EXHIBIT 99.4

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors of Valero GP, LLC

We have audited the accompanying consolidated balance sheet of Riverwalk
Logistics, L.P. and subsidiaries (a Delaware limited partnership) as of December
31, 2002. This consolidated balance sheet is the responsibility of the
Partnership's management. Our responsibility is to express an opinion on this
consolidated balance sheet based on our audit.

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

In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the consolidated financial position of
Riverwalk Logistics and subsidiaries as of December 31, 2002, in conformity with
accounting principles generally accepted in the United States.

/s/ ERNST & YOUNG LLP

San Antonio, Texas
March 6, 2003

RIVERWALK LOGISTICS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2002
(IN THOUSANDS)
<Table>
<Caption>
ASSETS

Current assets:
Cash and cash equivalents............................................... $ 33,534
Receivable from parent.................................................. 8,482
Accounts receivable..................................................... 1,502
Other current assets..................................................... 177
--------
Total current assets................................................. 43,695
--------

Property, plant and equipment.............................................. 486,939
Less accumulated depreciation and amortization............................. (137,663)
--------
Property, plant and equipment, net...................................... 349,276
Goodwill, net of accumulated amortization of $1,279........................ 4,715
Investment in Skelly-Belvieu Pipeline Company.............................. 16,090
Other noncurrent assets, net of accumulated amortization of $250........... 1,733
--------
Total assets........................................................... $ 415,509
========

LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Current portion of long-term debt....................................... $ 747
Accounts payable and accrued liabilities................................ 8,133
Taxes other than income taxes........................................... 3,797
--------
Total current liabilities............................................ 12,677

Long-term debt, less current portion....................................... 108,911
Other long-term liabilities................................................ 25
Deferred income tax liabilities............................................ -

Commitments and contingencies (see note 9)

Minority interest in Valero L.P. held by the public........................ 115,933
Minority interest in Valero L.P. held by affiliates of Valero Energy....... 171,764

Partners' equity:
Limited partner equity held by UDS Logistics, LLC....................... 6,193
General partner equity held by Valero GP, LLC........................... 6
--------
Total partners' equity................................................ 6,199
--------
Total liabilities and partners' equity................................ $ 415,509
========
</Table>

See accompanying notes to consolidated balance sheet.

RIVERWALK LOGISTICS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2002

NOTE 1: ORGANIZATION, BUSINESS, OPERATIONS AND BASIS OF PRESENTATION

ORGANIZATION AND BUSINESS

Riverwalk Logistics, L.P. (Riverwalk Logistics) is a Delaware limited
partnership formed on June 5, 2000 to become the general partner of Valero L.P.
(formerly Shamrock Logistics, L.P.) and Valero Logistics Operations, L.P.
(formerly Shamrock Logistics Operations, L.P.). The general partner of Riverwalk
Logistics is Valero GP, LLC and the limited partner is UDS Logistics, LLC (UDS
Logistics). Both Valero GP, LLC and UDS Logistics are indirect wholly owned
subsidiaries of Valero Energy Corporation (Valero Energy).

Valero L.P., a Delaware limited partnership and majority-owned subsidiary of
Valero Energy, was formed to ultimately acquire Valero Logistics Operation, L.P.
(Valero Logistics). The minority ownership in Valero L.P. of 26.4% is held by
public unitholders, which own 5,175,000 common units.

Valero Logistics, a Delaware limited partnership and a subsidiary of Valero
L.P., was formed to operate the crude oil and refined product pipeline,
terminalling and storage assets of the Ultramar Diamond Shamrock Logistics
Business.

As used in this financial statement, the term "Partnership" may refer, depending
on the context, to Riverwalk Logistics, Valero L.P. or Valero Logistics or a
combination of them.

The Partnership owns and operates most of the crude oil and refined product
pipeline, terminalling and storage assets that service three of Valero Energy's
refineries. These refineries consist of the McKee and Three Rivers refineries
located in Texas, and the Ardmore refinery located in Oklahoma. The pipeline,
terminalling and storage assets provide for the transportation of crude oil and
other feedstocks to the refineries and the transportation of refined products
from the refineries to terminals or third-party pipelines for further
distribution. The Partnership's revenues are earned primarily from providing
these services to Valero Energy (see Note 9: Related Party Transactions).

Valero Energy is an independent refining and marketing company. Its operations
consist of 12 refineries with a total throughput capacity of 1,900,000 barrels
per day and an extensive network of company-operated and dealer-operated
convenience stores. Valero Energy's refining operations rely on various
logistics assets (pipelines, terminals, marine dock facilities, bulk storage
facilities, refinery delivery racks and rail car loading equipment) that support
its refining and retail operations, including the logistics assets owned and
operated by the Partnership. Valero Energy markets the refined products produced
at the McKee, Three Rivers and Ardmore refineries primarily in Texas, Oklahoma,
Colorado, New Mexico, Arizona and several mid-continent states through a network
of company-operated and dealer-operated convenience stores, as well as through
other wholesale and spot market sales and exchange agreements.

THE PARTNERSHIP'S OPERATIONS
The Partnership's operations include interstate and intrastate pipelines, which
are subject to extensive federal and state environmental and safety regulations.
In addition, the tariff rates and practices under which the Partnership offers
interstate and intrastate transportation services in its pipelines are subject
to regulation by the Federal Energy Regulatory Commission (FERC), the Texas
Railroad Commission or the Colorado Public Utility Commission, depending on the
location of the pipeline. Tariff rates and practices for each pipeline are
required to be filed with the respective commission upon completion of a
pipeline and when a tariff rate is being revised. In addition, the regulations
include annual reporting requirements for each pipeline.

The Partnership has an ownership interest in 9 crude oil pipelines with an
aggregate length of approximately 783 miles and 19 refined product pipelines
with an aggregate length of approximately 2,846 miles. In addition, the
Partnership owns a 25-mile crude hydrogen pipeline. The Partnership operates all
but three of the pipelines.

RIVERWALK LOGISTICS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - (Continued)

The Partnership also owns 5 crude oil storage facilities with a total storage
capacity of 3,326,000 barrels and 12 refined product terminals (including the
asphalt terminal acquired on January 7, 2003) with a total storage capacity of
3,192,000 barrels.

BASIS OF PRESENTATION

Prior to July 1, 2000, the Partnership's pipeline, terminalling and storage
assets were owned and operated by Ultramar Diamond Shamrock Corporation (UDS),
and such assets serviced the three refineries discussed above, which were also
owned by UDS at that time. These assets and their related operations are
referred to herein as the Ultramar Diamond Shamrock Logistics Business
(predecessor). Effective July 1, 2000, UDS transferred the Ultramar Diamond
Shamrock Logistics Business, along with certain liabilities, to Shamrock
Logistics Operations, L.P. (Shamrock Logistics Operations), a wholly owned
subsidiary of Shamrock Logistics, L.P. (Shamrock Logistics). Shamrock Logistics
was wholly owned by UDS. On April 16, 2001, Shamrock Logistics closed on an
initial public offering of its common units, which represented 26.4% of its
outstanding partnership interests.

On May 7, 2001, Valero Energy announced that it had entered into an Agreement
and Plan of Merger with UDS whereby UDS agreed to be acquired by Valero Energy
for total consideration of approximately $4.3 billion and the assumption of
approximately $2.0 billion of debt. The acquisition of UDS by Valero Energy
became effective on December 31, 2001. This acquisition included the acquisition
of UDS's majority ownership interest in Shamrock Logistics. Effective January 1,
2002, Shamrock Logistics changed its name to Valero L.P., and Shamrock Logistics
Operations changed its name to Valero Logistics.

On February 1, 2002, the Partnership acquired the Wichita Falls Crude Oil
Pipeline and Storage Business (the Wichita Falls Business) from Valero Energy
for $64,000,000. The consolidated balance sheet as of December 31, 2001 was
restated to reflect the acquisition of the Wichita Falls Business because the
Partnership and the Wichita Falls Business came under the common control of
Valero Energy commencing on that date, and thus, represented a reorganization of
entities under common control.

On May 30, 2002, Valero L.P. formed a Delaware corporation, Valero GP, Inc. (GP,
Inc.). Valero L.P. contributed a 0.01% limited partner interest in Valero
Logistics to GP, Inc. as a capital contribution. Valero Logistics' partnership
agreement was then amended to convert GP, Inc.'s limited partner interest in
Valero Logistics into a general partner interest and to convert the existing
1.0101% general partner interest in Valero Logistics (held by Riverwalk
Logistics) into a limited partner interest. Riverwalk Logistics then contributed
its 1.0101% limited partner interest in Valero Logistics to Valero L.P. in
exchange for an additional 1.0% general partner interest in Valero L.P. The
resulting structure is as follows: Riverwalk Logistics serves as the general
partner of Valero L.P. with a 2% general partner interest. GP. Inc. serves as
the general partner of Valero Logistics with a 0.01% general partner interest
and Valero L.P. is the limited partner of Valero Logistics with a 99.99% limited
partner interest. There was no financial statement impact related to this
restructuring as all amounts were recorded at historical cost.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION: All interpartnership transactions have been eliminated in the
consolidation of Riverwalk Logistics and its subsidiaries. In addition, the
operations of certain of the crude oil and refined product pipelines and refined
product terminals that are jointly owned with other companies are
proportionately consolidated in the accompanying consolidated balance sheet.

USE OF ESTIMATES: The preparation of financial statements in accordance with
United States generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated balance sheet and accompanying notes. Actual results could differ
from those estimates. On an ongoing basis, management reviews its estimates,
including those related to commitments, contingencies and environmental
liabilities, based on currently available information. Changes in facts and
circumstances may result in revised estimates.

RIVERWALK LOGISTICS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - (Continued)

CASH AND CASH EQUIVALENTS: All highly liquid investments with an original
maturity of three months or less when purchased are considered to be cash
equivalents.

PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is stated at cost.
Additions to property, plant and equipment, including maintenance and expansion
capital expenditures and capitalized interest, are recorded at cost. Maintenance
capital expenditures represent capital expenditures to replace partially or
fully depreciated assets to maintain the existing operating capacity of existing
assets and extend their useful lives. Expansion capital expenditures represent
capital expenditures to expand the operating capacity of existing assets,
whether through construction or acquisition. Repair and maintenance expenses
associated with existing assets that are minor in nature and do not extend the
useful life of existing assets are charged to operating expenses as incurred.
Depreciation is provided principally using the straight-line method over the
estimated useful lives of the related assets. When property, plant and equipment
is retired or otherwise disposed of, the difference between the carrying value
and the net proceeds is recognized as gain or loss in the statement of income in
the year retired.

IMPAIRMENT OF LONG-LIVED ASSETS: Long-lived assets, including property, plant
and equipment and the investment in Skelly-Belvieu Pipeline Company, LLC, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. The evaluation of
recoverability is performed using undiscounted estimated net cash flows
generated by the related asset. If an asset is deemed to be impaired, the amount
of impairment is determined as the amount by which the net carrying value
exceeds discounted estimated net cash flows.

GOODWILL: Goodwill represents the excess of cost over the fair value of net
assets acquired in 1997. The Partnership adopted Financial Accounting Standards
Board (FASB) Statement No. 142, "Goodwill and Other Intangible Assets" effective
January 1, 2002 resulting in the cessation of goodwill amortization beginning
January 1, 2002. For the years ended December 31, 2001 and 2000, goodwill
amortization expense totaled $299,000 and $301,000, respectively, or
approximately $0.02 per unit per year, assuming 19,198,644 common and
subordinated units outstanding. In addition to the cessation of amortization,
Statement No. 142 requires that goodwill be tested initially upon adoption and
annually thereafter to determine whether an impairment has occurred. An
impairment occurs when the carrying amount exceeds the fair value of the
recognized goodwill asset. If impairment has occurred, the difference between
the carrying value and the fair value is recognized as a loss in the statement
of income in that period. Based on the results of the impairment tests performed
upon initial adoption of Statement No. 142 as of January 1, 2002, and the annual
impairment test performed as of October 1, 2002, no impairment had occurred.

INVESTMENT IN SKELLY-BELVIEU PIPELINE COMPANY, LLC: Formed in 1993, the
Skelly-Belvieu Pipeline Company, LLC (Skelly-Belvieu Pipeline Company) owns a
natural gas liquids pipeline that begins in Skellytown, Texas and extends to
Mont Belvieu, Texas near Houston. Skelly-Belvieu Pipeline Company is owned 50%
by Valero Logistics and 50% by ConocoPhillips (previously Phillips Petroleum
Company). The Partnership accounts for this investment under the equity method
of accounting (see Note 4: Investment in Skelly-Belvieu Pipeline Company).

DEFERRED FINANCING COSTS: Deferred financing costs are amortized using the
effective interest method.

ENVIRONMENTAL REMEDIATION COSTS: Environmental remediation costs are expensed
and the associated accrual established when site restoration and environmental
remediation and cleanup obligations are either known or considered probable and
can be reasonably estimated. Accrued liabilities are not discounted to present
value and are not reduced by possible recoveries from third parties; however,
they are net of any recoveries expected from Valero Energy related to the
environmental indemnifications. Environmental costs include initial site
surveys, costs for remediation and restoration and ongoing monitoring costs, as
well as fines, damages and other costs, when estimable. Adjustments to initial
estimates are recorded, from time to time, to reflect changing circumstances and
estimates based upon additional information developed in subsequent periods.

FEDERAL AND STATE INCOME TAXES: Riverwalk Logistics, Valero L.P. and Valero
Logistics are limited partnerships and are not subject to federal or state
income taxes. Accordingly, the taxable income or loss, which may vary

RIVERWALK LOGISTICS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - (Continued)

substantially from income or loss reported for financial reporting purposes, is
generally includable in the federal and state income tax returns of the
individual partners. For transfers of publicly held units subsequent to the
initial public offering, Valero L.P. has made an election permitted by section
754 of the Internal Revenue Code to adjust the common unit purchaser's tax basis
in Valero L.P.'s underlying assets to reflect the purchase price of the units.
This results in an allocation of taxable income and expense to the purchaser of
the common units, including depreciation deductions and gains and losses on
sales of assets, based upon the new unitholder's purchase price for the common
units.

The Wichita Falls Business was included in UDS' (now Valero Energy's)
consolidated federal and state income tax returns. Deferred income taxes were
computed based on recognition of future tax expense or benefits, measured by
enacted tax rates that were attributable to taxable or deductible temporary
differences between financial statement and income tax reporting bases of assets
and liabilities. No recognition will be given to federal or state income taxes
associated with the Wichita Falls Business for financial statement purposes for
periods subsequent to its acquisition by Valero L.P. The deferred income tax
liabilities related to the Wichita Falls Business as of February 1, 2002 were
retained by Valero Energy and were credited to net parent investment upon the
transfer of the Wichita Falls Business to Valero L.P.

MINORITY INTEREST: Minority interest in Valero L.P. held by the public
represents the 5,175,000 common units held by the public representing a 26.4%
ownership interest in Valero L.P. as of December 31, 2002. The minority interest
in Valero L.P. held by affiliates of Valero Energy represents the 4,424,322
common units and 9,599,322 subordinated units held by UDS Logistics representing
a 71.4% ownership interest in Valero L.P. as of December 31, 2002. In addition,
Valero GP, LLC holds 55,250 common units of Valero L.P. to settle awards of
contractual rights to receive common units previously issued to officers and
directors of Valero GP, LLC.

PARTNERS' EQUITY: Riverwalk Logistics' partnership equity consists of a 0.1%
general partner interest held by Valero GP, LLC and a 99.9% limited partner
interest held by UDS Logistics. In accordance with the partnership agreement of
Riverwalk Logistics, net income is allocated in proportion to ownership
interest. Distributions of available cash are also determined in accordance with
the partnership agreement.

SEGMENT DISCLOSURES: The Partnership operates in only one segment, the petroleum
pipeline segment of the oil and gas industry.

DERIVATIVE INSTRUMENTS: The Partnership currently does not hold or trade
derivative instruments.

RECENT ACCOUNTING PRONOUNCEMENT

In June 2001, the FASB issued Statement No. 143, "Accounting for Asset
Retirement Obligations." This statement establishes standards for accounting for
an obligation associated with the retirement of a tangible long-lived asset. An
asset retirement obligation should be recognized in the financial statements in
the period in which it meets the definition of a liability as defined in FASB
Concepts Statement No. 6, "Elements of Financial Statements." The amount of the
liability would initially be measured at fair value. Subsequent to initial
measurement, an entity would recognize changes in the amount of the liability
resulting from (a) the passage of time and (b) revisions to either the timing or
amount of estimated cash flows. Statement No. 143 also establishes standards for
accounting for the cost associated with an asset retirement obligation. It
requires that, upon initial recognition of a liability for an asset retirement
obligation, an entity capitalize that cost by recognizing an increase in the
carrying amount of the related long-lived asset. The capitalized asset
retirement cost would then be allocated to expense using a systematic and
rational method. Statement No. 143 will be effective for financial statements
issued for fiscal years beginning after June 15, 2002, with earlier application
encouraged. The Partnership is currently evaluating the impact of adopting this
new statement, however at the present time does not believe it will have a
material impact on its financial condition or results of operations.

RIVERWALK LOGISTICS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - (Continued)

NOTE 3: PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, at cost, consisted of the following as of
December 31, 2002 (in thousands):

<Table>
<Caption>
ESTIMATED
USEFUL
LIVES
-----
(years)

Land........................................... - $ 820
Land improvements.............................. 20 68
Buildings...................................... 35 5,647
Pipeline and equipment......................... 3 - 40 442,681
Rights of way.................................. 20 - 35 29,860
Construction in progress....................... - 7,863

-------
Total........................................ 486,939
Accumulated depreciation and amortization...... (137,663)
-------
Property, plant and equipment, net........... $ 349,276
=======
</Table>

NOTE 4: INVESTMENT IN SKELLY-BELVIEU PIPELINE COMPANY

The Partnership owns a 50% interest in Skelly-Belvieu Pipeline Company, which is
accounted for under the equity method. The following presents summarized
unaudited balance sheet information related to Skelly-Belvieu Pipeline Company
as of December 31, 2002 (in thousands):

BALANCE SHEET INFORMATION:
Current assets................................................ $ 1,572
Property, plant and equipment, net............................ 48,739
------
Total assets................................................ $ 50,311
======

Current liabilities........................................... $ 150
Members' equity............................................... 50,161
------
Total liabilities and members' equity....................... $ 50,311
======

The excess of the Partnership's 50% share of members' equity over the carrying
value of its investment is attributable to the step-up in basis to fair value of
the initial contribution to Skelly-Belvieu Pipeline Company. This excess, which
totaled $8,990,000 as of December 31, 2002, is being accreted into income over
33 years.

NOTE 5: LONG-TERM DEBT

Long-term debt consisted of the following as of December 31, 2002
(in thousands):

6.875% senior notes, net of unamortized discount of $300... $ 99,700
Port Authority of Corpus Christi note payable.............. 9,958
$120,000,000 revolving credit facility..................... -
---------
Total debt............................................... 109,658
Less current portion....................................... (747)
---------
Long-term debt, less current portion..................... $ 108,911
=========

RIVERWALK LOGISTICS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - (Continued)

The long-term debt repayments are due as follows (in thousands):

2003........................................... $ 747
2004........................................... 485
2005........................................... 524
2006........................................... 566
2007........................................... 611
Thereafter..................................... 106,725
-------
Total repayments........................... $ 109,658
=======

Valero L.P. has no operations and its only asset is its investment in Valero
Logistics, which owns and operates the Partnership's pipelines and terminals.
Valero L.P. has fully and unconditionally guaranteed the senior notes issued by
Valero Logistics and any obligations under Valero Logistics' revolving credit
facility.

6.875% SENIOR NOTES
On July 15, 2002, Valero Logistics completed the sale of $100,000,000 of 6.875%
senior notes due 2012, issued under the Partnership's shelf registration
statement, for total proceeds of $99,686,000. The net proceeds of $98,207,000,
after deducting underwriters' commissions and offering expenses of $1,479,000,
were used to repay the $91,000,000 outstanding under the revolving credit
facility. The senior notes do not have sinking fund requirements. Interest on
the senior notes is payable semiannually in arrears on January 15 and July 15 of
each year.

The senior notes rank equally with all other existing senior unsecured
indebtedness of Valero Logistics, including indebtedness under the revolving
credit facility. The senior notes contain restrictions on Valero Logistics'
ability to incur secured indebtedness unless the same security is also provided
for the benefit of holders of the senior notes. In addition, the senior notes
limit Valero Logistics' ability to incur indebtedness secured by certain liens
and to engage in certain sale-leaseback transactions. The senior notes are
irrevocably and unconditionally guaranteed on a senior unsecured basis by Valero
L.P. The guarantee by Valero L.P. ranks equally with all of its existing and
future unsecured senior obligations.

At the option of Valero Logistics, the senior notes may be redeemed in whole or
in part at any time at a redemption price, which includes a make-whole premium,
plus accrued and unpaid interest to the redemption date. The senior notes also
include a change-in-control provision, which requires that an investment grade
entity own and control the general partner of Valero L.P. and Valero Logistics.
Otherwise Valero Logistics must offer to purchase the senior notes at a price
equal to 100% of their outstanding principal balance plus accrued interest
through the date of purchase.

$120,000,000 REVOLVING CREDIT FACILITY
On December 15, 2000, Valero Logistics (formerly Shamrock Logistics Operations)
entered into a five-year $120,000,000 revolving credit facility. The revolving
credit facility expires on January 15, 2006 and borrowings under the revolving
credit facility bear interest based on either an alternative base rate or LIBOR
at the option of Valero Logistics. Valero Logistics also incurs a facility fee
on the aggregate commitments of lenders under the revolving credit facility,
whether used or unused. Borrowings under the revolving credit facility may be
used for working capital and general partnership purposes. Borrowings to fund
distributions to unitholders; however, is limited to $25,000,000 and such
borrowings must be reduced to zero for a period of at least 15 consecutive days
during each fiscal year. The amounts available to the Partnership under the
revolving credit facility are not subject to a borrowing base computation;
therefore as of December 31, 2002, the entire $120,000,000 was available.

Borrowings under the revolving credit facility are unsecured and rank equally
with all of Valero Logistics' outstanding unsecured and unsubordinated debt. The
revolving credit facility requires that Valero Logistics maintain certain
financial ratios and includes other restrictive covenants, including a
prohibition on distributions by Valero Logistics if any default, as defined in
the revolving credit facility, exists or would result from the distribution. The
revolving credit facility also includes a change-in-control provision, which
requires that Valero Energy and its affiliates own, directly or indirectly, at
least 20% of Valero L.P.'s outstanding units or at least 100%

RIVERWALK LOGISTICS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - (Continued)

of Valero L.P.'s general partner interest and 100% of Valero Logistics'
outstanding equity. Management believes that the Partnership is in compliance
with all of these ratios and covenants.

See Note 12: Subsequent Events - Amended Revolving Credit Facility for a
discussion of an amendment to Valero Logistics revolving credit facility
finalized in March of 2003.

PORT AUTHORITY OF CORPUS CHRISTI NOTE PAYABLE
The Ultramar Diamond Shamrock Logistics Business previously entered into a
financing agreement with the Port of Corpus Christi Authority of Nueces County,
Texas (Port Authority of Corpus Christi) for the construction of a crude oil
storage facility. The original note totaled $12,000,000 and is due in annual
installments of $1,222,000 through December 31, 2015. Interest on the unpaid
principal balance accrues at a rate of 8% per annum. In conjunction with the
July 1, 2000 transfer of assets and liabilities to the Partnership, the
$10,818,000 outstanding indebtedness owed to the Port Authority of Corpus
Christi was assumed by the Partnership. The land on which the crude oil storage
facility was constructed is leased from the Port Authority of Corpus Christi
(see Note 7: Commitments and Contingencies).

SHELF REGISTRATION STATEMENT
On June 6, 2002, Valero L.P. and Valero Logistics filed a $500,000,000 universal
shelf registration statement with the Securities and Exchange Commission
covering the issuance of an unspecified amount of common units or debt
securities or a combination thereof. Valero L.P. may, in one or more offerings,
offer and sell common units representing limited partner interest in Valero L.P.
Valero Logistics may, in one or more offerings, offer and sell its debt
securities, which will be fully and unconditionally guaranteed by Valero L.P. As
a result of the July 2002 senior note offering by Valero Logistics, the
remaining balance under the universal shelf registration statement is
$400,000,000 as of December 31, 2002.

NOTE 6: ENVIRONMENTAL MATTERS

The Partnership's operations are subject to extensive federal, state and local
environmental laws and regulations. Although the Partnership believes its
operations are in substantial compliance with applicable environmental laws and
regulations, risks of additional costs and liabilities are inherent in pipeline,
terminalling and storage operations, and there can be no assurance that
significant costs and liabilities will not be incurred. Moreover, it is possible
that other developments, such as increasingly stringent environmental laws,
regulations and enforcement policies thereunder, and claims for damages to
property or persons resulting from the operations, could result in substantial
costs and liabilities. Accordingly, the Partnership has adopted policies,
practices and procedures in the areas of pollution control, product safety,
occupational health and the handling, storage, use and disposal of hazardous
materials to prevent material environmental or other damage, and to limit the
financial liability which could result from such events. However, some risk of
environmental or other damage is inherent in pipeline, terminalling and storage
operations, as it is with other entities engaged in similar businesses.

In connection with the transfer of assets and liabilities from the Ultramar
Diamond Shamrock Logistics Business to Shamrock Logistics Operations on July 1,
2000, UDS agreed to indemnify Shamrock Logistics Operations for environmental
liabilities that arose prior to July 1, 2000. In connection with the initial
public offering of Shamrock Logistics, UDS agreed to indemnify Shamrock
Logistics for environmental liabilities that arose prior to April 16, 2001 and
that are discovered within 10 years after April 16, 2001. In conjunction with
the acquisitions of the Southlake refined product terminal on July 2, 2001 and
the Ringgold crude oil storage facility on December 1, 2001, UDS agreed to
indemnify the Partnership for environmental liabilities that arose prior to the
acquisition dates and are discovered within 10 years after acquisition. Excluded
from these indemnifications are liabilities that result from a change in
environmental law. Effective with the acquisition of UDS, Valero Energy has
assumed these environmental indemnifications. In addition, as an operator or
owner of the assets, the Partnership could be held liable for pre-acquisition
environmental damage should Valero Energy be unable to fulfill its obligation.
However, the Partnership believes that such a situation is remote given Valero
Energy's financial condition.

RIVERWALK LOGISTICS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - (Continued)

In conjunction with the sale of the Wichita Falls Business to the Partnership,
Valero Energy agreed to indemnify the Partnership for any environmental
liabilities that arose prior to February 1, 2002 and that are discovered by
April 15, 2011.

Environmental exposures and liabilities are difficult to assess and estimate due
to unknown factors such as the magnitude of possible contamination, the timing
and extent of remediation, the determination of the Partnership's liability in
proportion to other parties, improvements in cleanup technologies and the extent
to which environmental laws and regulations may change in the future. Although
environmental costs may have a significant impact on the results of operations
for any single period, the Partnership believes that such costs will not have a
material adverse effect on its financial position. As of December 31, 2002, the
Partnership has not incurred any material environmental liabilities that were
not covered by the environmental indemnifications.

NOTE 7: COMMITMENTS AND CONTINGENCIES

The Ultramar Diamond Shamrock Logistics Business previously entered into several
agreements with the Port Authority of Corpus Christi including a crude oil dock
user agreement, a land lease agreement and a note agreement. The crude oil dock
user agreement, which renews annually in May, allows the Partnership to operate
and manage a crude oil dock in Corpus Christi. The Partnership shares use of the
crude oil dock with two other users, and operating costs are split evenly among
the three users. The crude oil dock user agreement requires that the Partnership
collect wharfage fees, based on the quantity of barrels offloaded from each
vessel, and dockage fees, based on vessels berthing at the dock. These fees are
remitted to the Port Authority of Corpus Christi monthly. The wharfage and
one-half of the dockage fees that the Partnership pays for the use of the crude
oil dock reduces the annual amount it owes to the Port Authority of Corpus
Christi under the note agreement discussed in Note5: Long Term Debt.

The Ultramar Diamond Shamrock Logistics Business previously entered into a
refined product dock user agreement, which renews annually in April, with the
Port Authority of Corpus Christi to use a refined product dock. The Partnership
shares use of the refined product dock with one other user, and operating costs
are split evenly between the two users. The refined product dock user agreement
requires that the Partnership collect and remit the wharfage and dockage fees to
the Port Authority of Corpus Christi.

The crude oil and the refined product docks provide Valero Energy's Three Rivers
refinery access to marine facilities to receive crude oil and deliver refined
products. For the year ended December 31, 2002, the Three Rivers refinery
received 86% of its crude oil requirements from crude oil received at the crude
oil dock. Also, for the year ended December 31, 2002, 6% of the refined products
produced at the Three Rivers refinery was transported via pipeline to the Corpus
Christi refined product dock.

The Partnership has the following land leases related to refined product
terminals and crude oil storage facilities:

o Corpus Christi crude oil storage facility: a 20-year noncancellable
operating lease on 31.35 acres of land through 2014, at which time the
lease is renewable every five years, for a total of 20 renewable years.

o Corpus Christi refined product terminal: a 5-year noncancellable
operating lease on 5.21 acres of land through 2006, and a 5-year
noncancellable operating lease on 8.42 acres of land through 2007, at
which time the agreements are renewable for at least two five-year
periods.

o Harlingen refined product terminal: a 13-year noncancellable operating
lease on 5.88 acres of land through 2008, and a 30-year noncancellable
operating lease on 9.04 acres of land through 2008.

o Colorado Springs airport terminal: a 50-year noncancellable operating
lease on 46.26 acres of land through 2043, at which time the lease is
renewable for another 50-year period.

All of the Partnership's land leases, including the above leases, require
monthly payments totaling $19,000 and are adjustable every five years based on
changes in the Consumer Price Index.

RIVERWALK LOGISTICS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - (Continued)

In addition, the Partnership leases certain equipment and vehicles under
operating lease agreements expiring through 2003. Future minimum rental payments
applicable to noncancellable operating leases as of December 31, 2002, are as
follows (in thousands):

2003................................................ $ 227
2004................................................ 226
2005................................................ 226
2006................................................ 212
2007................................................ 186
Thereafter.......................................... 1,422
-----
Future minimum lease payments................... $ 2,499
=====

The Partnership is involved in various lawsuits, claims and regulatory
proceedings incidental to its business. In the opinion of management, the
outcome of such matters will not have a material adverse effect on the
Partnership's financial position or results of operations.

NOTE 8: FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

The estimated fair value of the Partnership's fixed rate debt as of December 31,
2002 was $109,922,000, as compared to the carrying value of $109,658,000. This
fair value was estimated using discounted cash flow analysis, based on the
Partnership's current incremental borrowing rates for similar types of borrowing
arrangements. The Partnership has not utilized derivative financial instruments
related to these borrowings. Interest rates on borrowings under the revolving
credit facility float with market rates and thus the carrying amount
approximates fair value.

Substantially all of the Partnership's revenues are derived from Valero Energy
and its subsidiaries. Valero Energy transports crude oil to three of its
refineries using the Partnership's various crude oil pipelines and storage
facilities and transports refined products to its company-owned retail
operations or wholesale customers using the Partnership's various refined
product pipelines and terminals. Valero Energy and its subsidiaries are
investment grade customers; therefore, the Partnership does not believe that the
trade receivable from Valero Energy represents a significant credit risk.
However, the concentration of business with Valero Energy, which is a large
refining and retail marketing company, has the potential to impact the
Partnership's overall exposure, both positively and negatively, to changes in
the refining and marketing industry.

NOTE 9: RELATED PARTY TRANSACTIONS

The Partnership has related party transactions with Valero Energy for pipeline
tariff and terminalling fee revenues, certain employee costs, insurance costs,
administrative costs and interest expense on the debt due to parent for the
period from July 1, 2000 through April 15, 2001. The receivable from parent as
of December 31, 2002 represents the net amount due from Valero Energy for these
related party transactions and the net cash collected under Valero Energy's
centralized cash management program on the Partnership's behalf.

SERVICES AGREEMENT
Effective July 1, 2000, UDS entered into a Services Agreement with the
Partnership, whereby UDS agreed to provide the corporate functions of legal,
accounting, treasury, engineering, information technology and other services for
an annual fee of $5,200,000 for a period of eight years. The $5,200,000 is
adjustable annually based on the Consumer Price Index published by the U.S.
Department of Labor, and may also be adjusted to take into account additional
service levels necessitated by the acquisition or construction of additional
assets. Concurrent with the acquisition of UDS by Valero Energy, Valero Energy
became the obligor under the Services Agreement. Management believes that the
$5,200,000 is a reasonable approximation of the general and administrative costs
related to the pipeline, terminalling and storage operations. This annual fee is
in addition to the incremental general and administrative costs to be incurred
from third parties for services Valero Energy does not provide under the

RIVERWALK LOGISTICS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - (Continued)

Services Agreement (see Note 10: Employee Benefit Plans). A portion of the
general and administrative costs is passed on to third parties, which jointly
own certain pipelines and terminals with the Partnership.

The Services Agreement also requires that the Partnership reimburse Valero
Energy for various recurring costs of employees who work exclusively within the
pipeline, terminalling and storage operations and for certain other costs
incurred by Valero Energy relating solely to the Partnership. These employee
costs include salary, wage and benefit costs.

PIPELINES AND TERMINALS USAGE AGREEMENT
On April 16, 2001, UDS entered into a Pipelines and Terminals Usage Agreement
with the Partnership, whereby UDS agreed to use the Partnership's pipelines to
transport at least 75% of the crude oil shipped to and at least 75% of the
refined products shipped from Valero Energy's McKee, Three Rivers and Ardmore
refineries and to use the Partnership's refined product terminals for
terminalling services for at least 50% of all refined products shipped from
these refineries until at least April of 2008. Valero Energy also assumed the
obligation under the Pipelines and Terminals Usage Agreement in connection with
the acquisition of UDS by Valero Energy. For the year ended December 31, 2002,
Valero Energy used the Partnership's pipelines to transport 97% of its crude oil
shipped to and 80% of the refined products shipped from the McKee, Three Rivers
and Ardmore refineries, and Valero Energy used the Partnership's terminalling
services for 59% of all refined products shipped from these refineries.

If market conditions change with respect to the transportation of crude oil or
refined products, or to the end markets in which Valero Energy sells refined
products, in a material manner such that Valero Energy would suffer a material
adverse effect if it were to continue to use the Partnership's pipelines and
terminals at the required levels, Valero Energy's obligation to the Partnership
will be suspended during the period of the change in market conditions to the
extent required to avoid the material adverse effect.

OMNIBUS AGREEMENT
The Omnibus Agreement governs potential competition between Valero Energy and
the Partnership. Under the Omnibus Agreement, Valero Energy has agreed, and will
cause its controlled affiliates to agree, for so long as Valero Energy controls
the general partner, not to engage in the business of transporting crude oil and
other feedstocks or refined products, including petrochemicals, or operating
crude oil storage facilities or refined product terminalling assets in the
United States. This restriction does not apply to:

o any business retained by UDS (and now part of Valero Energy) as of
April 16, 2001, the closing of the Partnership's initial public
offering, or any business owned by Valero Energy at the date of its
acquisition of UDS on December 31, 2001;

o any business with a fair market value of less than $10 million;

o any business acquired by Valero Energy in the future that constitutes
less than 50% of the fair market value of a larger acquisition,
provided the Partnership has been offered and declined the opportunity
to purchase the business; and

o any newly constructed pipeline, terminalling or storage assets that the
Partnership has not offered to purchase at fair market value within one
year of construction.

Also under the Omnibus Agreement, Valero Energy has agreed to indemnify the
Partnership for environmental liabilities related to the assets transferred to
the Partnership in connection with the Partnership's initial public offering,
provided that such liabilities arose prior to and are discovered within 10 years
after that date (excluding liabilities resulting from a change in law after
April 16, 2001).

NOTE 10: EMPLOYEE BENEFIT PLANS

The Partnership, which has no employees, relies on employees of Valero Energy
and its affiliates to provide the necessary services to operate the
Partnership's assets. The Valero Energy employees who operate the Partnership's
assets are included in the various employee benefit plans of Valero Energy and
its affiliates. These plans include qualified, non-contributory defined benefit
retirement plans, defined contribution 401(k) plans, employee and retiree

RIVERWALK LOGISTICS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - (Continued)

medical, dental and life insurance plans, long-term incentive plans (i.e. unit
options and bonuses) and other such benefits.

LONG-TERM INCENTIVE PLAN
The Board of Directors of Valero GP, LLC previously adopted the "2000 Long-Term
Incentive Plan" (the LTIP) under which Valero GP, LLC may award up to 250,000
common units of Valero L.P. to certain key employees of Valero Energy's
affiliates providing services to the Partnership and to directors and officers
of Valero GP, LLC. Awards under the LTIP can include unit options, restricted
common units, distribution equivalent rights (DERs), contractual rights to
receive common units, etc.

Under the LTIP, in July of 2001, Valero GP, LLC granted 205 restricted common
units and DERs to each of its then two outside directors. The restricted common
units were to vest at the end of a three-year period and be paid in cash. The
DERs were to accumulate equivalent distributions that other Valero L.P.
unitholders receive over the vesting period. As a result of the change in
control related to Valero Energy's acquisition of UDS on December 31, 2001, the
restricted common units vested and the accrued amounts were paid to the
directors.

In January of 2002, under the LTIP, Valero GP, LLC granted 55,250 contractual
rights to receive common units of Valero L.P. and DERs to its officers, certain
employees of its affiliates and its outside directors. In conjunction with the
grant of contractual rights to receive common units under the LTIP, Valero L.P.
issued 55,250 common units to Valero GP, LLC on January 21, 2002 for total
consideration of $2,262,000 (based on the then $40.95 market price per common
unit), the receivable for which is classified in minority interest in Valero
L.P. held by affiliates of Valero Energy in the consolidated balance sheet as of
December 31, 2002. One-third of the contractual rights to receive common units
awarded by Valero GP, LLC will vest at the end of each year of a three-year
vesting period.

NOTE 11: VALERO L.P.'S SUBORDINATED UNITS, ALLOCATIONS OF NET INCOME AND CASH
DISTRIBUTIONS

VALERO L.P.'S SUBORDINATED UNITS
All of the subordinated units of Valero L.P. may convert to common units of
Valero L.P. on a one-for-one basis on the first day following the record date
for distributions for the quarter ending December 31, 2005, if Valero L.P. meets
the tests set forth in its partnership agreement. If the subordination period
ends, the rights of the holders of subordinated units will no longer be
subordinated to the rights of the holders of common units and the subordinated
units may be converted into common units.

VALERO L.P.'S ALLOCATIONS OF NET INCOME
Valero L.P.'s partnership agreement, as amended, sets forth the calculation to
be used to determine the amount and priority of cash distributions that the
common unitholders, subordinated unitholders and Riverwalk Logistics will
receive. Valero L.P.'s partnership agreement also contains provisions for the
allocation of net income and loss to the unitholders and Riverwalk Logistics.
For purposes of maintaining partner capital accounts, the partnership agreement
specifies that items of income and loss shall be allocated among the partners in
accordance with their respective percentage interests. Normal allocations
according to percentage interests are done after giving effect, if any, to
priority income allocations in an amount equal to incentive cash distributions
allocated 100% to Riverwalk Logistics.

VALERO L.P.'S CASH DISTRIBUTIONS
During the subordination period, the holders of Valero L.P.'s common units are
entitled to receive each quarter a minimum quarterly distribution of $0.60 per
unit ($2.40 annualized) prior to any distribution of available cash to holders
of Valero L.P.'s subordinated units. The subordination period is defined
generally as the period that will end on the first day of any quarter beginning
after March 31, 2006 if (1) Valero L.P. has distributed at least the minimum
quarterly distribution on all outstanding units with respect to each of the
immediately preceding three consecutive, non-overlapping four-quarter periods
and (2) Valero L.P.'s adjusted operating surplus, as defined in the partnership
agreement, during such periods equals or exceeds the amount that would have been
sufficient to enable Valero L.P. to distribute the minimum quarterly
distribution on all outstanding units on a fully diluted basis and the related
distribution on the 2% general partner interest during those periods.

RIVERWALK LOGISTICS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - (Continued)

During the subordination period, Valero L.P.'s cash is distributed first 98% to
the holders of common units and 2% to Riverwalk Logistics until there has been
distributed to the holders of common units an amount equal to the minimum
quarterly distribution and arrearages in the payment of the minimum quarterly
distribution on the common units for any prior quarter. Secondly, cash is
distributed 98% to the holders of subordinated units and 2% to Riverwalk
Logistics until there has been distributed to the holders of subordinated units
an amount equal to the minimum quarterly distribution. Thirdly, cash in excess
of the minimum quarterly distributions is distributed to the unitholders and
Riverwalk Logistics based on the percentages shown below.

Riverwalk Logistics is entitled to incentive distributions if the amount Valero
L.P. distributes with respect to any quarter exceeds specified target levels
shown below:

PERCENTAGE OF DISTRIBUTION
--------------------------
VALERO L.P. RIVERWALK
QUARTERLY DISTRIBUTION AMOUNT PER UNIT UNITHOLDERS LOGISTICS
-------------------------------------- ----------- ---------

Up to $0.60..................................... 98% 2%
Above $0.60 up to $0.66......................... 90% 10%
Above $0.66 up to $0.90......................... 75% 25%
Above $0.90..................................... 50% 50%

NOTE 12: SUBSEQUENT EVENTS

ACQUISITION OF TELFER ASPHALT TERMINAL AND STORAGE FACILITY
On January 7, 2003, the Partnership completed its acquisition of Telfer Oil
Company's (Telfer) California asphalt terminal and storage facility for
$15,000,000. The asphalt terminal and storage facility assets include two
storage tanks with a combined storage capacity of 350,000 barrels, six
5,000-barrel polymer modified asphalt tanks, a truck rack, rail facilities and
various other tanks and equipment. In conjunction with the Telfer asset
acquisition, the Partnership entered into a six-year Terminal Storage and
Throughput Agreement with Valero Energy. The agreement includes (a) a lease of
the asphalt storage tanks and related equipment for a monthly fee of $0.60 per
barrel of storage capacity, (b) the right to move asphalt through the terminal
during the term of the Terminal Storage and Throughput Agreement in
consideration for $1.25 per barrel of throughput with a guaranteed minimum
annual throughput of 280,000 barrels, and (c) reimbursement to the Partnership
of certain costs, including utilities.

The Partnership will account for the Telfer acquisition as a purchase of a
business in accordance with FASB Statement No. 141 and allocate the purchase
price to the individual assets and liabilities acquired based on their fair
value on January 7, 2003. A portion of the purchase price represented payment
to the principal owner of Telfer for a non-compete agreement and for the lease
of certain facilities adjacent to the terminal operations.

UNITS ISSUED UNDER LTIP
On January 24, 2003, under the LTIP, Valero GP, LLC granted 30,000 contractual
rights to receive common units and DERs to its officers and directors, excluding
the outside directors. In conjunction with the grant of contractual rights to
receive common units under the LTIP, Valero GP, LLC purchased 30,000 newly
issued common units from Valero L.P. for total consideration of $1,149,000. Also
in January of 2003, one-third of the previously issued contractual rights vested
and Valero GP, LLC distributed actual Valero L.P. common units to the officers
and directors. Certain of the officers and directors settled their tax
withholding on the vested common units by delivering 6,491 common units to
Valero GP, LLC. As of February 1, 2003, Valero GP, LLC owns 73,319 common units
of Valero L.P.

DISTRIBUTIONS
On January 24, 2003, Valero L.P. declared a quarterly distribution of $0.70 per
unit payable on February 14, 2003 to unitholders of record on February 5, 2003.
This distribution related to the fourth quarter of 2003 and totaled $14,121,000,
of which $622,000 represented Riverwalk Logistics' share of such distribution.
The Riverwalk Logistics' distribution included a $340,000 incentive
distribution.

RIVERWALK LOGISTICS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET - (Continued)

INTEREST RATE SWAP

On February 14, 2003, Valero Logistics entered into an interest rate swap
agreement to manage its exposure to changes in interest rates. The interest rate
swap has a notional amount of $60,000,000 and is tied to the maturity of the
6.875% senior notes. Under the terms of the interest rate swap agreement, Valero
Logistics will receive a fixed 6.875% rate and will pay a floating rate based on
LIBOR plus 2.45%. Valero Logistics will account for the interest rate swap as a
fair value hedge, with changes in the fair value recorded as an adjustment to
interest expense in the consolidated statement of income.

AMENDED REVOLVING CREDIT FACILITY

On March 6, 2003, Valero Logistics entered into an amended revolving credit
facility with the various banks included in its existing revolving credit
facility and from a group of new banks to increase the revolving credit facility
to $175,000,000. In addition to increasing the aggregate amount available under
the facility, the amount that may be borrowed to fund distributions to
unitholders was increased from $25,000,000 to $40,000,000. No other significant
terms and conditions of the revolving credit facility were changed, except that
the "Total Debt to EBITDA Ratio" as defined in the revolving credit facility was
changed such that the ratio may not exceed 4.0 to 1.0 (as opposed to 3.0 to 1.0
in the original facility), and Valero L.P. is now irrevocably and
unconditionally guaranteeing the revolving credit facility. This guarantee by
Valero L.P. ranks equally with all of its existing and future unsecured senior
obligations.

REDEMPTION OF VALERO L.P. COMMON UNITS AND AMENDMENT TO VALERO L.P.'S
PARTNERSHIP AGREEMENT

Valero L.P. intends to redeem from UDS Logistics a number of Valero L.P. common
units sufficient to reduce Valero Energy's aggregate ownership interest in
Valero L.P. to 49.5% or less, including Riverwalk Logistics' 2% general partner
interest. Valero L.P. intends to redeem the common units with proceeds from
debt financings expected to be completed in the first quarter of 2003.

In addition to the redemption of common units, Valero L.P. intends to amend its
partnership agreement to provide that Riverwalk Logistics may be removed by the
vote of the holders of at least 58% of its outstanding units, excluding the
common and subordinated units held by UDS Logistics and Valero GP, LLC. Upon
completion of the above redemption of common units and the amendment to Valero
L.P.'s partnership agreement, Riverwalk Logistics will no longer be deemed in
control of Valero L.P. and thus will no longer consolidate Valero L.P. and its
subsidiaries with its operations.

ASSET CONTRIBUTION TRANSACTIONS
On March 6, 2003, the Partnership entered into the following agreements:

o Affiliates of Valero Energy contributed to the Partnership certain crude
oil and other feedstock tank assets located at Valero Energy's West plant
of the Corpus Christi refinery, Texas City refinery and Benicia refinery to
Valero Logistics in exchange for an aggregate amount of $200,000,000 in
cash; and

o Affiliates of Valero Energy contributed to the Partnership certain refined
product pipelines and refined product terminals connected to Valero
Energy's Corpus Christi and Three Rivers refineries (referred to as the
South Texas Pipelines and Terminals) in exchange for an aggregate amount of
$150,000,000 in cash.

The contribution transactions are expected to close in March 2003 and are
conditioned upon the ability of the Partnership to obtain equity and debt
financing in sufficient amounts.