori L. Maddox effective as of
September 26, 2002

* 10.52 -- Form of First Amendment to Executive Employment Agreement
between EOTT Energy Corp. and Molly M. Sample effective as of
July 29, 2002

* 10.53 -- Letter of Offering from EOTT Energy LLC to Thomas M. Matthews
dated February 27, 2003

* 10.54 -- Letter of Offering from EOTT Energy LLC to H. Keith Kaelber
dated February 27, 2003

* 21.1 -- Subsidiaries of the Registrant

* 99.1 -- Section 906 Certification for Thomas M. Matthews

* 99.2 -- Section 906 Certification for H. Keith Kaelber

* Filed herewith.

** Filed herewith, but confidential treatment has been requested with
respect to certain portions of this exhibit.

*** Certain portions of this exhibit have been treated confidentially.

**** Confidential treatment has been requested with respect to certain
portions of this exhibit.