VALERO L.P. AND VALERO LOGISTICS OPERATIONS, L.P.
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
NOTE 1: Organization
Valero L.P. is a Delaware limited partnership owned approximately 73% by Valero
Energy Corporation (Valero Energy) and approximately 27% by public unitholders.
Valero Logistics Operations, L.P. (Valero Logistics Operations) is also a
Delaware limited partnership and is a subsidiary of Valero L.P. As used in this
report, the term Partnership may refer, depending on the context, to Valero
L.P., Valero Logistics Operations or both of them taken as a whole.
The Partnership owns and operates most of the crude oil and refined product
pipeline, terminalling and storage assets located in Texas, Oklahoma, New Mexico
and Colorado that support Valero Energy's McKee and Three Rivers refineries
located in Texas and its Ardmore refinery located in Oklahoma.
Valero Energy is a refining and marketing company with 12 refineries and
approximately 4,600 company-operated and dealer-operated convenience stores.
Valero Energy's refining operations include various logistics assets (pipelines,
terminals, marine dock facilities, bulk storage facilities, refinery delivery
racks, rail car loading equipment and shipping and trucking operations) that
support the refining and retail operations. A portion of the logistics assets
consists of crude oil and refined product pipelines, refined product terminals
and crude oil storage facilities located in Texas, Oklahoma, New Mexico and
Colorado that support the McKee, Three Rivers and Ardmore refineries. These
pipeline, terminalling and storage assets transport crude oil and other
feedstocks to the refineries and transport refined products from the refineries
to terminals for further distribution. Valero Energy markets the refined
products produced by these refineries primarily in Texas, Oklahoma, Colorado,
New Mexico and Arizona through a network of approximately 2,700 company-operated
and dealer-operated convenience stores, as well as other wholesale and spot
market sales and exchange agreements.
On December 31, 2001, Valero Energy completed its acquisition of Ultramar
Diamond Shamrock Corporation (UDS) in a purchase business combination. The
assets acquired included UDS' ownership in Valero L.P. and Valero Logistics
Operations as well as ownership of Riverwalk Logistics, L.P., the general
partner of both Valero L.P. and Valero Logistics Operations.
NOTE 2: Basis of Presentation
The Partnership prepared these unaudited consolidated and combined financial
statements in accordance with United States' generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934.
Accordingly, they do not include all of the information and notes required by
United States generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Certain previously reported amounts have been reclassified to conform
to the 2002 presentation.
Operating results for the three months ended March 31, 2002 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2002. The balance sheet as of December 31, 2001 has been derived from the
audited consolidated financial statements as of that date and restated to
include the balances of the Wichita Falls Business as discussed below, but does
not include all of the information and notes required by United States generally
accepted accounting principles for complete financial statements.
In addition, substantially all of the Partnership's revenues are derived from
Valero Energy and its various subsidiaries, based on the operations of Valero
Energy's McKee, Three Rivers and Ardmore refineries. Accordingly, the
Partnership's results are directly impacted by the operations of these three
Valero Energy refineries.