<PAGE>


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

                                    FORM 10-Q


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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

                                       OR


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

              FOR THE TRANSITION PERIOD FROM _________ TO _________

                          COMMISSION FILE NO.: 1-16335


                          WILLIAMS ENERGY PARTNERS L.P.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              DELAWARE                                 73-1599053
   (STATE OR OTHER JURISDICTION OF          (IRS EMPLOYER IDENTIFICATION NO.)
   INCORPORATION OR ORGANIZATION)


            ONE WILLIAMS CENTER, P.O. BOX 3448, TULSA, OKLAHOMA 74172
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)

                                 (918) 573-2000
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


         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  X  No
                                              ---    ---

    As of November 11, 2002, there were 13,679,694 common units outstanding.


<PAGE>


                                TABLE OF CONTENTS

                                     PART I

                              FINANCIAL INFORMATION

<Table>
<Caption>
                                                                           Page
                                                                           ----
<S>     <C>                                                                <C>

ITEM 1. FINANCIAL STATEMENTS

        WILLIAMS ENERGY PARTNERS L.P.

        Consolidated Statements of Income for the three and nine
        months ended September 30, 2002 and 2001 .........................   2

        Consolidated Balance Sheets as of September 30, 2002 and
        December 31, 2001 ................................................   3

        Consolidated Statements of Cash Flows for the nine months
        ended September 30, 2002 and 2001 ................................   4

        Notes to Consolidated Financial Statements .......................   5

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS ........................................  15

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .......  26

ITEM 4. CONTROLS AND PROCEDURES ..........................................  26

        FORWARD-LOOKING STATEMENTS .......................................  27


                                     PART II

                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS ................................................  28

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ........................  28

ITEM 3. DEFAULTS UPON SENIOR SECURITIES ..................................  28

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS ............  28

ITEM 5. OTHER INFORMATION ................................................  28

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K .................................  28

        CERTIFICATIONS ...................................................  31
</Table>

                                       1

<PAGE>
                                     PART I
                             FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


                         WILLIAMS ENERGY PARTNERS L.P.
                       CONSOLIDATED STATEMENTS OF INCOME
                    (IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
                                  (UNAUDITED)

<Table>
<Caption>
                                                                 THREE MONTHS ENDED              NINE MONTHS ENDED
                                                                    SEPTEMBER 30,                  SEPTEMBER 30,
                                                            ----------------------------    ----------------------------
                                                                2002            2001            2002            2001
                                                            ------------    ------------    ------------    ------------
<S>                                                         <C>             <C>             <C>             <C>

Transportation and terminalling revenues:
     Third party ........................................   $     84,878    $     81,846    $    240,940    $    234,571
     Affiliate ..........................................          8,560           7,699          24,966          19,682
Product sales revenues:
     Third party ........................................         13,818          10,264          29,941          35,389
     Affiliate ..........................................          6,120          18,178          24,091          44,317
Affiliate construction and management fee
  revenues ..............................................             --             213             210             807
                                                            ------------    ------------    ------------    ------------
          Total revenues ................................        113,376         118,200         320,148         334,766
Costs and expenses:
     Operating ..........................................         42,509          42,635         112,867         116,691
     Product purchases ..................................         18,039          25,428          48,463          71,919
     Depreciation and amortization ......................          8,753           8,813          26,345          26,497
     General and administrative .........................          9,776          12,995          32,731          34,958
                                                            ------------    ------------    ------------    ------------
          Total costs and expenses ......................         79,077          89,871         220,406         250,065
                                                            ------------    ------------    ------------    ------------
Operating profit ........................................         34,299          28,329          99,742          84,701
Interest expense:
     Affiliate interest expense .........................             --           1,593             407           7,135
     Other interest expense .............................          6,467           1,642          14,190           3,763
Interest income .........................................           (192)           (536)           (937)         (1,872)
Debt placement fee amortization .........................          2,191              80           7,221             160
Other income ............................................             --            (205)         (1,048)         (1,375)
                                                            ------------    ------------    ------------    ------------
Income before income taxes ..............................         25,833          25,755          79,909          76,890
Provision for income taxes ..............................             --           7,605           8,322          22,800
                                                            ------------    ------------    ------------    ------------
Net income ..............................................   $     25,833    $     18,150    $     71,587    $     54,090
                                                            ============    ============    ============    ============

Allocation of net income:
   Portion applicable to the pre-initial
      public offering period ............................   $         --    $         --    $         --    $        304
   Portion applicable to Williams Pipe Line
      earnings prior to its acquisition on
      April 11, 2002 ....................................             --          12,487          13,445          37,129
   Portion applicable to partners' interest .............         25,833           5,663          58,142          16,657
                                                            ------------    ------------    ------------    ------------
      Net income ........................................   $     25,833    $     18,150    $     71,587    $     54,090
                                                            ============    ============    ============    ============

Limited partners' interest in net income ................   $     24,428    $      5,550    $     55,414    $     16,324
General partner's interest in net income ................          1,405             113           2,728             333
                                                            ------------    ------------    ------------    ------------
Portion of net income applicable to partners' interest ..   $     25,833    $      5,663    $     58,142    $     16,657
                                                            ============    ============    ============    ============

Basic net income per limited partner unit ...............   $       0.90    $       0.49    $       2.75    $       1.44
                                                            ============    ============    ============    ============

Weighted average number of limited partner units
  outstanding used for basic net income per unit
  calculation ...........................................         27,190          11,359          20,131          11,359
                                                            ============    ============    ============    ============

Diluted net income per limited partner unit .............   $       0.90    $       0.49    $       2.75    $       1.44
                                                            ============    ============    ============    ============

Weighted average number of limited partner units
   outstanding used for diluted net income per unit
   calculation ..........................................         27,247          11,359          20,185          11,359
                                                            ============    ============    ============    ============
</Table>

                             See accompanying notes.


                                       2
<PAGE>

                          WILLIAMS ENERGY PARTNERS L.P.
                           CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<Table>
<Caption>
                                                                 SEPTEMBER 30,   DECEMBER 31,
                                                                     2002            2001
                                                                 ------------    ------------
                                                                  (UNAUDITED)
<S>                                                              <C>             <C>
                             ASSETS
Current assets:
    Cash and cash equivalents ................................   $     42,564    $     13,837
    Accounts receivable (less allowance for doubtful
        accounts of $399 and $510 at September 30, 2002
        and December 31, 2001, respectively) .................         19,692          16,828
    Other accounts receivable ................................          7,583          11,598
    Affiliate accounts receivable ............................         10,872           8,228
    Inventory ................................................          4,401          21,057
    Deferred income taxes - affiliate ........................             --           1,690
    Other current assets .....................................         13,257           1,828
                                                                 ------------    ------------
        Total current assets .................................         98,369          75,066
Property, plant and equipment, at cost .......................      1,325,106       1,338,393
    Less: accumulated depreciation ...........................        394,608         374,653
                                                                 ------------    ------------
        Net property, plant and equipment ....................        930,498         963,740
Goodwill (less amortization of $145 for both
    September 30, 2002 and December 31, 2001) ................         22,209          22,282
Other intangibles (less amortization of $233 and $310 at
    September 30, 2002 and December 31, 2001, respectively)
 .............................................................          2,495           2,639
Long-term affiliate receivables ..............................         15,897          21,296
Long-term receivables ........................................         11,158           8,809
Other noncurrent assets ......................................          2,322          10,727
                                                                 ------------    ------------
          Total assets .......................................   $  1,082,948    $  1,104,559
                                                                 ============    ============

                   LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
    Accounts payable .........................................   $      9,351    $     12,636
    Affiliate accounts payable ...............................         17,199          10,157
    Affiliate income taxes payable ...........................             --           8,544
    Accrued affiliate payroll and benefits ...................          5,836           4,606
    Accrued taxes other than income ..........................         13,754           9,948
    Accrued interest payable .................................            125             277
    Environmental liabilities ................................         10,811           8,650
    Deferred revenue .........................................         11,955           5,103
    Other current liabilities ................................          6,262           8,503
    Affiliate distributions payable ..........................          5,291              --
    Acquisition payable ......................................             --           8,853
                                                                 ------------    ------------
        Total current liabilities ............................         80,584          77,277
Long-term debt ...............................................        559,000         139,500
Long-term affiliate note payable .............................             --         138,172
Long-term affiliate payable ..................................            450           1,262
Deferred income taxes ........................................             --         147,029
Other deferred liabilities ...................................            807           1,127
Environmental liabilities ....................................         12,087           8,260
Minority interest ............................................             --           2,250
Class B equity securities ....................................        304,388              --
Commitments and contingencies
Partners' Capital:
     Partners' capital .......................................        126,627         589,682
     Accumulated other comprehensive income ..................           (995)             --
                                                                 ------------    ------------
          Total partners' capital ............................        125,632         589,682
                                                                 ------------    ------------
          Total liabilities and partners' capital ............   $  1,082,948    $  1,104,559
                                                                 ============    ============
</Table>

                             See accompanying notes.


                                       3
<PAGE>


                          WILLIAMS ENERGY PARTNERS L.P.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)
<Table>
<Caption>
                                                                                          NINE MONTHS ENDED
                                                                                            SEPTEMBER 30,
                                                                                     ----------------------------
                                                                                         2002            2001
                                                                                     ------------    ------------
<S>                                                                                  <C>             <C>
Operating Activities:
    Net income ...................................................................   $     71,587    $     54,090
    Adjustments to reconcile net income to net cash provided by
      operating activities:
        Depreciation and amortization ............................................         26,345          26,497
        Debt placement fee amortization ..........................................          7,221             160
        Deferred compensation expense ............................................          1,857           1,199
        Deferred income taxes ....................................................          1,641           4,950
        Gain on sale of assets ...................................................         (1,032)             --
        Changes in components of operating assets and liabilities
          excluding certain assets and liabilities of Williams Pipe Line
        Company excluded as part of its acquisition:
           Accounts receivable and other accounts receivable .....................         (7,625)           (116)
           Affiliate accounts receivable .........................................         (4,140)           (898)
           Inventories ...........................................................          5,864         (18,304)
           Accounts payable ......................................................         (3,285)         (1,174)
           Affiliate accounts payable ............................................         (1,533)         15,049
           Accrued income taxes due affiliate ....................................            487           1,012
           Accrued affiliate payroll and benefits ................................          1,230            (709)
           Accrued taxes other than income .......................................          3,806           6,178
           Accrued interest payable ..............................................           (152)            269
           Long-term affiliate receivables .......................................         (8,225)           (441)
           Current and noncurrent environmental liabilities ......................          8,154           1,086
           Other current and noncurrent assets and liabilities ...................         (5,974)          4,566
                                                                                     ------------    ------------
               Net cash provided by operating activities .........................         96,226          93,414

Investing Activities:
    Additions to property, plant and equipment ...................................        (25,644)        (27,293)
    Purchase of businesses .......................................................       (692,493)        (29,100)
    Proceeds from sale of assets .................................................          1,367              --
    Payment of acquisition deposit ...............................................         (6,000)
    Other ........................................................................            (62)            (66)
                                                                                     ------------    ------------
        Net cash used by investing activities ....................................       (722,832)        (56,459)

Financing Activities:
    Distributions paid ...........................................................        (27,959)         (9,905)
    Borrowings under credit facility .............................................          8,500         119,500
    Borrowings under short-term note .............................................        700,000              --
    Payments on short-term note ..................................................       (289,000)             --
    Capital contributions by affiliate ...........................................         17,051             634
    Sales of common units to public (less underwriters' commissions) .............        284,568          92,460
    Debt placement costs .........................................................         (7,087)           (909)
    Payment of formation costs associated with initial public offering ...........             --          (3,098)
    Redemption of 600,000 common units from affiliate ............................             --         (12,060)
    Payments on affiliate note payable ...........................................        (29,780)       (216,815)
    Payment of interest rate hedge ...............................................           (995)             --
    Other ........................................................................             35              --
                                                                                     ------------    ------------
        Net cash provided (used) by financing activities .........................        655,333         (30,193)
                                                                                     ------------    ------------

Change in cash and cash equivalents ..............................................         28,727           6,762
Cash and cash equivalents at beginning of period .................................         13,837              10
                                                                                     ------------    ------------
Cash and cash equivalents at end of period .......................................   $     42,564    $      6,772
                                                                                     ============    ============

Supplemental non-cash investing and financing transactions:
    Contributions by affiliate of long-term debt, deferred income tax
      liabilities, and other assets and liabilities to Partnership
        capital ..................................................................        186,847          73,484
    Purchase of business .........................................................       (304,388)             --
    Issuance of Class B equity securities ........................................        304,388              --
                                                                                     ------------    ------------
        Total ....................................................................   $    186,847    $     73,484
                                                                                     ============    ============
</Table>

                             See accompanying notes.


                                       4
<PAGE>

                          WILLIAMS ENERGY PARTNERS L.P.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. BASIS OF PRESENTATION

         In the opinion of management, the accompanying financial statements of
Williams Energy Partners L.P. (the "Partnership"), which are unaudited, except
for the balance sheet as of December 31, 2001 which is derived from audited
financial statements, include all normal and recurring adjustments necessary to
present fairly the Partnership's financial position as of September 30, 2002,
the results of operations for the three and nine month periods ended September
30, 2002 and 2001, and its cash flows for the nine months ended September 30,
2002 and 2001. The results of operations for the three and nine months ended
September 30, 2002 and the cash flows for the nine months ended September 30,
2002 are not necessarily indicative of the results to be expected for the full
year ending December 31, 2002.

         The historical results for Williams Pipe Line Company ("Williams Pipe
Line") included income and expenses and assets and liabilities that were
conveyed to and assumed by an affiliate of Williams Pipe Line prior to its
acquisition by the Partnership. The assets principally included Williams Pipe
Line's interest in and agreements related to Longhorn Partners Pipeline
("Longhorn"), an inactive refinery site at Augusta, Kansas and the ATLAS 2000
software system. The liabilities principally included the environmental
liabilities associated with the inactive refinery site in Augusta, Kansas and
current and deferred income taxes and affiliate note payable. The current and
deferred income taxes and the affiliate note payable were contributed to the
Partnership in the form of a capital contribution by an affiliate of The
Williams Companies, Inc. ("Williams"). The income and expenses associated with
Longhorn have not been included in the financial results of the Partnership
since the acquisition of Williams Pipe Line by the Partnership in April 2002.
Also, as agreed between the Partnership and Williams, revenues from Williams
Pipe Line's blending operations, other than an annual blending fee of
approximately $3.0 million, have not been included in the financial results of
the Partnership since April 2002. In addition, general and administrative
expenses related to the Williams Pipe Line system that the Partnership has been
reimbursing to Williams GP LLC ("General Partner"), its General Partner, have
been limited to $30.0 million on an annual basis. See Note 12 - Subsequent
Events regarding changes to the General Partner after September 30, 2002.

         Pursuant to the rules and regulations of the Securities and Exchange
Commission, the financial statements do not include all of the information and
notes normally included with financial statements prepared in accordance with
accounting principles generally accepted in the United States. These financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Partnership's Annual Report on Form
10-K for the year ended December 31, 2001.

         Certain amounts in the financial statements for 2001 have been
reclassified to conform to the current period's presentation.


2. ORGANIZATION

         Williams Energy Partners L.P. is a Delaware limited partnership that
was formed in August 2000 to own, operate and acquire a diversified portfolio of
complementary energy assets. At the time of the Partnership's initial public
offering in February 2001, the Partnership owned: (a) selected petroleum
products terminals previously owned by Williams Energy Ventures, Inc., and (b)
an ammonia pipeline system, Williams Ammonia Pipeline Inc., previously owned by
Williams Natural Gas Liquids, Inc. ("WNGL"). Prior to the closing of the
Partnership's initial public offering in February 2001, Williams Energy
Ventures, Inc. was owned by Williams Energy Services, LLC ("WES"). Both WES and
WNGL are wholly owned subsidiaries of Williams. Williams GP LLC, a Delaware
limited liability company, was also formed in August 2000, to serve as General
Partner for the Partnership.


                                       5
<PAGE>


         On February 9, 2001, the Partnership completed its initial public
offering of 4 million common units representing limited partner interests in the
Partnership at a price of $21.50 per unit. The proceeds of $86.0 million were
used to pay underwriting discounts and commissions of $5.6 million and legal,
professional fees and costs associated with the initial public offering of $3.1
million, with the remainder used to reduce affiliate note balances with
Williams.

         As part of the initial public offering, the underwriters exercised
their over-allotment option and purchased 600,000 common units, also at a price
of $21.50 per unit. The net proceeds of $12.1 million, after underwriting
discounts and commissions of $0.8 million, from this over-allotment option were
used to redeem 600,000 of the common units held by WES to reimburse it for
capital expenditures related to the Partnership's assets. The Partnership
maintained the historical costs of the net assets in connection with the initial
public offering. Following the exercise of the underwriters' over-allotment
option, 40% of the Partnership was owned by the public and 60%, including the
General Partner's ownership, was owned by affiliates of the Partnership.
Generally, the limited partners' liability in the Partnership is limited to
their investment.

         On April 11, 2002, the Partnership acquired all of the membership
interests of Williams Pipe Line for approximately $1.0 billion (see Note 3 -
Acquisitions). Because Williams Pipe Line was an affiliate of the Partnership at
the time of the acquisition, the transaction was between entities under common
control and, as such, has been accounted for similarly to a pooling of
interests. Accordingly, the consolidated financial statements and notes of the
Partnership have been restated to reflect the combined historical results of
operations, financial position and cash flows of Williams Energy Partners and
Williams Pipe Line throughout the periods presented. Williams Pipe Line's
operations are presented as a separate operating segment of the Partnership (see
Note 4 - Segment Disclosures).

         On April 11, 2002, the Partnership issued 7,830,924 Class B units
representing limited partner interests to its General Partner, Williams GP LLC.
The securities, valued at $304.4 million, were issued as partial payment for the
acquisition of Williams Pipe Line (See Note 3 - Acquisitions). The Partnership
has the right to redeem the Class B units for cash based on the 20-day average
closing price of the common units prior to the redemption date. If the Class B
units are not redeemed by April 11, 2003, then upon the request of the General
Partner and approval of the holders of a majority of the common units voting at
a meeting of the unitholders, the Class B units will convert into common units.
If the approval of the conversion by the common unitholders is not obtained
within 120 days of the General Partner's request, the General Partner will be
entitled to receive distributions with respect to its Class B units, on a per
unit basis, equal to 115% of the amount of distributions paid on a common unit.
See Note 12 - Subsequent Events for changes to the unit voting rights and
changes to the General Partner.

         In May 2002, the Partnership issued 8 million common units representing
limited partner interests in the Partnership at a price of $37.15 per unit for
total proceeds of $297.2 million. Associated with this offering, Williams paid
the Partnership $6.1 million to maintain its 2% general partner interest. A
portion of the total proceeds was used to pay underwriting discounts and
commissions of $12.6 million. Legal, professional fees and costs associated with
this offering were approximately $1.7 million. The remaining cash proceeds of
$289.0 million were used to partially repay the $700.0 million short-term note
assumed by the Partnership to help finance the Williams Pipe Line acquisition
(see Note 7 - Debt).

         See Note 12 - Subsequent Events regarding changes to the General
Partner after September 30, 2002.

3. ACQUISITIONS

         On April 11, 2002, the Partnership acquired all of the membership
interests of Williams Pipe Line for approximately $1.0 billion. The Partnership
financed the transaction through equity issued to Williams and with short-term
debt. Consideration of $304.4 million was given to Williams in the form of Class
B units representing limited partner interests in the Partnership issued to the
General Partner. Williams retained $15.0 million of Williams Pipe Line's
accounts receivable and the remaining $680.6 million of the consideration for
Williams Pipe Line was settled by the Partnership remitting to Williams $674.4
million in cash, after netting Williams' $6.2 million required contribution to
maintain its 2% general partner interest. The Partnership borrowed $700.0
million from a group of financial institutions, paid WES $674.4 million and used
$7.1 million of the borrowed funds to pay debt fees. The Partnership reserved
$3.5 million of the borrowed funds to pay transaction costs and retained $15.0
million to meet working capital needs.


                                       6
<PAGE>


         Because Williams Pipe Line was an affiliate of the Partnership at the
time of the acquisition, the transaction was between entities under common
control. As such, generally accepted accounting principles required that
Williams Pipe Line's assets and liabilities be recorded on the Partnership's
consolidated financial statements at their historical values, despite their
having been acquired at market value. As a result, the General Partner's capital
account was decreased by $415.1 million, which equaled the difference between
the historical and market values of Williams Pipe Line. The effect of this
treatment on the Partnership's overall capital balance resulted in a
debt-to-total capitalization ratio of 56.5%. Excluding this treatment, the
debt-to-total capitalization ratio is 39.8%.

         On August 23, 2002, Williams Pipe Line entered into a purchase and sale
agreement ("PSA") with Tesoro Refining and Marketing Company ("Tesoro") to
acquire Tesoro's pipeline that runs from Mandan, North Dakota to Roseville,
Minneapolis for $110.0 million. Acquisition and transition costs are estimated
to be approximately $3.8 million. The line includes approximately 280 miles of
pipe and four marketing terminals. At the time the PSA was signed, Williams Pipe
Line paid Tesoro an acquisition commitment fee of $6.0 million. In the event
Williams Pipe Line is unable to close within five days of the Federal Trade
Commission's ("FTC") approval of the transaction, or if the Partnership breaches
the PSA, the $6.0 million commitment fee will belong to Tesoro. The expected
closing date is uncertain due to the extensive requests made by the FTC. The
Partnership will fund the acquisition through additional borrowings. See Note 12
- Subsequent Events for events, which occurred after September 30, 2002,
applicable to the Tesoro pipeline acquisition.


4. SEGMENT DISCLOSURES

         Management evaluates performance based upon segment profit or loss from
operations, which includes revenues from affiliate and external customers,
operating expenses, depreciation and affiliate general and administrative
expenses. Affiliate revenues, which reflect transactions that are generally at
market values, are accounted for as if the sales were to unaffiliated third
parties.

         The Partnership's reportable segments are strategic business units that
offer different products and services. The segments are managed separately
because each segment requires different marketing strategies and business
knowledge.

<Table>
<Caption>
                                                              THREE MONTHS ENDED SEPTEMBER 30, 2002
                                                    ---------------------------------------------------------
                                                                     PETROLEUM       AMMONIA
                                                      WILLIAMS        PRODUCTS      PIPELINE
                                                     PIPE LINE       TERMINALS       SYSTEM         TOTAL
                                                    ------------   ------------   ------------   ------------
                                                                    (IN THOUSANDS - UNAUDITED)
 <S>                                                 <C>            <C>            <C>            <C>
Revenues:
    Third party customers .......................   $     80,860   $     16,112   $      1,724   $     98,696
    Affiliate customers .........................         10,435          4,245             --         14,680
                                                    ------------   ------------   ------------   ------------
        Total revenues ..........................         91,295         20,357          1,724        113,376
Operating expenses ..............................         32,415          9,254            840         42,509
Product purchases ...............................         18,039             --             --         18,039
Depreciation and amortization ...................          5,664          2,924            165          8,753
Affiliate general and administrative expenses ...          7,500          2,141            135          9,776
                                                    ------------   ------------   ------------   ------------
Segment profit ..................................   $     27,677   $      6,038   $        584   $     34,299
                                                    ============   ============   ============   ============

</Table>

<Table>
<Caption>
                                                             THREE MONTHS ENDED SEPTEMBER 30, 2001
                                                    ---------------------------------------------------------
                                                                     PETROLEUM      AMMONIA
                                                      WILLIAMS        PRODUCTS      PIPELINE
                                                     PIPE LINE       TERMINALS       SYSTEM         TOTAL
                                                    ------------   ------------   ------------   ------------
                                                                   (IN THOUSANDS - UNAUDITED)
<S>                                                 <C>            <C>            <C>            <C>
Revenues:
    Third party customers .......................   $     74,596   $     14,303   $      3,211   $     92,110
    Affiliate customers .........................         21,826          4,264             --         26,090
                                                    ------------   ------------   ------------   ------------
        Total revenues ..........................         96,422         18,567          3,211        118,200
Operating expenses ..............................         33,318          8,009          1,308         42,635
Product purchases ...............................         25,428             --             --         25,428
Depreciation and amortization ...................          6,070          2,580            163          8,813
Affiliate general and administrative expenses ...         10,582          2,045            368         12,995
                                                    ------------   ------------   ------------   ------------
Segment profit ..................................   $     21,024   $      5,933   $      1,372   $     28,329
                                                    ============   ============   ============   ============
</Table>


                                       7
<PAGE>


<Table>
<Caption>
                                                              NINE MONTHS ENDED SEPTEMBER 30, 2002
                                                    ---------------------------------------------------------
                                                                     PETROLEUM      AMMONIA
                                                      WILLIAMS        PRODUCTS     PIPELINE
                                                     PIPE LINE       TERMINALS      SYSTEM           TOTAL
                                                    ------------   ------------   ------------   ------------
                                                                   (IN THOUSANDS - UNAUDITED)
<S>                                                 <C>            <C>            <C>            <C>

Revenues:
    Third party customers .......................   $    215,382   $     46,877   $      8,622   $    270,881
    Affiliate customers .........................         36,179         13,088             --         49,267
                                                    ------------   ------------   ------------   ------------
        Total revenues ..........................        251,561         59,965          8,622        320,148
Operating expenses ..............................         85,031         24,768          3,068        112,867
Product purchases ...............................         48,463             --             --         48,463
Depreciation and amortization ...................         17,347          8,505            493         26,345
Affiliate general and administrative expenses ...         25,279          6,454            998         32,731
                                                    ------------   ------------   ------------   ------------
Segment profit ..................................   $     75,441   $     20,238   $      4,063   $     99,742
                                                    ============   ============   ============   ============
</Table>

<Table>
<Caption>
                                                               NINE MONTHS ENDED SEPTEMBER 30, 2001
                                                    ---------------------------------------------------------
                                                                     PETROLEUM       AMMONIA
                                                      WILLIAMS        PRODUCTS      PIPELINE
                                                     PIPE LINE       TERMINALS       SYSTEM         TOTAL
                                                    ------------   ------------   ------------   ------------
                                                                   (IN THOUSANDS - UNAUDITED)
<S>                                                 <C>            <C>            <C>            <C>
Revenues:
    Third party customers .......................   $    218,295   $     41,590   $     10,075   $    269,960
    Affiliate customers .........................         52,761         12,045             --         64,806
                                                    ------------   ------------   ------------   ------------
        Total revenues ..........................        271,056         53,635         10,075        334,766
Operating expenses ..............................         90,785         22,653          3,253        116,691
Product purchases ...............................         71,919             --             --         71,919
Depreciation and amortization ...................         17,991          8,019            487         26,497
Affiliate general and administrative expenses ...         28,414          5,633            911         34,958
                                                    ------------   ------------   ------------   ------------
Segment profit ..................................   $     61,947   $     17,330   $      5,424   $     84,701
                                                    ============   ============   ============   ============
</Table>

5. RELATED PARTY TRANSACTIONS

         The Partnership has entered into agreements with various Williams
subsidiaries. Agreements with Williams Energy Marketing & Trading Company
("EM&T") provide for sales of pipeline inventory overages and product blending
and fractionation services, as well as lease storage capacity and, historically,
for sales of blended gasoline. (See Note 1 - Basis of Presentation for more
information about income and expenses associated with Williams Pipe Line
historical operations that are no longer being conducted by the Partnership).
Because of the nature of the Partnership's agreements with Williams, the
Partnership has limited commodity price exposure. The Partnership has several
agreements with EM&T, which provide for: (i) the access to and utilization of
one of the Partnership's inland terminals, (ii) approximately 2.8 million
barrels of storage and other ancillary services at the Partnership's marine
terminal facilities, (iii) capacity utilization rights to substantially all of
the capacity of the Gibson, Louisiana marine terminal facility, and (iv)
throughput commitments with Williams Pipe Line that allows Williams Pipe Line to
satisfy its throughput commitments on third party pipelines. Williams Pipe Line
has entered into agreements with Williams Petroleum Services Inc. and Williams
Bio-Energy, LLC ("Williams Bio-Energy"), affiliates of Williams, to provide
butane blending services and ethanol storage, respectively. Williams Bio-Energy
also leases ethanol storage at the Partnership's Galena Park, Texas marine
facility. Both EM&T and Williams Refining & Marketing, L.L.C. ship product on
the Williams Pipe Line system and EM&T leases tank storage on the Williams Pipe
Line system. Additionally, the Partnership has agreements with Williams Refining
& Marketing for access to and utilization of the Partnership's inland terminal
facilities and with Williams Bio-Energy for access to and utilization of both
the Partnership's inland and marine facilities. The following are revenues from
various Williams subsidiaries (in thousands):

<Table>
<Caption>
                                                   THREE MONTHS ENDED           NINE MONTHS ENDED
                                                      SEPTEMBER 30,               SEPTEMBER 30,
                                              ---------------------------   ---------------------------
                                                  2002           2001           2002           2001
                                              ------------   ------------   ------------   ------------
<S>                                           <C>            <C>            <C>            <C>
Williams Energy Marketing & Trading ........  $     10,212   $     20,995   $     35,495   $     53,193
Williams Refining & Marketing ..............         1,699          3,705          7,517          7,956
Williams Bio-Energy ........................         1,278          1,095          3,400          2,494
Williams Petroleum Services ................           875             --          1,750             --
Other ......................................           616            295          1,105          1,163
                                              ------------   ------------   ------------   ------------
     Total .................................  $     14,680   $     26,090   $     49,267   $     64,806
                                              ============   ============   ============   ============
</Table>


                                       8
<PAGE>


         Beginning with the closing date of the initial public offering, the
General Partner, through provisions included in the Omnibus Agreement, has
limited the amount of general and administrative costs charged to the
Partnership for the petroleum products terminals and ammonia pipeline system
operations. In addition, beginning with the acquisition of Williams Pipe Line,
the General Partner has limited the amount of general and administrative expense
charged to the Partnership for these operations. The additional general and
administrative costs incurred by the General Partner, but not charged to the
Partnership, totaled $6.2 million and $3.5 million for the three months ended
September 30, 2002 and 2001, respectively, and $15.3 million for the nine months
ended September 30, 2002 and $6.7 million for the period February 10, 2001
through September 30, 2001.

         On August 1, 2002, Williams announced that it had sold 98% of Mapletree
LLC, which owns Mid-America Pipeline Company ("MAPL") to Enterprise Products
Partners L.P. ("Enterprise). The Partnership has an agreement with MAPL, which
addresses shared operating costs as well as commercial and general and
administrative support costs related to the Partnership's ammonia pipeline
system. Enterprise has agreed to continue this agreement for a six-month
transition period, which can be extended to a one-year period unless either
party provides a 90-day written notification to cancel the agreement. However,
the agreement also stipulates that the shared operating costs with MAPL will
remain in effect as long as MAPL owns and operates the natural gas liquids
pipeline system adjoining the Partnership's ammonia pipeline system, unless the
parties mutually agree to terminate the agreement.


6. INVENTORIES

         Inventories at September 30, 2002 and December 31, 2001 were as follows
(in thousands):

<Table>
<Caption>
                                       SEPTEMBER 30,   DECEMBER 31,
                                           2002            2001
                                       -------------   ------------
<S>                                     <C>            <C>
Refined petroleum products ..........   $        257   $      5,926
Natural gas liquids .................          2,664         14,210
Additives ...........................          1,074            480
Other ...............................            406            441
                                        ------------   ------------
     Total inventories ..............   $      4,401   $     21,057
                                        ============   ============
</Table>

         The decrease in the natural gas liquids inventory is the result of the
Partnership changing its butane blending operations to that of a service
provider only. The decrease in refined petroleum products is the result of the
selling of inventories due to favorable market conditions during the current
quarter.

7. DEBT

         As of September 30, 2002, the Partnership had a $175.0 million bank
credit facility with $148.0 million borrowed under that facility and $27.0
million of additional borrowing capacity. The credit facility is comprised of a
$90.0 million term loan facility and an $85.0 million revolving credit facility,
which includes a $73.0 million acquisition sub-facility and a $12.0 million
working capital sub-facility. As of September 30, 2002, the Partnership had
borrowed $90.0 million under the term loan facility and $58.0 million under the
acquisition facility. The credit facility's term extends through February 5,
2004, with all amounts due at that time. Borrowings under the credit facility
carry an interest rate equal to the Eurodollar rate plus a spread from 1.0% to
1.5%, depending on the leverage ratio of Williams OLP, L.P. ("OLP"), a
subsidiary of the Partnership. Interest is also assessed on the unused portion
of the credit facility at a rate from 0.2% to 0.4%, depending on the OLP's
leverage ratio. The OLP's leverage ratio is defined as the ratio of consolidated
total debt to consolidated earnings before interest, income taxes, depreciation
and amortization for the period of the four fiscal quarters ending on such date.
Debt placement fees associated with the initiation of the credit facility were
$0.9 million, which are being amortized over the life of the facility. The
weighted average interest rate on the credit facility was 3.4% for both the
three and nine months ended September 30, 2002, and 5.5% for the three months
ended September 30, 2001, and 6.0% for the period February 9, 2001 through
September 30, 2001.

         In April 2002, the Partnership borrowed $700.0 million from a group of
financial institutions. This note was used to help finance the Partnership's
acquisition of Williams Pipe Line. During the second quarter of 2002, with net
proceeds from an equity offering, the Partnership repaid $289.0 million of the
note. The


                                       9
<PAGE>


weighted average interest rate on this note was 5.2% for the three months ended
September 30, 2002, and 4.6% for the period April 11, 2002 through September 30,
2002. Debt placement fees associated with the note were $7.1 million and were
amortized over the life of the note, including $2.1 million amortized in the
current quarter. In October 2002, the Partnership negotiated an extension to the
maturity of this note from October 8, 2002, to November 27, 2002. During the
extension period, the note will carry an interest rate equal to the Eurodollar
rate plus 4.0%, or the prime rate plus 3.0%, at the Partnership's discretion.
The Partnership paid debt financing costs of approximately $2.1 million
associated with the maturity date extension. Because the Partnership has both
the ability and the intent to refinance this loan with long-term debt, the loan
has been classified as long-term on the balance sheet. If the short-term note is
repaid after November 15, 2002, the Partnership will incur additional debt
financing costs of approximately $4.1 million.

         During September 2002, in anticipation of a new debt placement to
replace the short-term debt assumed to acquire Williams Pipe Line, the
Partnership entered into an interest rate hedge. The effect of this interest
rate hedge was to set the coupon rate on a portion of the fixed-rate debt at
7.75% prior to actual execution of the debt agreement. The cost of the hedge,
approximately $1.0 million, was recorded in other comprehensive income and will
be amortized over the five-year life of the fixed-rate debt that the Partnership
anticipates funding in November 2002. See Note 12 - Subsequent Events for
debt-related activity that occurred after September 30, 2002.


8. COMMITMENTS AND CONTINGENCIES

         WES has agreed to indemnify the Partnership against any covered
environmental losses, up to $15.0 million, relating to assets it contributed to
the Partnership at the time of the initial public offering that arose prior to
February 9, 2001, that become known within three years after February 9, 2001,
and that exceed all amounts recovered or recoverable by the Partnership under
contractual indemnities from third parties or under any applicable insurance
policies. Covered environmental losses are those non-contingent terminal and
ammonia system environmental losses, costs, damages and expenses suffered or
incurred by the Partnership arising from correction of violations of, or
performance of remediation required by, environmental laws in effect at February
9, 2001, due to events and conditions associated with the operation of the
assets and occurring before February 9, 2001.

         In connection with the acquisition of Williams Pipe Line, WES agreed to
indemnify the Partnership for any breach of a representation or warranty that
results in losses and damages of up to $110.0 million after the payment of a
$6.0 million deductible. With respect to any amount exceeding $110.0 million,
WES will be responsible for one-half of that amount up to $140.0 million. In no
event will WES' liability exceed $125.0 million. These indemnification
obligations will survive for one year, except that those relating to employees
and employee benefits will survive for the applicable statute of limitations and
those relating to real property, including title to WES' assets, will survive
for ten years. This indemnity also provides that the Partnership will be
indemnified for an unlimited amount of losses and damages related to tax
liabilities. In addition, any losses and damages related to environmental
liabilities that arose prior to the acquisition will be subject only to a $2.0
million deductible, which was met during the third quarter of 2002, with the
indemnification covering six years.

         Estimated liabilities for environmental costs were $22.9 million and
$16.9 million at September 30, 2002 and December 31, 2001, respectively.
Management estimates that expenditures associated with these environmental
remediation liabilities will be paid over the next five years. Receivables
associated with these environmental liabilities of $21.4 million and $5.1
million at September 30, 2002 and December 31, 2001, respectively, have been
recognized as recoverable from affiliates and third parties. These estimates,
provided on an undiscounted basis, were determined based primarily on data
provided by a third-party environmental evaluation service and Williams'
internal environmental engineers. These liabilities have been classified as
current or non-current based on management's estimates regarding the timing of
actual payments.

         In conjunction with the 1999 acquisition of the Gulf Coast marine
terminals from Amerada Hess Corporation ("Hess"), Hess has disclosed to the
Partnership all suits, actions, claims, arbitrations, administrative,
governmental investigation or other legal proceedings pending or threatened,
against or related to the assets acquired by the Partnership, which arise under
environmental law. In the event that any pre-acquisition releases of hazardous
substances at the Partnership's Corpus Christi and Galena Park, Texas and
Marrero, Louisiana marine terminal facilities were unknown at closing but
subsequently identified by the Partnership prior to July 30, 2004, the
Partnership will be liable for the first $2.5 million


                                       10
<PAGE>


of environmental liabilities, Hess will be liable for the next $12.5 million of
losses and the Partnership will assume responsibility for any losses in excess
of $15.0 million. Also, Hess agreed to indemnify the Partnership through July
30, 2014, against all known and required environmental remediation costs at the
Corpus Christi and Galena Park, Texas marine terminal facilities from any
matters related to pre-acquisition actions. Hess has indemnified the Partnership
for a variety of pre-acquisition fines and claims that may be imposed or
asserted against the Partnership under certain environmental laws. At both
September 30, 2002 and December 31, 2001, the Partnership had accrued $0.6
million for costs that may not be recoverable under Hess' indemnification.

         During 2001, the Partnership recorded an environmental liability of
$2.6 million at its New Haven, Connecticut facility, which was acquired in
September 2000. This liability was based on third-party environmental
engineering estimates completed as part of a Phase II environmental assessment,
routinely required by the State of Connecticut to be conducted by the purchaser
following the acquisition of a petroleum storage facility. The Partnership has
begun a Phase III environmental assessment at this facility, which will be
completed during the fourth quarter of 2002. The environmental liability at the
new Haven facility could change materially based on this more thorough analysis.
The seller of these assets agreed to indemnify the Partnership for certain of
these environmental liabilities. In addition, the Partnership purchased
insurance for up to $25.0 million of environmental liabilities associated with
these assets, which carries a deductible of $0.3 million. Any environmental
liabilities at this location not covered by the seller's indemnity and not
covered by insurance are covered by the WES environmental indemnifications to
the Partnership, subject to the $15.0 million limitation.

         During 2001, the Environmental Protection Agency ("EPA"), pursuant to
Section 308 of the Clean Water Act, preliminarily determined that Williams may
have systemic problems with petroleum discharges from pipeline operations. The
inquiry primarily focused on Williams Pipe Line, which was subsequently acquired
by the Partnership. The response to the EPA's information request was submitted
during November 2001. Any claims the EPA may assert relative to this inquiry
would be covered by the Partnership's environmental indemnifications from
Williams.

         WNGL will indemnify the Partnership for right-of-way defects or
failures in the ammonia pipeline easements for 15 years after the initial public
offering closing date. WES has also indemnified the Partnership for right-of-way
defects or failures associated with the marine terminal facilities at Galena
Park, Corpus Christi and Marrero for 15 years after the initial public offering
closing date.

         On May 31, 2002, Farmland Industries, Inc. ("Farmland") and several of
its subsidiaries filed for Chapter 11 bankruptcy protection. Farmland, the
largest customer on the ammonia pipeline system, is also a customer of Williams
Pipe Line and petroleum products terminals. The Partnership received
approximately $2.3 million in payments from Farmland during the preference
period prior to Farmland filing for bankruptcy. Management believes that the
Partnership will not be required to reimburse these funds to the bankruptcy
trustee because they were received in the ordinary course of business with
Farmland. Farmland's receivable balance with the Partnership at September 30,
2002, was $0.2 million. The Partnership has two five-year petroleum pipeline
lease capacity agreements with Farmland. The first of these agreements, which
expires on November 30, 2004, requires an annual payment by Farmland of $1.2
million on each November 30th during the contract period. The second agreement,
which expires on April 30, 2007, is for $0.5 million annually and is invoiced to
Farmland on a monthly basis.

         The Partnership is party to various other claims, legal actions and
complaints arising in the ordinary course of business. In the opinion of
management, the ultimate resolution of all claims, legal actions and complaints
after consideration of amounts accrued, insurance coverage or other
indemnification arrangements will not have a material adverse effect upon the
Partnership's future financial position, results of operations or cash flows.


                                       11
<PAGE>


9. RESTRICTED UNITS

         In February 2001, the General Partner adopted the Williams Energy
Partners' Long-Term Incentive Plan for Williams' employees who perform services
for Williams Energy Partners L.P. and directors of the General Partner. The
Long-Term Incentive Plan consists of two components: phantom units and unit
options. The Long-Term Incentive Plan permits the grant of awards covering an
aggregate of 700,000 common units. The Long-Term Incentive Plan is administered
by the compensation committee of the General Partner's board of directors.

         In April 2001, the General Partner issued grants of 92,500 restricted
units, which are also referred to as phantom units, to certain key employees
associated with the Partnership's initial public offering in February 2001.
These one-time initial public offering phantom units will vest over a 34-month
period ending on February 9, 2004, and are subject to forfeiture if employment
is terminated prior to vesting. These units are subject to early vesting if the
Partnership achieves certain performance measures. The Partnership achieved the
first of two performance measures in February 2002 and as a result, 46,250 of
the phantom units vested, resulting in a charge to compensation expense of
approximately $1.0 million. The Partnership recognized additional compensation
expense of $0.1 million and $0.4 million related to the remaining non-vested
units associated with these grants in the three and nine months ended September
30, 2002, respectively. When the $0.70 per unit distribution, approved by the
General Partner's board of directors on October 23, 2002, is paid on November
14, 2002, the final performance measure associated with the initial public
offering unit awards will be met. As a result, the remaining 46,250 awards will
vest at the earlier of: (i) the funding date of the Williams Pipe Line
short-term note replacement, or (ii) December 1, 2002. The Partnership expects
that it will recognize an expense of $0.7 million associated with the vesting of
these awards. The fair market value of the phantom units associated with this
grant was $2.8 million on the grant date.

         In April 2001, the General Partner issued grants of 64,200 phantom
units associated with the annual incentive compensation plan. The actual number
of units that will be awarded under this grant will be determined by the
Partnership on February 9, 2004. At that time, the Partnership will assess
whether certain performance criteria have been met and determine the number of
units that will be awarded, which could range from zero units up to a total of
128,400 units. These units are also subject to forfeiture if employment is
terminated prior to February 9, 2004. These awards do not have an early vesting
feature, unless there is a change in control of the Partnership's General
Partner. The Partnership is assuming that the full 128,400 will ultimately be
awarded and recognized $0.3 million and $0.9 million of compensation expense
associated with these awards for the three and nine months ended September 30,
2002. The fair market value of the phantom units associated with this grant was
$4.2 million on September 30, 2002.

         The Board of Directors of the Partnership's General Partner approved
22,150 phantom units associated with the 2002 incentive compensation plan. The
actual number of units that will be awarded under this grant will be determined
by the Partnership in early 2005. At that time, the Partnership will assess
whether certain performance criteria have been met and determine the number of
units that will be awarded, which could range from zero units up to a total of
44,300 units. These units are also subject to forfeiture if employment is
terminated prior to the vesting date. These awards do not have an early vesting
feature, unless there is a change in control of the Partnership's General
Partner. The Partnership is assuming that 22,150 units will ultimately be
awarded and recorded incentive compensation expense of $0.1 million during the
current quarter associated with these awards. Based on the closing price of
$32.50 per unit at September 30, 2002, these units were valued at $0.7 million.



                                       12
<PAGE>


10. DISTRIBUTIONS

         Distributions paid by the Partnership during 2001 and 2002 are as
follows:

<Table>
<Caption>
    DATE
    CASH               PER UNIT CASH         TOTAL
DISTRIBUTION            DISTRIBUTION         CASH
    PAID                  AMOUNT         DISTRIBUTION
------------------     -------------     ------------
<S>                    <C>              <C>

  05/15/01(a)             $0.2920        $3.4 million
  08/14/01                $0.5625        $6.5 million
  11/14/01                $0.5775        $6.7 million
  02/14/02                $0.5900        $6.9 million
  05/15/02                $0.6125        $7.2 million
  08/14/02(b)             $0.6750       $19.2 million
  11/14/02(b & c)         $0.7000       $20.1 million
</Table>

         (a) This distribution represented the prorated minimum quarterly
distribution for the 50-day period following the initial public offering closing
date, which included February 10, 2001 through March 31, 2001.

         (b) Total cash distributions on 8/14/02 and 11/14/02 include $5.3
million and $5.5 million, respectively, of distributions associated with the
Class B units. These distributions have been reserved and will not be
distributed until the short-term note, used to help finance the Williams Pipe
Line acquisition, is repaid.

         (c) The General Partner declared this cash distribution on October 23,
2002, to be paid on November 14, 2002, to unitholders of record at the close of
business on November 4, 2002. Total cash distributions of $20.1 million include
an incentive distribution to the Partnership's General Partner of $0.7 million.

11. NET INCOME PER UNIT

         The following tables provide details of the basic and diluted net
income per unit computations (in thousands, except per unit amounts):

<Table>
<Caption>
                                                                     FOR THE THREE MONTHS ENDED
                                                                         SEPTEMBER 30, 2002
                                                             ------------------------------------------
                                                                INCOME         UNITS         PER UNIT
                                                              (NUMERATOR)  (DENOMINATOR)      AMOUNT
                                                             ------------  -------------   ------------
<S>                                                          <C>            <C>            <C>
Limited partners' interest in net income .................   $     24,428

Basic net income per common and subordinated unit ........   $     24,428         27,190   $       0.90

Effect of dilutive restricted unit grants ................             --             57             --
                                                             ------------   ------------   ------------

Diluted net income per common and subordinated unit ......   $     24,428         27,247   $       0.90
                                                             ============   ============   ============
</Table>


<Table>
<Caption>
                                                                  FOR THE NINE MONTHS ENDED
                                                                      SEPTEMBER 30, 2002
                                                         ------------------------------------------
                                                             INCOME        UNITS         PER UNIT
                                                          (NUMERATOR)  (DENOMINATOR)      AMOUNT
                                                         ------------  -------------   ------------
<S>                                                      <C>           <C>             <C>

Limited partners' interest in net income .............   $     55,414

Basic net income per common and subordinated unit ....   $     55,414         20,131   $       2.75

Effect of dilutive restricted unit grants ............             --             54             --
                                                         ------------   ------------   ------------

Diluted net income per common and subordinated unit ..   $     55,414         20,185   $       2.75
                                                         ============   ============   ============
</Table>

      Units reported as dilutive securities are related to restricted unit
grants associated with the one-time initial public offering award (see Note 9).


                                       13
<PAGE>
12. SUBSEQUENT EVENTS

         In October 2002, the Partnership negotiated an extension of the
Williams Pipe Line short-term note to November 27, 2002. During the extension
period, the note carries an interest rate equal to the Eurodollar rate plus 4.0%
or the prime rate plus 3.0%, at the Partnership's discretion. The Partnership
paid debt financing costs of approximately $2.1 million associated with the
maturity date extension. If the short-term note is repaid after November 15,
2002, the Partnership will incur additional debt financing costs of
approximately $4.1 million.

         On October 25, 2002, the Partnership sold the Mobile, Alabama inland
terminal to Radcliff/Economy Marine Services, Inc. for approximately $1.3
million and recorded a gain on the sale of approximately $1.0 million. The
Mobile, Alabama terminal was considered to be a non-core asset of the
Partnership. The sale reduced the number of inland facilities owned by the
Partnership from 25 terminals to 24 terminals.

         On October 31, 2002, Williams Pipe Line entered into a private
placement debt agreement, effective October 1, 2002, with a group of financial
institutions for up to $200.0 million aggregate principal amount of Floating
Rate Series A Senior Secured Notes and up to $340.0 million aggregate principal
amount of Fixed Rate Series B Senior Secured Notes. The maturity date of both
notes is October 7, 2007. Two borrowings will occur in relation to these notes.
The first borrowing will be for $420.0 million, allocated pro rata between the
Series A notes and Series B notes, and will be used to repay Williams Pipe
Line's existing short-term note and pay related debt placement fees. The second
borrowing will be allocated pro rata between the Series A notes and Series B
notes and will be for either: (i) $120.0 million if the Tesoro pipeline
acquisition is consummated (See Note 3 - Acquisitions), or (ii) $60.0 million to
be used primarily for repayment of other debt of the Partnership. The Floating
Rate Series A Senior Secured Notes will carry an interest rate equal to the
six-month Eurodollar Rate plus: (i) 4.25% or (ii) an amount necessary to equal
the rate on the Series B note borrowings on a swap-equivalent basis, whichever
is greater. The Fixed Rate Series B Senior Secured Notes will carry an interest
rate of 7.67% on the first borrowing and a rate equal to the five year U.S.
Treasury Bond plus 4.70% on the second borrowing. Debt placement fees associated
with these notes are expected to be $12.1 million, which will be amortized over
the life of the notes. Payment of interest and repayment of the principal is
guaranteed by the Partnership. As part of this agreement, the Partnership agreed
that it will not redeem or retire the Partnership's Class B units held by
Williams or any of its affiliates except with the proceeds from equity issued by
the Partnership.

         During October 2002 and November 2002, several amendments were made to
the Partnership and General Partner agreements. The first change requires the
Partnership and the General Partner to maintain separateness from Williams
including formalities on interaction between the Partnership, the public and
Williams. Changes were also made to require the approval of the Conflicts
Committee (consisting of three independent directors) before the General Partner
can make bankruptcy-related decisions for the Partnership. In addition,
adjustments were made to the voting rights of units held by Williams. Williams'
Class B units no longer have voting rights, its subordinated units have one-half
vote for every one unit owned and its common units will be allowed to vote in
the subordinated class vote. Finally, election of the board members of the
General Partner has been moved to a vote of the common unitholders, with the
first vote to be held in 2003. The voting right changes and board member
election changes will be voided and reversed in the event of a foreclosure in a
Williams-related bankruptcy proceeding.

         In addition, Williams is in the process of creating a new General
Partner, WEG GP LLC. The new General Partner, which is owed by affiliates of
Williams, has all of the rights, privileges and responsibilities relative to the
Partnership previously held by the old General Partner, Williams GP LLC.
Williams GP LLC will continue to own the Class B units issued by Partnership in
April 2002.

         On November 4, 2002, Tesoro returned the $6.0 million acquisition
commitment fee (See Note 3 - Acquisitions) to the Partnership. In return, the
Partnership agreed to allow Tesoro to seek alternate potential acquirers for its
pipeline. The Partnership is still actively pursuing the acquisition of this
pipeline from Tesoro.


                                       14
<PAGE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

INTRODUCTION

         Management's Discussion and Analysis of Financial Condition and Results
of Operations should be read in conjunction with the consolidated financial
statements and notes thereto. Williams Energy Partners L.P. is a publicly traded
limited partnership formed by The Williams Companies, Inc. ("Williams") to own,
operate and acquire a diversified portfolio of complementary energy assets. We
are principally engaged in the transportation, storage and distribution of
refined petroleum products and ammonia. Our current asset portfolio consists of:

           -     the Williams Pipe Line system;

           -     five marine terminal facilities;

           -     24 inland terminals (some of which are partially owned); and

           -     an ammonia pipeline system.

         On April 11, 2002, we acquired, for approximately $1.0 billion, all of
the membership interests of Williams Pipe Line Company ("Williams Pipe Line"),
which owns and operates the Williams Pipe Line system. Because Williams Pipe
Line was an affiliate of ours at the time of the acquisition, the transaction
was between entities under common control and, as such, was accounted for
similarly to a pooling of interest. Accordingly, our consolidated financial
statements and notes have been restated to reflect the historical results of
operations, financial position and cash flows of Williams Energy Partners and
Williams Pipe Line on a combined basis throughout the periods presented.

         The historical results for Williams Pipe Line include revenue and
expenses and assets and liabilities that were conveyed to and assumed by an
affiliate of Williams Pipe Line prior to our acquisition of it. These assets
primarily include Williams Pipe Line's interest in and agreements related to
Longhorn Partners Pipeline ("Longhorn"), an inactive refinery site at Augusta,
Kansas and the ATLAS 2000 software system. The results from these assets have
not been included in our financial results since the acquisition of Williams
Pipe Line by the Partnership in April 2002. In addition, revenues from Williams
Pipe Line's blending operations, other than an annual blending fee of
approximately $3.0 million, have not been included in our financial results
since April 2002. We have reported the Williams Pipe Line system's operations as
a separate operating segment.


RECENT DEVELOPMENTS

         On August 23, 2002, we entered into a purchase and sale agreement
("PSA") with Tesoro Refining and Marketing Company ("Tesoro") to acquire
Tesoro's pipeline that runs from Mandan, North Dakota to Roseville, Minneapolis
for $110.0 million. Acquisition and transition costs are estimated to be
approximately $3.8 million. The line includes approximately 280 miles of pipe
and four marketing terminals. The expected closing date is uncertain due to the
extensive requests made by the Federal Trade Commission ("FTC"). We will fund
the acquisition through additional borrowings. At the time the PSA was signed,
we paid Tesoro an acquisition commitment fee of $6.0 million (See Note 3 -
Acquisitions). On November 4, 2002, Tesoro returned the $6.0 million acquisition
commitment fee to us. In return, we agreed to allow Tesoro to seek alternate
potential acquirers for its pipeline; however, we are still actively pursuing
this acquisition. Under the terms of PSA, in the event that we are unable to
close this transaction within five days of the FTC's approval of the
transaction, or if we breach the PSA, we will owe Tesoro the $6.0 million
commitment fee.

         On October 23, 2002, our General Partner declared an increase in the
quarterly cash distribution from $0.675 to $0.70 per unit, representing a 4%
increase over the previous quarter's distribution and a 33% increase since our
initial public offering in February 2001. The distribution increase is for the
period of July 1 through September 30, 2002. The distribution will be paid on
November 14, 2002 to unitholders of record at the close of business on November
4, 2002.


                                       15
<PAGE>
         In October 2002, we negotiated an extension to the maturity of the
Williams Pipe Line short-term note, extending the maturity date to November 27,
2002. During the extension period, the note will carry an interest rate equal to
the Eurodollar rate plus 4.0% or the prime rate plus 3.0%, at our discretion. We
paid debt financing costs of approximately $2.1 million associated with the
maturity date extension. If the short-term note is repaid after November 15,
2002, the Partnership will incur additional debt financing costs of $4.1
million.

         On October 25, 2002, we sold the Mobile, Alabama inland terminal to
Radcliff/Economy Marine Services, Inc. for approximately $1.3 million and
recorded a gain on the sale of approximately $1.0 million. The Mobile, Alabama
terminal was considered to be a non-core asset of the Partnership. The sale
reduced the number of inland facilities owned by us from 25 terminals to 24
terminals.

         On October 31, 2002, Williams Pipe Line entered into a private
placement debt agreement. See Liquidity beginning on page 24 for additional
information concerning this agreement.

         During October 2002 and November 2002, several amendments were made to
the Partnership and General Partner agreements. The first change requires our
General Partner and us to maintain separateness from Williams including
formalities on interaction between us, the public and Williams. Changes were
also made to require the approval of the Conflicts Committee (consisting of
three independent directors) before the General Partner can make
bankruptcy-related decisions for us. In addition, adjustments were made to the
voting rights of units held by Williams. Williams' Class B units no longer have
voting rights, its subordinated units have one-half vote for every one unit
owned and its common units will be allowed to vote in the subordinated class
vote. Finally, election of the board members of our General Partner has been
moved to a vote of the common unitholders, with the first vote to be held in
2003. The voting right changes and board member election changes will be voided
and reversed in the event of a foreclosure in a Williams-related bankruptcy
proceeding.

         In addition, Williams is in the process of creating a new General
Partner, WEG GP LLC. The new General Partner, which is owned by affiliates of
Williams, has all of the rights, privileges and responsibilities as the old
General Partner, Williams GP LLC. Williams GP LLC will continue to own the Class
B units issued by us in April 2002.


RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO SEPTEMBER 30, 2001

<Table>
<Caption>
                                                                                THREE MONTHS ENDED
                                                                                   SEPTEMBER 30,
                                                                           ---------------------------
                                                                               2002           2001
                                                                           ------------   ------------
                                                                                 ($ in millions)
<S>                                                                        <C>            <C>
FINANCIAL HIGHLIGHTS
Revenues:
    Williams Pipe Line system transportation and related activities ....   $       72.6   $       67.8
    Petroleum products terminals .......................................           20.4           18.5
    Ammonia pipeline system ............................................            1.7            3.2
                                                                           ------------   ------------
       Revenues excluding product and construction revenues ............   $       94.7   $       89.5
    Williams Pipe Line system product and construction revenues ........           18.7           28.7
                                                                           ------------   ------------
       Total revenues ..................................................   $      113.4   $      118.2
Operating expenses:
    Williams Pipe Line system transportation and related activities ....   $       32.4   $       33.3
    Petroleum products terminals .......................................            9.3            8.0
    Ammonia pipeline system ............................................            0.8            1.3
                                                                           ------------   ------------
       Operating expenses excluding product purchases ..................   $       42.5   $       42.6
    Williams Pipe Line system product purchases ........................           18.0           25.4
                                                                           ------------   ------------
       Total operating expenses ........................................   $       60.5   $       68.0
                                                                           ------------   ------------
       Total operating margin ..........................................   $       52.9   $       50.2
                                                                           ============   ============
</Table>


                                       16
<PAGE>

<Table>
<Caption>
                                                                                    THREE MONTHS ENDED
                                                                                       SEPTEMBER 30,
                                                                               ---------------------------
                                                                                   2002            2001
                                                                               ------------   ------------
                                                                                    ($ in millions)

<S>                                                                            <C>            <C>

OPERATING STATISTICS
Williams Pipe Line system:
    Transportation revenue per barrel shipped (cents per barrel) ...........           98.2           93.9
    Transportation barrels shipped (million barrels) .......................           60.5           60.2
    Barrel miles (billions) ................................................           19.4           18.6
Petroleum products terminals:
    Marine terminal facilities:
       Average storage capacity utilized per month (barrels in millions) ...           16.3           15.8
       Throughput (barrels in millions)(a) .................................            5.4            1.8
    Inland terminals:
       Throughput (barrels in millions) ....................................           14.5           16.2
Ammonia pipeline system:
    Volume shipped (tons in thousands) .....................................             87            171
</Table>

----------
(a)      For the three months ended Sept. 30, 2002, represents throughput at the
         Gibson and New Haven marine facilities. As the Gibson facility was
         acquired in October 2001, the three months ended Sept. 30, 2001
         represents throughput at the New Haven facility only.

         Combined revenues excluding product and construction revenues for the
three months ended September 30, 2002 were $94.7 million compared to $89.5
million for the three months ended September 30, 2001, an increase of $5.2
million, or 6%. This increase was a result of:

         o an increase in Williams Pipe Line system's transportation and related
activities revenues of $4.8 million, or 7%. This increase was partially
attributable to higher transportation revenue per barrel shipped, resulting from
a tariff increase on July 1, 2002 and customers transporting products longer
distances. Williams Pipe Line revenue further increased due to increased storage
utilization, higher rates imposed on data services and increased ethanol
terminal volumes;

         o an increase in petroleum products terminals revenues of $1.9 million,
or 10%, primarily due to the acquisition of the Gibson marine facility that was
acquired in October 2001 and higher utilization and increased rates at our Gulf
Coast facilities due to a favorable marketing environment;

         o a decrease in ammonia pipeline system revenues of $1.5 million, or
47%, due to less shipments on the pipeline, primarily as a result of one of our
shippers filing for Chapter 11 bankruptcy during May. The weighted average
tariff increased between periods from $16.38 in 2001 to $17.63 during 2002.

         Operating expenses excluding product purchases for the third quarter
were basically unchanged from $42.6 million in 2001 compared to $42.5 million
for 2002. This slight decrease consisted of:

         o a decrease in Williams Pipe Line system expenses of $0.9 million, or
3%. Reductions in environmental expenses were partially offset by increased
pipeline lease expenses. Environmental costs were lower due to the
indemnification from Williams for environmental issues resulting from operations
prior to our ownership of the pipeline. The pipeline lease expenses represent
costs, which are charged back to our customers, for tariffs paid on connecting
pipelines to move a customer's product to its ultimate destination. This service
began in the current year, hence, there are no associated pipeline lease
expenses in the prior year quarter;

         o an increase in petroleum products terminals expenses of $1.3 million,
or 16%, primarily due to the addition of the Gibson marine facility and higher
maintenance expenses at the Gulf Coast facilities. The increase in maintenance
costs was primarily attributable to the timing of tank cleaning and American
Petroleum Institute ("API") 653 inspection expenses;

         o a decrease in ammonia pipeline system expenses of $0.5 million, or
38%, primarily due to lower environmental expenses.

         Revenues from Williams Pipe Line product sales were $18.7 million for
the three months ended September 30, 2002, while product purchases were $18.0
million, resulting in a net margin of $0.7 million


                                       17
<PAGE>


in 2002. The 2002 net margin represents a decrease of $2.4 million compared to a
net margin in 2001 of $3.1 million resulting from product sales in 2001 of $28.5
million and product purchases of $25.4 million. This margin decline primarily
results from butane blending activities prior to the partnership's ownership. In
conjunction with our acquisition of Williams Pipe Line, we will provide butane
blending services for a fee of $0.8 million per quarter rather than operating on
a margin basis.

         Affiliate construction and management fee revenues for the three months
ended September 30, 2002 were zero compared to $0.2 million for the three months
ended September 30, 2001. Historically, Williams Pipe Line received a fee to
manage Longhorn and to provide consulting services associated with the
pipeline's construction and start-up, as needed. Prior to our acquisition of
Williams Pipe Line, this Longhorn obligation was transferred to an affiliate of
Williams Pipe Line and will not be provided by us.

         Depreciation and amortization expense for the three months ended
September 30, 2002 was unchanged from 2001 at $8.8 million. Additional
depreciation associated with acquisitions and capital improvements was offset by
the elimination of depreciation associated with assets we did not acquire as
part of the Williams Pipe Line acquisition.

         General and administrative expenses for the three months ended
September 30, 2002 were $9.8 million compared to $13.0 million for the three
months ended September 30, 2001, a decrease of $3.2 million, or 25%. General and
administrative expenses are allocated from Williams as defined by the Omnibus
Agreement. For 2002, these expense allocations are limited to $9.2 million per
quarter plus equity-based incentive compensation expenses related to Williams
Energy Partners' performance. The amount of general and administrative expenses
incurred by the General Partner but not allocated to us was $6.2 million for the
three months ended September 30, 2002. Incentive compensation costs associated
with our equity-based long-term incentive plan are specifically excluded from
the expense limitation and were $0.6 million during the three months ended
September 30, 2002. Prior to our acquisition, Williams Pipe Line was allocated
general and administrative costs from Williams based on a three-factor formula
that considers operating margin, payroll costs and property, plant and
equipment. The limit on general and administrative expenses that can be charged
by our General Partner to us will continue to be adjusted in the future to
reflect additional general and administrative expenses incurred with
acquisitions and annual adjustments allowed by the Omnibus Agreement.

         Net interest expense for the three months ended September 30, 2002 was
$6.3 million compared to $2.7 million for the three months ended September 30,
2001. The increase in interest expense was primarily related to the additional
debt associated with the acquisition of Williams Pipe Line, partially offset by
lower weighted average interest rates, which decreased from 4.9% for the three
months ended September 30, 2001 to 4.8% for the three months ended September 30,
2002.

         We do not pay income taxes because we are a partnership.

         Net income for the three months ended September 30, 2002 was $25.8
million compared to $18.2 million for the three months ended September 30, 2001,
an increase of $7.6 million, or 42%. The operating margin increased by $2.7
million during the period, largely as a result of increased revenues and reduced
expenses on the Williams Pipe Line system and enhanced earnings from the
acquisition of the Gibson marine terminal, partially offset by reduced ammonia
revenues and product sales margins. General and administrative expenses
decreased by $3.2 million while net interest expenses increased by $3.6 million.
Debt placement fee amortization expense increased $2.1 million due to the
amortization of the debt costs associated with the financing of Williams Pipe
Line. Other income decreased $0.2 million because the 2001 quarter included
amounts received by Williams Pipe Line from certain insurance settlements.
Income taxes decreased $7.6 million due to the elimination of income taxes on
Williams Pipe Line in the partnership structure.


                                       18
<PAGE>


NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO SEPTEMBER 30, 2001

<Table>
<Caption>
                                                                                NINE MONTHS ENDED
                                                                                  SEPTEMBER 30,
                                                                          ---------------------------
                                                                              2002           2001
                                                                          ------------   ------------
                                                                                ($ in millions)
<S>                                                                       <C>            <C>
FINANCIAL HIGHLIGHTS
Revenues:
    Williams Pipe Line system transportation and related activities ...   $      198.5   $      190.6
    Petroleum products terminals ......................................           60.0           53.6
    Ammonia pipeline system ...........................................            8.6           10.1
                                                                          ------------   ------------
       Revenues excluding product and construction revenues ...........   $      267.1   $      254.3
    Williams Pipe Line system product and construction revenues .......           53.0           80.5
                                                                          ------------   ------------
       Total revenues .................................................   $      320.1   $      334.8
Operating expenses:
    Williams Pipe Line system transportation and related activities ...   $       85.0   $       90.8
    Petroleum products terminals ......................................           24.8           22.6
    Ammonia pipeline system ...........................................            3.1            3.3
                                                                          ------------   ------------
       Operating expenses excluding product purchases .................   $      112.9   $      116.7
    Williams Pipe Line system product purchases .......................           48.5           71.9
                                                                          ------------   ------------
       Total operating expenses .......................................   $      161.4   $      188.6
                                                                          ------------   ------------
       Total operating margin .........................................   $      158.7   $      146.2
                                                                          ============   ============
OPERATING STATISTICS Williams Pipe Line system:
    Transportation revenue per barrel shipped (cents per barrel) ......           94.3           91.0
    Transportation barrels shipped (million barrels) ..................          172.1          175.2
    Barrel miles (billions) ...........................................           52.1           52.2
Petroleum products terminals:
    Marine terminal facilities:
       Average storage capacity utilized per month
         (barrels in millions) ........................................           16.3           15.6
       Throughput (barrels in millions) (a) ...........................           15.8            7.4
    Inland terminals:
       Throughput (barrels in millions) ...............................           43.6           41.4
Ammonia pipeline system:
    Volume shipped (tons in thousands) ................................            478            511
</Table>

(a)      For the nine months ended September 30, 2002, represents throughput at
         the Gibson and New Haven marine facilities. As the Gibson facility was
         acquired in October 2001, the nine months ended September 30, 2001
         represents throughput at the New Haven facility only.

         Combined revenues excluding product and construction revenues for the
nine months ended September 30, 2002 were $267.1 million compared to $254.3
million for the nine months ended September 30, 2001, an increase of $12.8
million, or 5%. This increase consisted of:

         o an increase in Williams Pipe Line system's transportation and related
activities revenues of $7.9 million, or 4%. Transportation revenues increased
between periods due to a higher tariff that more than offset lower shipments.
The tariff was higher due to mid-year tariff increases and our customers
transporting products longer distances. Further, increased rates imposed on data
services as well as higher ethanol loading and storage volumes resulted in
additional revenue;

         o an increase in petroleum products terminals revenues of $6.4 million,
or 12%, primarily due to the acquisition of our Gibson marine facility in
October 2001 and two Little Rock inland terminals in June 2001. Higher
utilization at the Gulf Coast marine facilities was offset by reduced throughput
at our inland terminals;

         o a decrease in ammonia pipeline system revenues of $1.5 million or
15%, primarily due to a throughput deficiency billing in the prior year that
resulted from a shipper not meeting its minimum annual throughput commitment for
the contract year ended June 2001. In addition, revenue also declined due to
reduced volume as a result of one of our shippers filing for Chapter 11
bankruptcy during May 2002.


                                       19
<PAGE>


Partially offsetting these decreases was a higher weighted average tariff of
$16.84 in 2002 compared to $16.19 during the prior year.

         Operating expenses excluding product purchases for the nine months
ended September 30, 2002 were $112.9 million compared to $116.7 million for the
nine months ended September 30, 2001, a decrease of $3.8 million, or 3%. This
increase consisted of:

         o a decrease in Williams Pipe Line system expenses of $5.8 million, or
6%, primarily due to lower environmental expenses and reduced power costs.
Environmental costs were lower due to the indemnification from Williams for
environmental issues resulting from operations prior to our ownership of the
pipeline, and power expenses declined due to less volume transported coupled
with reduced power rates. Partially offsetting these reductions was an increase
in pipeline lease expenses, which represent costs charged back to our customers
for tariffs paid on connecting pipelines to move a customer's product to its
ultimate destination. This service began in the current year, hence, there are
no associated pipeline lease expenses in the prior year;

         o an increase in petroleum products terminals expenses of $2.2 million,
or 10%, primarily due to the addition of the Gibson marine facility and Little
Rock inland terminals. Increased maintenance expenses were also incurred at our
other locations due to the timing of tank cleaning and API 653 inspections.
Lower utility expenses at the Gulf Coast facilities partially offset these
increases;

         o a decrease in ammonia pipeline system expenses of $0.2 million
primarily due to lower environmental expenses.

         Revenues from Williams Pipe Line product sales were $52.8 million for
the nine months ended September 30, 2002, while product purchases were $48.5
million, resulting in a net margin of $4.3 million in 2002. The 2002 net margin
represents a decrease of $3.5 million compared to a net margin in 2001 of $7.8
million resulting from product sales in 2001 of $79.7 million and product
purchases of $71.9 million. This margin decline results from butane blending
activities prior to the partnership's ownership. In conjunction with our
acquisition of Williams Pipe Line, we will provide butane blending services for
a fee of $0.8 million per quarter rather than operating on a margin basis.

         Affiliate construction and management fee revenues for the nine months
ended September 30, 2002 were $0.2 million compared to $0.8 million for the nine
months ended September 30, 2001. Historically, Williams Pipe Line received a fee
to manage Longhorn and to provide consulting services associated with the
pipeline's construction and start-up, as needed. Prior to our acquisition of
Williams Pipe Line, this Longhorn obligation was transferred to an affiliate of
Williams Pipe Line and will not be provided by us.

         Depreciation and amortization expense for the nine months ended
September 30, 2002 was $26.3 million, representing a $0.2 million decrease from
2001 at $26.5 million. Additional depreciation associated with acquisitions and
capital improvements primarily offset the elimination of depreciation associated
with assets we did not acquire as part of the Williams Pipe Line acquisition.

         General and administrative expenses for the nine months ended September
30, 2002 were $32.7 million compared to $35.0 million for the nine months ended
September 30, 2001, a decrease of $2.3 million, or 7%. General and
administrative expenses are allocated from Williams as defined by the Omnibus
Agreement. For 2002, these expense allocations are limited to $9.2 million per
quarter plus equity-based incentive compensation expenses related to Williams
Energy Partners' performance. The amount of general and administrative expenses
incurred by the General Partner but not allocated to us was $15.3 million for
the nine months ended September 30, 2002. Incentive compensation costs
associated with our long-term incentive plan are specifically excluded from the
expense limitation and were $2.4 million during the nine months ended September
30, 2002. The first-quarter incentive compensation costs included a $1.0 million
charge associated with the early vesting of a portion of the phantom units
issued to key employees at the time of our initial public offering. The early
vesting was triggered as a result of meeting the target for our growth in cash
distributions paid to unitholders. Prior to our acquisition, Williams Pipe Line
was allocated general and administrative costs from Williams based on a
three-factor formula that considers operating margin, payroll costs and
property, plant and equipment. The limit on general and administrative expenses
that can be charged by our General Partner to us will continue to be adjusted in
the future to reflect additional general and administrative expenses incurred
with acquisitions as well as the annual adjustments allowed by the Omnibus
Agreement.


                                       20
<PAGE>


         Net interest expense for the nine months ended September 30, 2002 was
$13.7 million compared to $9.0 million for the nine months ended September 30,
2001. The increase in interest expense was primarily related to the additional
debt associated with the acquisition of Williams Pipe Line, partially offset by
lower weighted average interest rates, which decreased from 4.9% for the nine
months ended September 30, 2001 to 4.1% for the nine months ended September 30,
2002.

         We do not pay income taxes because we are a partnership. However,
Williams Pipe Line was subject to income taxes prior to our acquisition of it in
April 2002, and our pre-initial public offering earnings in 2001 were also
taxable. We primarily based our income tax rate of 38.2% and 37.9% for the nine
months ended September 30, 2002 and 2001, respectively, upon the effective
income tax rate for Williams. The effective income tax rate exceeds the U.S.
federal statutory income tax rate primarily due to state income taxes.

         Net income for the nine months ended September 30, 2002 was $71.6
million compared to $54.1 million for the nine months ended September 30, 2001,
an increase of $17.5 million, or 32%. The operating margin increased by $12.5
million during the period, largely as a result of increased revenues and
decreased expenses on the Williams Pipe Line system, earnings from the
acquisitions of the Little Rock and Gibson terminal facilities and enhanced
utilization of the Gulf Coast marine facilities, partially offset by lower
product sales margins. Depreciation expense and general and administrative
expenses decreased by $0.2 million and $2.3 million, respectively, while net
interest expenses increased by $4.6 million. Debt placement fee amortization
expense increased $7.0 million primarily due to the amortization of the debt
costs from the debt associated with the acquisition of Williams Pipe Line. Other
income decreased $0.3 million. Income taxes decreased $14.5 million due to the
elimination of income taxes because of our partnership structure.

         OTHER KNOWN TRENDS OR EVENTS

         We have significant relationships with Williams, the owner of our
General Partner, Farmland Industries, Inc. ("Farmland") and other third-party
entities that impact our operating results. Williams has completed a number of
asset sales and entered into secure credit facilities to address its liquidity
needs, and Farmland has filed for bankruptcy. Our relationships with these two
entities are described below:

         Williams - During the past year, Williams has experienced financial and
liquidity difficulties and currently does not have an investment grade credit.
We are engaged contractually with Williams on several fronts, including
commercial relationships, contracted services and indemnities. The extent of
these relationships include:

         o        Williams is the owner of our General Partner and owns
                  approximately 55% of the partnership.

         o        Williams is a customer, representing approximately 15% of our
                  September 30, 2002, year-to-date revenues. We expect to
                  replace a majority of these revenues, without significant
                  impact to our results of operations, if Williams is unable to
                  perform on its existing obligations.

         o        Williams provides various services for us. Through these
                  services, Williams operates our assets and provides general
                  and administrative services. All employees supporting our
                  partnership are employees of Williams. We pay full cost for
                  the operating expenses associated with our assets, and we
                  incur an additional cost of approximately $40.0 million per
                  year for general and administrative services. Through
                  September 30, 2002, general and administrative charges to our
                  General Partner from Williams exceeded the amount charged to
                  us per the provisions of the Omnibus Agreement by $15.3
                  million. We believe a majority of those excess charges
                  incurred by the General Partner do not relate to services
                  essential for our ongoing operations.

                  One of the services provided by Williams and its affiliates is
                  the shared operating costs of the ammonia pipeline system with
                  Mid-America Pipeline Company. On August 1, 2002, Williams
                  announced that it had sold 98% of Mapletree LLC, which owns
                  Mid-America Pipeline Company ("MAPL"), to Enterprise Products
                  Partners L.P. ("Enterprise"). The Partnership has an agreement
                  with MAPL, which addresses shared operating costs as well as
                  commercial and


                                       21
<PAGE>


                  general and administrative support costs related to the
                  Partnership's ammonia pipeline system. Enterprise has agreed
                  to continue this agreement for a six-month transition period,
                  which can be extended to a one-year period unless either party
                  provides a 90-day written notification to cancel the
                  agreement. However, the agreement also stipulates that the
                  shared operating costs with MAPL will remain in effect as long
                  as MAPL owns and operates the natural gas liquids pipeline
                  system adjoining our ammonia pipeline system, unless the
                  parties mutually agree to terminate the agreement. The
                  operating costs of the ammonia pipeline could increase based
                  on a re-evaluation by Enterprise of the operating costs for
                  MAPL to dispatch the ammonia system and operate the shared
                  facilities on the ammonia pipeline system.

         o        For assets included in our initial public offering, Williams
                  has agreed to provide maintenance capital reimbursements for
                  expenditures in excess of $4.9 million during 2002. We have
                  received $4.0 million reimbursement so far this year
                  associated with the initial public offering assets and expect
                  to receive an additional $6.5 million through the remainder of
                  2002. In addition, Williams has agreed to pay maintenance
                  capital associated with the Williams Pipe Line system in
                  excess of $19.0 million per year for 2002, 2003 and 2004 up to
                  a cumulative maximum of $15.0 million. We expect to spend less
                  than $19.0 million annually for maintenance capital for the
                  Williams Pipe Line system and do not expect any reimbursement
                  from Williams associated with this asset.

         o        Williams has provided various indemnifications to us. The most
                  significant indemnification covers environmental remediation
                  costs associated with assets purchased from Williams relating
                  to events prior to our purchase. For assets involved in our
                  initial public offering, this indemnification extends until
                  February 2004 up to an aggregate liability of $15.0 million.
                  For the Williams Pipe Line system, this indemnification
                  extends until April 2008 up to an aggregate liability of
                  $125.0 million. Receivables from Williams associated with
                  these indemnifications were $22.9 million at September 30,
                  2002.


         Farmland - Farmland filed for Chapter 11 bankruptcy protection on May
31, 2002. Farmland is the largest customer on our ammonia pipeline system.
Farmland also owns and operates a refinery in Coffeyville, Kansas, with its
products marketed through a third party that ships on Williams Pipe Line. This
third party shipper is not affiliated with either Farmland or Williams. Combined
total revenues associated with Farmland's ammonia shipments and this third party
shipper on the Williams Pipe Line were $25.3 million and $31.3 million for the
nine months ended September 30, 2002 and 2001, respectively, and $43.0 million
for the year ended December 31, 2001, representing 7.9%, 9.3% and 9.6% of total
revenues for the nine months ended September 30, 2002, September 30, 2001 and
the twelve months ended December 31, 2001, respectively. We cannot predict the
impact Farmland's bankruptcy may have on our financial position, results of
operations or cash flows. However, demand for products from Farmland's
Coffeyville, Kansas refinery have continued to be strong and we expect that this
demand will remain strong for the foreseeable future. Also, we believe that
Farmland will either continue to operate its Coffeyville, Kansas refinery or
will sell it to a third party who will continue its operation. Additionally,
demand for anhydrous ammonia has not changed significantly, and we believe that
we will continue to meet this demand through shipments of anhydrous ammonia that
is either produced at Farmland's facility, whether owned by them or a subsequent
buyer of its production facility, or produced by one of our other ammonia
pipeline customers. For the nine months ended September 30, 2002, the ammonia
pipeline system accounted for 3% of our total operating margin.


LIQUIDITY AND CAPITAL RESOURCES


CASH FLOWS AND CAPITAL EXPENDITURES

         Net cash provided by operating activities for the nine months ended
September 30, 2002 was $96.2 million compared to $93.4 million for the nine
months ended September 30, 2001. The $2.8 million increase in cash was primarily
a result of increased net income, partially offset by changes in working
capital. Affiliate and long-term affiliate receivables increased during 2002
resulting in a $11.0 million use of cash primarily due to the indemnification
from Williams for environmental liabilities occurring prior to our ownership of
Williams Pipe Line. As part of our acquisition of Williams Pipe Line, Williams
retained $15.0 million of its accounts receivable. Therefore, accounts
receivable increased during 2002 as those receivables were replaced as part of
the ongoing operations of that business, resulting in a $7.5 million use of
cash. In addition, affiliate accounts payable decreased, resulting in a $16.6
million use of cash between periods. Prior to our ownership of it, Williams Pipe
Line did not settle intercompany payables with cash on


                                       22
<PAGE>


a monthly basis, allowing the affiliate payable to increase. Subsequent to our
ownership of Williams Pipe Line, we pay the affiliate amounts each month, which
resulted in a cash reduction between periods. Partially offsetting these working
capital items which utilized cash, inventories decreased between periods
resulting in a cash inflow of $24.2 million. Inventory balances were lower due
to the elimination of butane blending inventories as we now perform butane
blending as a service provider without carrying the relevant inventory and due
to the selling of refined petroleum products inventories because of a favorable
market condition during the current quarter.

         Net cash used by investing activities for the nine months ended
September 30, 2002 and 2001 was $722.8 million and $56.5 million, respectively.
Investing activities for 2002 include the acquisition of Williams Pipe Line and
the Aux Sable pipeline as well as a deposit for the pending acquisition of a
refined petroleum products pipeline from Tesoro Petroleum Corporation. Investing
activities for 2001 include the acquisition of two inland terminals in Little
Rock, Arkansas. Maintenance capital for the period ended September 30, 2002 was
$17.7 million, compared to $15.9 million during 2001. Please see Capital
Requirements below for more discussion of capital expenditures.

         Net cash provided by financing activities for the nine months ended
September 30, 2002 was $655.3 million compared to net cash used of $30.2 million
in 2001. The cash provided during the first nine months of 2002 principally
involved the debt and equity funding associated with our acquisition of Williams
Pipe Line. Cash was used in 2001 to repay affiliate notes associated with both
our initial public offering assets as well as the Williams Pipe Line, partially
offset by proceeds from debt borrowings and equity issued in our initial public
offering.

         Federal Energy Regulatory Commission ("FERC") Notice of Proposed
Rulemaking - On August 1, 2002, the FERC issued a Notice of Proposed Rulemaking
that, if adopted, would amend its Uniform Systems of Accounts for public
utilities, natural gas companies and oil pipeline companies by requiring
specific written documentation concerning the management of funds from a
FERC-regulated subsidiary by a non-FERC-regulated parent. Under the proposed
rule, as a condition for participating in a cash management or money pool
arrangement, the FERC-regulated entity would be required to maintain a minimum
proprietary capital balance (stockholder's equity) of 30 percent, and the
FERC-regulated entity and its parent would be required to maintain investment
grade credit ratings. If either of these conditions is not met, the
FERC-regulated entity would not be eligible to participate in the cash
management or money pool arrangement. The period for interested companies to
make comments to the FERC relative to this proposed rule has ended and the FERC
is evaluating its position on the issue. We do not know when or if the rule will
be enacted. Although it appears that, if enacted, the rule may affect the way in
which we manage cash, we are unable, at this time, to predict the full impact of
this proposed regulation on our business.


CAPITAL REQUIREMENTS

         The transportation, storage and distribution business requires
continual investment to upgrade or enhance existing operations and to ensure
compliance with safety and environmental regulations. The capital requirements
of our businesses consist primarily of:

         o        maintenance capital expenditures, such as those required to
                  maintain and upgrade equipment reliability and safety and to
                  address environmental regulations; and

         o        expansion capital expenditures to acquire additional
                  complementary assets to grow our business and to expand or
                  upgrade our existing facilities, such as projects that
                  increase storage or throughput volumes or develop pipeline
                  connections to new supply sources.

         Williams has agreed to reimburse us for maintenance capital
expenditures incurred in 2001 and 2002 in excess of $4.9 million per year
related to the assets contributed to us at the time of our initial public
offering. This reimbursement obligation is subject to a maximum combined
reimbursement for 2001 and 2002 of $15.0 million. During 2001, we incurred $8.8
million of maintenance capital expenditures for these assets and recorded a
reimbursement from Williams of $3.9 million. As a result of these
reimbursements, the maximum reimbursement obligation of Williams with respect to
these assets was reduced to $11.1 million for 2002. As of September 30, 2002, we
have recorded a reimbursement from Williams of $4.0 million and we expect
maintenance capital expenditures for the full year of 2002 for our petroleum
products terminals and ammonia pipeline system to be approximately $15.5
million, with $10.5 million being reimbursed by Williams.


                                       23
<PAGE>


         In connection with the acquisition of the Williams Pipe Line system,
Williams has agreed to reimburse us for maintenance capital expenditures
incurred in 2002, 2003 and 2004 in excess of $19.0 million per year related to
the Williams Pipe Line system, subject to a maximum combined reimbursement for
all years of $15.0 million. In 2002, we expect to incur maintenance capital
expenditures related to the Williams Pipe Line system of approximately $13.0
million and, therefore, do not anticipate any reimbursements from Williams
associated with Williams Pipe Line's 2002 maintenance capital expenditures.

         We expect to incur aggregate maintenance capital expenditures for 2002
for all of our businesses, net of reimbursements from Williams, of $18.0
million.

         In addition to maintenance capital, we are also planning to incur
expansion and upgrade capital expenditures at our existing facilities, including
pipeline connections. The total we plan to spend for expansion is approximately
$12.5 million in 2002, not including capital needs associated with additional
acquisitions, if any. We expect to fund our future expansion capital
expenditures, including any acquisitions, from:

         o        cash provided by operations;

         o        borrowings under the revolving credit facility discussed below
                  and other borrowings; and

         o        the issuance of additional common units.


LIQUIDITY

         Operating Partnership Credit Facility. Subsequent to the closing of our
initial public offering on February 9, 2001, we have relied on cash generated
from internal operations as our primary source of funding for uses other than
acquisition capital expenditures. Additional funding requirements are met by a
$175.0 million credit facility of our operating partnership that expires on
February 5, 2004. This credit facility is comprised of a $90.0 million term loan
and an $85.0 million revolving credit facility. The revolving credit facility is
comprised of a $73.0 million acquisition sub-facility and a $12.0 million
working capital sub-facility. As of September 30, 2002, $15.0 million was
available under the acquisition sub-facility and $12.0 million was available
under the working capital sub-facility.

         The credit facility contains various operational and financial
covenants. Management believes that we are in compliance with all of these
covenants.

         Williams Pipe Line Short-term Loan. In connection with the acquisition
of the Williams Pipe Line system, we and our subsidiary, Williams Pipe Line,
entered into a six-month $700.0 million credit agreement. In October 2002 we
negotiated an extension of the maturity of the Williams Pipe Line short-term
note from October 8, 2002 to November 27, 2002. All of the proceeds from this
loan were used to finance the Williams Pipe Line acquisition. During May 2002,
we issued an additional 8.0 million common units to the public at a price of
$37.15 per unit. After paying underwriter discounts and commissions and equity
issuance fees, we received net proceeds of $283.1 million from the common equity
issuance. In addition, Williams contributed $6.1 million to maintain its 2%
general partner interest. Using these proceeds, we repaid $289.0 million on the
loan, resulting in an outstanding balance of $411.0 million at September 30,
2002.

         Our obligations under this short-term loan are unsecured. This
indebtedness ranks equally with all of our outstanding unsecured and
non-subordinated debt. We may prepay this short-term loan at any time, in whole
or in part, without penalty. Our operating partnership is not a borrower under
this credit agreement.

         The credit agreement contains various covenants limiting our and
Williams Pipe Line's ability to:

         o        incur additional unsecured indebtedness other than under our
                  operating partnership's credit facility described above;

         o        grant liens other than tax liens, mechanic's and materialman's
                  liens and other liens and encumbrances incurred in the
                  ordinary course of business;

         o        make investments, other than investments in the Williams Pipe
                  Line system, cash and short-term securities and acquisitions;

         o        merge or consolidate;


                                       24
<PAGE>


         o        dispose of assets;

         o        make distributions other than from available cash or, in the
                  case of Williams Pipe Line, in excess of $7.5 million in each
                  quarter;

         o        engage in any business other than the transportation, storage
                  and distribution of hydrocarbons and ammonia;

         o        create obligations for some lease payments; or

         o        engage in transactions with affiliates other than arm's-length
                  transactions.

         The credit agreement also contains a covenant requiring Williams Pipe
Line to maintain EBITDA (as defined in the credit agreement) of at least $20.0
million for each fiscal quarter. Management believes that we are in compliance
with all of these covenants. If this short-term loss is repaid after November
15, 2002, the partnership will incur additional debt placement fees of
approximately $4.1 million.


         On October 31, 2002, Williams Pipe Line entered into a private
placement debt agreement, effective October 1, 2002, with a group of financial
institutions for up to $200.0 million aggregate principal amount of Floating
Rate Series A Senior Secured Notes and up to $340.0 million aggregate principal
amount of Fixed Rate Series B Senior Secured Notes. The maturity date of both
notes is October 7, 2007. Two borrowings will occur in relation to these notes.
The first borrowing will be for $420.0 million, allocated pro rata between the
Series A notes and Series B notes, and will be used to repay Williams Pipe
Line's existing short-term note and related debt placement fees. The second
borrowing will be allocated pro rata between the Series A notes and Series B
notes and will be for either: (i) $120.0 million if the Tesoro pipeline
acquisition is consummated (See Note 3 - Acquisitions), or (ii) $60.0 million to
be used primarily for repayment of our other debt. The Floating Rate Series A
Senior Secured Notes will carry an interest rate equal to the six-month
Eurodollar Rate plus (i) 4.25% or (ii) an amount necessary to equal the rate on
the Series B note borrowings on a swap-equivalent basis, whichever is greater.
The Fixed Rate Series B Senior Secured Notes will carry an interest rate of
7.67% on the first borrowing and a rate equal to the five year U.S. Treasury
Bond plus 4.70% on the second borrowing. Debt placement fees associated with
these notes are expected to be $12.1 million, which will be amortized over the
life of the notes. Payment of interest and repayment of the principal is
guaranteed by Williams Energy Partners. As part of this agreement, we also
agreed that we will not redeem or retire the Partnership's Class B units held by
Williams or any of its affiliates except with the proceeds from our equity
issuances. Our ability to secure new financing and the cost of future debt could
be influenced by Williams' financial position.

         Debt-to-Total Capitalization - The ratio of debt-to-total
capitalization is a measure frequently used by the financial community to assess
the reasonableness of a company's debt levels compared to total capitalization,
calculated by summing total debt and total equity. Based on the figures shown in
our balance sheet, debt-to-total capitalization appears to be 57%. Since
accounting rules require that the acquisition of Williams Pipe Line be recorded
at historical book value due to the affiliate nature of the transaction, the
$415.1 million difference between the purchase price and book value was recorded
as a decrease to the General Partner's capital account, thus lowering the equity
component. If the pipeline had been purchased from a third party, the asset
would have been recorded at market value, resulting in a debt to total
capitalization of 40%. Management has indicated that it is targeting a
debt-to-total capitalization of approximately 40%.


NEW ACCOUNTING PRONOUNCEMENTS

         In May 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 145, "Rescission of
FASB Statements No. 4, 44 and 64, Amendment of FASB Statement 13 and Technical
Corrections." The provisions of SFAS No. 145 regarding the rescission of
Statement 4 are effective for financial statements issued for fiscal years
beginning after May 15, 2002. Any gain or loss on extinguishment of debt that
was classified as an extraordinary item in prior periods presented that does not
meet the criteria in APB 30 for classification as an extraordinary item should
be reclassified. Certain provisions of this Statement related to Statement 13
are effective for transactions occurring after May 15, 2002. All other
provisions of this Statement will be effective for


                                       25
<PAGE>


financial statements issued on or after May 15, 2002. We plan to adopt this
standard in January 2003, and it is not expected to have a material impact on
our results of operations or financial position.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This Statement supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" and amends Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions." The Statement retains the basic framework of SFAS No.
121, resolves certain implementation issues of SFAS No. 121, extends
applicability to discontinued operations and broadens the presentation of
discontinued operations to include a component of an entity. The Statement is to
be applied prospectively and is effective for financial statements issued for
fiscal years beginning after December 15, 2001. We adopted this standard in
January 2002. The Statement had no initial impact on our results of operations
or financial position.

         In June 2002, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations," which is effective for fiscal years beginning after
June 15, 2002. The Statement requires legal obligations associated with the
retirement of long-lived assets to be recognized at their fair value at the time
that the obligations are incurred. Upon initial recognition of a liability, that
cost should be capitalized as a part of the related long-lived asset and
allocated to expense over the useful life of the asset. We will adopt the new
rules on asset retirement obligations on January 1, 2003. Application of the new
rules is not expected to have a material impact on our results of operations or
financial position. The estimated obligations will consider current factors such
as expected future inflation rates, current costs of borrowing, estimated
retirement dates and estimated expected costs of required retirement activities.
Retirement obligations have not been estimated for pipeline transmission and
terminal assets because their remaining life is not currently determinable.

         In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 establishes
accounting and reporting standards for business combinations and requires all
business combinations to be accounted for by the purchase method. The Statement
is effective for all business combinations for which the date of acquisition is
July 1, 2001 or later. SFAS No. 142 addresses accounting and reporting standards
for goodwill and other intangible assets. Under this Statement, goodwill and
intangible assets with indefinite useful lives will no longer be amortized but
will be tested annually for impairment. The Statement becomes effective for all
fiscal years beginning after December 15, 2001. We have applied the new rules on
accounting for goodwill and other intangible assets beginning January 1, 2002.
Based on the amount of goodwill recorded as of December 31, 2001, application of
the non-amortization provision of the Statement resulted in a decrease to
amortization expense in the first nine months of 2002 of approximately $0.6
million.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Market risk is the risk of loss arising from adverse changes in market
rates and prices. The principal market risk to which we are exposed is interest
rate risk. Debt we incur under our credit facility and the Williams Pipe Line
short-term loan bear variable interest based on the Eurodollar rate. If the
Eurodollar rate changed by 0.125%, our annual debt coverage obligations
associated with the $148.0 million of outstanding borrowings under the credit
facility at September 30, 2002 and the $411.0 million of outstanding borrowings
under the Williams Pipe Line short-term loan would change by approximately $0.7
million.


ITEM 4. CONTROLS AND PROCEDURES

         An evaluation of the effectiveness of the design and operation of the
Partnership's disclosure controls and procedures (as defined in rule 13a-14(c)
of the Securities Exchange Act) was performed within the 90 days prior to the
filing date of this report. This evaluation was performed under the supervision
and with the participation of the Partnership's management, including the
General Partner's Chief Executive Officer and Chief Financial Officer. Based
upon that evaluation, the General Partner's Chief Executive Officer and Chief
Financial Officer concluded that these disclosure controls and practices are
effective.


                                       26
<PAGE>


         A self-evaluation of the Partnership's internal controls was performed
during October 2002. The Partnership concluded that there were no significant
deficiencies or material weaknesses in its internal controls. There have been no
significant changes in the Partnership's internal controls or in other factors
that could significantly affect internal controls subsequent to the date of the
certifying officers' most recent evaluation.


FORWARD-LOOKING STATEMENTS

         Certain matters discussed in this Quarterly Report on Form 10-Q include
forward-looking statements - statements that discuss our expected future results
based on current and pending business operations. We make these forward-looking
statements in reliance on the safe harbor protections provided under the Private
Securities Litigation Reform Act of 1995.

         Forward-looking statements can be identified by words such as
"anticipates", "believes", "expects", "estimates", "forecasts", "projects" and
other similar expressions. Although we believe our forward-looking statements
are based on reasonable assumptions, statements made regarding future results
are subject to numerous assumptions, uncertainties and risks that may cause
future results to be materially different from the results stated or implied in
this document.

         The following are among the important factors that could cause actual
results to differ materially from any results projected, forecasted, estimated
or budgeted:

         o        Price trends and overall demand for natural gas liquids,
                  refined petroleum products, natural gas, crude oil and ammonia
                  in the United States and globally; economic activity, weather,
                  alternative energy sources, conservation and technological
                  advances may affect price trends and demand;

         o        Our failure to make principal or interest payments on our
                  short-term loan incurred to finance the acquisition of
                  Williams Pipe Line;

         o        Mergers among our customers and competitors could result in
                  lower volumes being shipped on our pipelines and/or demand for
                  product storage and terminal services at our terminal
                  facilities;

         o        The closure of mid-continent refineries that supply the
                  Williams Pipe Line could result in disruptions or reductions
                  in the volumes transported on the system;

         o        Changes in demand for refined petroleum products that we store
                  and distribute;

         o        Changes in demand for storage in our petroleum products
                  terminals;

         o        Changes in our tariff rate implemented by the Federal Energy
                  Regulatory Commission and the United States Surface
                  Transportation Board;

         o        Shut-downs or cutbacks at major refineries, petrochemical
                  plants, ammonia production facilities or other businesses that
                  use our services or supply services to us;

         o        Changes in the throughput on petroleum products pipelines
                  owned and operated by third parties and connected to our
                  petroleum products terminals;

         o        Loss of Williams Energy Marketing & Trading Company or
                  Williams Refining & Marketing, L.L.C. as customers;

         o        Loss of one or more of our three customers on our ammonia
                  pipeline system: in particular, the loss of volumes from
                  Farmland Industries, which filed for Chapter 11 bankruptcy
                  protection on May 31, 2002;

         o        An increase in the price of natural gas, which increases
                  ammonia production costs and could reduce the amount of
                  ammonia transported through our ammonia pipeline system;

         o        Changes in the federal government's policy regarding farm
                  subsidies, which could negatively impact the demand for
                  ammonia and reduce the amount of ammonia transported through
                  our ammonia pipeline system;

         o        An increase in the competition our petroleum products
                  terminals and ammonia pipeline system encounter;

         o        The occurrence of an operational hazard, act of terrorism or
                  unforeseen interruption for which we are not adequately
                  insured;

         o        Our ability to integrate any acquired operations into our
                  existing operations;

         o        Changes in the general economic conditions in the United
                  States;

         o        Changes in laws and regulations to which we are subject,
                  including tax, safety, environmental and employment laws and
                  regulations;

         o        The condition of the capital markets and equity markets in the
                  United States;


                                       27
<PAGE>

         o        The cost and effects of legal and administrative claims and
                  proceedings against us or our subsidiaries;

         o        The ability to raise capital in a cost-effective way;

         o        The effect of changes in accounting policies;

         o        The ability to control costs;

         o        The political and economic stability of the oil producing
                  nations of the world; and

         o        Our relationship with Williams, which subjects us to risks
                  that are beyond our control.


                                     PART II

                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         During 2001, the Environmental Protection Agency ("EPA"), pursuant to
Section 308 of the Clean Water Act, preliminarily determined that Williams may
have systemic problems with petroleum discharges from pipeline operations. The
inquiry primarily focused on Williams Pipe Line, which was subsequently acquired
by the Partnership. The response to the EPA's information request was submitted
during November 2001.

         No other material litigation or claims were filed against the
Partnership during the three months ended September 30, 2002, and there have
been no material changes in legal proceedings previously disclosed.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

         None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

         None.

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

         None.

ITEM 5. OTHER INFORMATION

         None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a)   Exhibits:

               Exhibit 10.1 -  SERVICES AGREEMENT dated September 30, 2002
               Exhibit 10.2 -  THIRD AMENDMENT TO OMNIBUS AGREEMENT dated
                                  September 30, 2002
               Exhibit 10.3 -  SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED
                                  PARTNERSHIP OF WILLIAMS ENERGY PARTNERS L.P.
                                  dated September 30, 2002
               Exhibit 10.4 -  THIRD AMENDED AND RESTATED LIMITED LIABILITY
                                  COMPANY AGREEMENT OF WILLIAMS GP LLC dated
                                  September 30, 2002
               Exhibit 10.5 -  FIRST AMENDMENT TO CREDIT AGREEMENT dated
                                  October 9, 2002
               Exhibit 10.6 -  NOTE PURCHASE AGREEMENT dated October 31, 2002
               Exhibit 10.7 -  SECURITY AGREEMENT dated October 31, 2002
               Exhibit 10.8 -  COLLATERAL AGENCY AGREEMENT dated October 31,
                                  2002


                                       28
<PAGE>
         (b)   Reports on Form 8-K:

                    On November 4, 2002, the Partnership reported on Form 8-K,
               that while it is continuing its acquisition efforts with Tesoro
               Refining & Marketing Company ("Tesoro") and discussions with the
               Federal Trade Commission, Tesoro has the right to enter into
               discussions with other potential buyers of its petroleum products
               pipeline.

                   On October 29, 2002, the Partnership reported on Form 8-K,
               its earnings for the three and nine months ended September 30,
               2002 and 2001.

                   On October 23, 2002, the Partnership announced that it had
               extended the maturity of its short-term loan associated with the
               acquisition of Williams Pipe Line to November 27, 2002, and is
               negotiating long-term debt financing to retire the short-term
               loan within the timeframe of the extension.

                  On August 26, 2002, the Partnership reported on Form 8-K, an
               agreement to acquire a refined petroleum products pipeline from
               Tesoro Refining & Marketing Company for $110 million.

                  On August 14, 2002, the Partnership submitted on Form 8-K,
               voluntary filings by the chief executive officer and the chief
               financial officer of Williams GP LLC, the general partner of the
               Partnership, complying with the Securities and Exchange
               Commission's file No. 4-460 Order requiring the filing of sworn
               statements pursuant to Section 21(a)(1) of the Securities and
               Exchange Act of 1934.

                  On August 14, 2002, the Partnership submitted on Form 8-K, the
               certification of the Partnership's Quarterly Report on Form 10-Q
               for the quarterly period ended June 30, 2002 by the chief
               executive officer and the chief financial officer of Williams GP
               LLC, the general partner of the Partnership, as required pursuant
               to Section 906 of the Sarbanes-Oxley Act of 2002.

                  On July 31, 2002, the Partnership reported on Form 8-K, its
               earnings for the three and six months ended June 30, 2002 and
               2001.

                  On July 25, 2002, the Partnership reported on Form 8-K, that
               it had held a conference call with analysts on July 23, 2002 to
               discuss the news announced on July 22, 2002, by Williams, the
               owner of the Partnership's General Partner.


                                       29
<PAGE>


                                   SIGNATURES


     Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, in Tulsa, Oklahoma, on November 14, 2002.


                                        WILLIAMS ENERGY PARTNERS L.P.

                                        By: Williams GP LLC
                                            its General Partner




                                        /s/ John D. Chandler
                                        -------------------------------------
                                        John D. Chandler
                                        Chief Financial Officer
                                        and Treasurer (Principal Accounting and
                                        Financial Officer)



                                       30
<PAGE>
                                 CERTIFICATIONS

I, Don R. Wellendorf, President and Chief Executive Officer of Williams GP LLC,
the General Partner of Williams Energy Partners L.P. (the "Partnership"),
certify that:

1. I have reviewed this quarterly report on Form 10-Q of Williams Energy
Partners L.P.;

2. Based on my knowledge, this quarterly 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 quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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 it consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this quarterly 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
     quarterly report (the "Evaluation Date"); and

(c)  Presented in this quarterly 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 other 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
quarterly 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 ay corrective
actions with regard to significant deficiencies and material weaknesses.

Date:  November 14, 2002


                                                  /s/ Don R. Wellendorf
                                                  ---------------------
                                                  Don R. Wellendorf,
                                                  Chief Executive Officer,
                                                  Williams GP LLC



                                       31
<PAGE>


I, John D. Chandler, Chief Financial Officer of WEG GP LLC, the General Partner
of Williams Energy Partners L.P. (the "Partnership"), certify that:

1. I have reviewed this quarterly report on Form 10-Q of Williams Energy
Partners L.P.;

2. Based on my knowledge, this quarterly 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 quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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 it consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this quarterly 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
     quarterly report (the "Evaluation Date"); and

(c)  Presented in this quarterly 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 other 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
quarterly 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 ay corrective
actions with regard to significant deficiencies and material weaknesses.

Date:  November 13, 2002


                                                  /s/ John D. Chandler
                                                  --------------------
                                                  John D. Chandler,
                                                  Chief Financial Officer,
                                                  Williams GP LLC



                                       32
<PAGE>


                                INDEX TO EXHIBITS

<Table>
<Caption>
EXHIBIT
NUMBER         DESCRIPTION
-------        -----------
<S>            <C>

   10.1        SERVICES AGREEMENT dated September 30, 2002

   10.2        THIRD AMENDMENT TO OMNIBUS AGREEMENT dated September 30, 2002

   10.3        SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
               WILLIAMS ENERGY PARTNERS L.P. dated September 30, 2002

   10.4        THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF
               WILLIAMS GP LLC dated September 30, 2002

   10.5        FIRST AMENDMENT TO CREDIT AGREEMENT dated October 9, 2002

   10.6        NOTE PURCHASE AGREEMENT dated October 31, 2002

   10.7        SECURITY AGREEMENT dated October 31, 2002

   10.8        COLLATERAL AGENCY AGREEMENT dated October 31, 2002

</Table>


                                       33



