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SEC Filings
10-Q
NUSTAR ENERGY L.P. filed this Form 10-Q on 05/15/2002
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                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.


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