PRIDE COMPANIES LP, 10-K, 2000-04-17

PRIDE COMPANIES LP
10-K, 2000-04-17
PIPE LINES (NO NATURAL GAS)

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

FORM 10-K

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

For the fiscal year ended December 31, 1999
Commission file number 1-10473

PRIDE COMPANIES, L.P.
(Name of registrant)

Delaware 75-2313597
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

1209 North Fourth Street, Abilene, Texas 79601
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:
(915) 677-5444

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Name of Each
Title of Each Class: Exchange on Which Registered:
- ------------------- ----------------------------
Common Units NASDAQ OTC Bulletin Board

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 [ ]

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

Number of Common Units outstanding as of March 27, 2000:4,950,000

The aggregate market value of the 4,694,000 Common Units
held by non-affiliates of the Partnership as of March 27, 2000
was approximately $587,000, which was computed using the
closing sales price of the Common Units on March 27, 2000.
<PAGE>
<PAGE>
TABLE OF CONTENTS

PART I

Items 1 and 2.

Business and Properties
General
Partnership Operations and Products
Markets and Competition
Customers
Long-Term Product Supply Agreement
Employees
Environmental Matters
Forward Looking Statements

Item 3. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

PART II

Item 5. Market for Partnership's Common Units and Related
Unitholder Matters

Item 6. Selected Financial Data

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations

Item 7a. Quantitative and Qualitative Disclosures About
Market Price

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure

PART III

Item 10. Directors and Executive Officers of the Partnership

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial
Owners and Management

Item 13. Certain Relationships and Related Transactions

PART IV

Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
<PAGE>
PART I

Items 1 and 2. Business and Properties

General

Pride Companies, L.P. (the "Partnership") was formed as a
limited partnership under the laws of the State of Delaware in
January 1990. The Partnership owns and operates a common carrier
products pipeline system and three products terminals in Abilene,
Texas (the "Abilene Terminal"); San Angelo, Texas (the "San
Angelo Terminal"); and Aledo, Texas (the "Aledo Terminal")
(collectively the "Products Terminals") that are used to market
conventional gasoline, low sulfur diesel fuel, and military
aviation fuel (the "Products Marketing Business"). The
Partnership also owns a modern simplex petroleum refinery
facility (the "Refinery") which was mothballed on March 22, 1998.
In April 1998, the Partnership began purchasing refined products
from Equilon, a refining and marketing joint venture between
Royal Dutch/Shell Group and Texaco, Inc. (the "Equilon
Agreement") to market through its products pipeline and Products
Terminals.

Prior to October 1, 1999, the Partnership also owned and
operated a crude oil gathering business that gathered,
transported, resold and redelivered crude oil in the Texas market
(the "Crude Gathering System"). On October 1, 1999, the
Partnership sold the operating assets utilized by the Crude
Gathering System to Sun Pipe Line Services, Inc. ("Sun") for
$29.6 million in cash proceeds and the assumption by Sun of
certain indebtedness in the amount of $5.3 million (the "Crude
Gathering Sale"). See "- Crude Gathering System". Accordingly,
the Crude Gathering System has been presented as discontinued
operations for all periods herein.

The Products Marketing Business operates the Products
Terminals and one common carrier products pipeline, that
originates at the Abilene Terminal and terminates at the San
Angelo Terminal (the "San Angelo Pipeline"). The Partnership's
operations are conducted primarily in the State of Texas.

Pride Refining, Inc., a Texas corporation, (the "Managing
General Partner") owns a 1.9% general partner interest in and
serves as the managing general partner of the Partnership. The
Partnership succeeded in January 1990 to the businesses of Pride
SGP, Inc. ("Special General Partner" or "Pride SGP") which owns a
0.1% general partner interest in and serves as the special
general partner of the Partnership. The Managing General Partner
and Pride SGP (collectively the "General Partners") collectively
own a 2% general partner interest. In addition to its general
partner interest, Pride SGP owns a 4.9% interest in the
Partnership through ownership of common limited partner units
("Common Units"). Public ownership represented by the remaining
Common Units is 93.1%. In accordance with the Third Amended and
Restated Agreement of Limited Partnership of Pride Companies,
L.P. (the "Partnership Agreement"), the Managing General Partner
conducts, directs and exercises control over substantially all of
the activities of the Partnership. The Partnership has no
directors or officers; however, directors and officers of the
Managing General Partner are employed by the Partnership to
function in this capacity.

The Partnership's principal business consists of marketing
military aviation fuel, conventional gasoline and low sulfur
diesel fuel. The San Angelo Pipeline transports products from
the Abilene Terminal to Dyess Air Force Base ("Dyess") in Abilene
and to the San Angelo Terminal. Prior to mothballing the
Refinery, the Partnership operated the Aledo pipeline ("Aledo
Pipeline") which transported product from the Abilene Terminal to
the Aledo Terminal (southwest of Fort Worth, Texas).

The Partnership's primary market area for refined products
includes Central and West Texas and is a region that is not
significantly served by the major refining centers of the Gulf
Coast. Fina, Inc. ("Fina"), a competitor of the Partnership,
currently has products pipeline access into Abilene, while the
Partnership is the only supplier with a products pipeline into
San Angelo. In April 1998, Equilon converted an existing crude
pipeline into a products pipeline that delivers conventional
gasoline, low sulfur diesel fuel and military aviation fuel to
the Abilene Terminal and Aledo Terminal for distribution to the
Partnership's existing customers. In the Partnership's primary
market area, product prices reflect a premium due to
transportation costs required to import refined products from
supply points outside of the market area. Joint Reserve - Fort
Worth, Dyess, and certain other military installations have been
long-time customers of the Partnership's military aviation fuel.
Management anticipates that the Partnership will continue to bid
for these and other military supply contracts in the future
although recent volumes have declined from prior years due to
increasing competition. See "- Partnership Operations and
Products" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Factors and Trends
Affecting Operating Results." Gasoline and diesel tankage and
sales facilities at the Aledo Terminal allow the Partnership
access to the smaller communities west of the Dallas-Fort Worth
("DFW") market along Interstate 20 for conventional gasoline and
the DFW market for low sulfur diesel fuel. See "- Markets and
Competition" below.

Partnership Operations and Products

Products Marketing Business. The Partnership receives
refined products from Equilon at the Abilene Terminal and Aledo
Terminal to market through its Products Terminals in Abilene, San
Angelo, and Aledo. The Partnership transports refined products
from the Abilene Terminal to Dyess in Abilene and to the
Partnership's San Angelo Terminal through the San Angelo
Pipeline. Prior to mothballing the Refinery, the Partnership
operated the Aledo Pipeline that transported refined products
from the Abilene Terminal to the Aledo Terminal. The Aledo
Pipeline was idled in April 1998, since Equilon's pipeline is
connected to the Aledo Terminal.

The Partnership delivers military aviation fuel to Dyess by
pipeline and trucks military aviation fuel from both the Abilene
Terminal and Aledo Terminal to other military installations
supplied by the Partnership. Conventional gasoline is marketed
through the Partnership's Products Terminals to non-military
customers in the Abilene area, San Angelo area, and in the
communities west of the Dallas-Fort Worth ("DFW") metropolitan
area along Interstate 20. Low sulfur diesel fuel is also
marketed through the Products Terminals to non-military customers
in the Abilene area, the San Angelo area, and in the DFW
metropolitan area.

Military aviation fuel delivered by the San Angelo Pipeline
to Dyess is sold f.o.b. the Abilene Terminal with title passing
to the purchaser as the product enters the pipeline. Prior to
1998, the Partnership had the only pipeline capable of delivering
jet fuel directly into Dyess. In late 1997, Fina purchased
Conoco's products terminal in Abilene and built its own pipeline
from its terminal to Dyess that enables Fina to also deliver
military aviation fuel by pipeline into Dyess.

Sales of military aviation fuel constitute a significant
portion of the Partnership's revenues. See "- Markets and
Competition" below. The expected volumes under the recently
awarded contract are 52,270,000 gallons compared to 25,250,000
gallons under last year's contract; however, the margins under
the new contract will be below last years contract. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Factors and Trends Affecting Operating
Results."

The Partnership and its predecessors have been supplying
products to Joint Reserve - Fort Worth and Dyess since the early
1960s. Management believes that there will continue to be strong
demand for military aviation fuel in the Partnership's market
area into the foreseeable future; however, due to increased
competition, the amount of military aviation fuel supplied by the
Partnership under the last two contracts, was at reduced volumes
from contracts prior to 1998. Furthermore, future contracts may
also be at reduced volumes. Dyess is an Air Combat Command
facility, formerly a strategic air command facility, and the
primary training base for the B-1 bomber crews. In addition,
Dyess also has two worldwide deployable airlift squadrons which
fly the C-130 Hercules. Under the contract that is effective
from April 1, 1999 through March 31, 2000, the Partnership
contracted to sell military aviation fuel to Dyess, Joint Reserve
- - Fort Worth, E-Systems, Inc. in Greenville, Texas, and AASF in
Dallas, Texas. Under the new contract that is effective from
April 1, 2000 through March 31, 2001, the Partnership will supply
military aviation fuel to Dyess, Sheppard Air Force Base in
Wichita Falls, Texas, Joint Reserve - Fort Worth, E-Systems, Inc,
AASF in Grand Prairie, Texas, AASF in Dallas, Texas, and
Goodfellow Air Force Base in San Angelo, Texas. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Factors and Trends Affecting Operating
Results - Other Factors."

As previously mentioned, the Partnership had operated the
Aledo Pipeline prior to purchasing refined petroleum products
from Equilon. Since the Aledo Pipeline was no longer being
utilized by the Products Marketing Business, the Partnership
executed an agreement to sell the pipeline for $2.5 million to an
unrelated third party on March 1, 2000. The closing date of the
sale is expected to be July 1, 2000. The Partnership will
receive cash at the time of closing of $100,000, a $1.9 million
nonrecourse note and a $500,000 nonrecourse note. The $1.9
million nonrecourse note has a term of 7 years, accrues interest
at 9.5% per annum and requires minimum installments of $31,000
per month. The $500,000 nonrecourse note also has a term of 7
years and accrues interest at 9.5% per annum; however, all
interest and principal on this note is due on maturity. The net
book value of the Aledo Pipeline is $1.5 million. Accordingly
the Partnership expects to report a gain for financial purposes
on the sale of approximately $951,000. For tax purposes, the
Partnership had a net tax basis in the asset of $3.2 million as
of December 31, 1999 and expects to report a loss of $655,000 on
the sale.

Crude Gathering System. Prior to October 1, 1999, the
partnership's businesses included the Crude Gathering System.
The Crude Gathering System consisted of an 800-mile pipeline
system, 425,000 barrels of crude oil, 40 truck injection
stations, 101 trucks used to transport crude oil and other
related equipment. For the first seven months of 1999, the
Partnership gathered 38,110 barrels per day ("BPD") of crude oil.

On October 1, 1999, the Partnership sold the operating
assets utilized by the Crude Gathering System to Sun for $29.6
million in cash proceeds and the assumption by Sun of certain
indebtedness in the amount of $5.3 million.

Refining. Prior to March 22, 1998, the principal business
of the Partnership was crude oil refining at its Refinery located
approximately ten miles north of Abilene, Texas. The Refinery
had a throughput capacity of 49,500 BPD and was permitted to
process 44,500 BPD. For the first three months of 1998, the
Refinery processed crude oil into refined products at an average
rate of approximately 28,090 BPD.

As a result of the mothballing of the Refinery, the
Partnership wrote down such assets $40.0 million at December 31,
1997. In December 1998, the Partnership sold its diesel
desulfurization unit for $3.1 million.

The other processing units previously utilized by the
Refinery are being held for sale. The timing of any such sale is
uncertain.

Markets and Competition

Fina, the Partnership's principal competitor in its primary
market area, operates a products pipeline in the Abilene area.
This competitor's pipeline originates in Big Spring, Texas (105
miles west of Abilene) and supplies Abilene, Midland, and Wichita
Falls, Texas and the Midcontinent. However, the Partnership
currently has the only products pipeline access to the San Angelo
area. Retailers and jobbers who are not supplied by the
Partnership or one of its exchange partners must truck their
products into San Angelo from locations as far away as 90 to 200
miles. In April 1998, Equilon completed conversion of an existing
crude pipeline into a products pipeline that delivers
conventional gasoline, low sulfur diesel fuel and military
aviation fuel from the Gulf Coast to the Partnership's Abilene
Terminal and Aledo Terminal, and the Partnership ships product
from the Abilene Terminal to the San Angelo Terminal through the
San Angelo Pipeline. Other Gulf Coast refiners ship their
products primarily throughout the southeast and central United
States. Total petroleum product demand for the Partnership's
market area is determined by demand for conventional gasoline,
low sulfur diesel fuel, and military aviation fuel. In the case
of each product, however, demand tends to vary by locality and
season. Aviation fuel consumption is from regional military and
civilian air facilities.

In February 1997, Fina and Holly Corp. ("Holly") announced
that they would expand their products pipeline system in West
Texas, New Mexico and Arizona and eventually bring refined
products into these markets from Fina's Port Arthur, Texas
refinery. The companies have completed the expansion, but are
currently supplying the products pipeline system with refined
products out of Fina's refinery in Big Spring and Holly's
refinery in Artesia, New Mexico. The Partnership does not know
when or if these two companies will bring refined products into
the Partnership's primary market area from Fina's Port Arthur
refinery or other Gulf Coast refineries.

Other companies are also considering projects to bring
petroleum products into West Texas, New Mexico and Arizona from
the Gulf Coast. These proposals, if implemented, would increase
competition in the Partnership's primary market areas.

In addition to its primary market areas in Abilene and San
Angelo for conventional gasoline and low sulfur diesel fuel, the
Partnership has access to a secondary market in the small
communities west of Dallas-Fort Worth along Interstate 20 for
conventional gasoline and the Dallas-Fort Worth metropolitan area
for low sulfur diesel fuel. The San Angelo market area is
accessible via the San Angelo Pipeline that is connected to
storage tanks at the Abilene Terminal. Market demand for
gasoline and diesel in Abilene and in San Angelo is estimated to
be approximately 17,500 BPD and 11,000 BPD, respectively. Market
demand for petroleum products in the Dallas - Fort Worth area is
estimated to be approximately 343,000 BPD, with reformulated
gasoline, diesel and a limited amount of conventional gasoline
accounting for an aggregate of 195,000 BPD.

The Partnership sells gasoline to branded product companies
and to unbranded dealers. Low sulfur diesel fuel is primarily
sold to truck stops and end users with a limited amount sold to
other branded product companies. A number of major petroleum
product marketers in West Texas do not have local refinery
facilities or sales terminals. Accordingly, such marketers
supplement their local needs by purchases or product exchanges
with local suppliers, such as the Partnership. The Partnership
currently sells or exchanges diesel, conventional gasoline, and
military aviation fuel, depending on local market needs
throughout the region. Some of the marketers in the area that
purchase from or exchange refined products with the Partnership
include Chevron, Citgo, Conoco, Equiva, Exxon, Phillips, Star
Enterprise and Ultramar Diamond Shamrock ("UDS"). The
Partnership has one exchange agreement and two sales agreements
with these companies for product supplied out of the Abilene
Terminal; four exchange agreements and two sales agreements with
these companies for products supplied out of the San Angelo
Terminal; and one exchange agreement and one sales agreement with
these companies for product supplied out of the Aledo Terminal.
The exchange agreements have enabled the Partnership to expand
its marketing area to Amarillo, Texas, Lubbock, Texas,
Midland/Odessa, Texas, and Wichita Falls, Texas without incurring
transportation costs to these cities. Prior to March 31, 2000,
the Partnership had operated several retail fueling facilities.

Prior to October 1, 1999, the Partnership had marketed to
third parties the crude oil it previously sold to the Refinery.
These third parties included other refiners and companies that
bought, sold and exchanged crude oil. The Partnership entered
into two two-year contracts to sell Gary-Williams Energy,
Corporation (Gary-Williams) beginning in April 1998 and UDS
beginning in August 1998, a portion of the crude oil previously
sold to the Refinery. Such contracts were assumed by Sun as part
of the Crude Gathering Sale.

Customers

One of the Partnership's major customers is the Defense
Energy Support Center ("DESC"). Revenues from the DESC comprised
13.6%, 26.4% and 22.0% of total revenues from continuing
operations in 1999, 1998 and 1997, respectively. At December 31,
1999, the Partnership had $283,000 in receivables from the DESC.

Long-Term Product Supply Agreement

In 1997, the Partnership executed a long-term product supply
agreement (the "Agreement") with Equilon to supply gasoline,
diesel fuel and jet fuel to the Partnership. The Agreement has a
10-year primary term which began in April 1998, the date Equilon
completed its system of pipelines and terminals. The Agreement
also has two-year renewal provisions for up to an additional 10
years. After the initial five years of the initial ten-year term
("Primary Term"), if Equilon determines that shipment of products
on its new products pipeline is no longer economical due to
product prices, then Equilon may notify the Partnership of
proposed redetermined prices. If the Partnership does not accept
such redetermined prices, then Equilon may elect to terminate the
Agreement by 18 months' written notice. After the Primary Term,
if either party under the Agreement can demonstrate that the
prices for delivered products under the Agreement are producing
cash flows materially below that received during the Primary
Term, then such party may notify the other party of proposed
prices it must receive to continue. If the other party does not
accept such redetermined pricing, then the other party may elect
not to renew the Agreement not less than one year prior to the
end of the current term. The Agreement may furthermore be
terminated upon any breach by the other party which continues
beyond 30 days following notice of breach. Additionally, the
Agreement provides that the Partnership will purchase all
gasoline, diesel and jet fuel which it may desire to purchase,
exclusively from Equilon. The Partnership's cost for such
product is based primarily on the market price in the area in
which the products are received less a discount. The Partnership
will use Equilon products to supply its existing customer base,
which includes wholesale customers, exchange partners, and
military bases, primarily using the Products Terminals and San
Angelo Pipeline.

In connection with the Agreement, the Partnership mothballed
its Refinery, but will continue to utilize the terminal and
storage facilities at the Refinery for a refined products
terminalling facility (the Abilene Terminal). See also
"Financial Condition - Financial Resources and Liquidity." The
Partnership believes that cash flows will likely be less volatile
since the Agreement will result in more stable product margins
and eventually decrease the Partnership's exposure to volatility
in refining margins. The Partnership also believes that the
Agreement will better enable the Partnership to remain
competitive as environmental standards change and the industry
trends toward consolidation and realignments in the future.

Employees

As of December 31, 1999, the Partnership had 39 employees,
in the Products Marketing Business.

Environmental Matters

The Partnership's activities involve the transportation,
storage, and marketing of refined petroleum products that
constitute or contain substances regulated under certain federal
and state environmental laws and regulations. The Partnership is
also subject to federal, state and local laws and regulations
relating to air emissions and disposal of wastewater as well as
other environmental laws and regulations, including those
governing the handling, release and cleanup of hazardous
materials and wastes. The Partnership has from time to time
expended resources, both financial and managerial, to comply with
environmental regulations and permit requirements and anticipates
that it will continue to be required to expend financial and
managerial resources for this purpose in the future. For the
year ended December 31, 2000, the Partnership expects to spend
$212,000 related to an investigative study by the Texas Natural
Resource Conservation Commission. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -
Factors and Trends Affecting Operating Results" and "Legal
Proceedings."

Forward Looking Statements

This Form 10-K contains certain forward looking statements.
Such statements are typically punctuated by words or phrases such
as "anticipate," "estimate," "projects," "should," "may,"
"management believes," and words or phrases of similar import.
Such statements are subject to certain risks, uncertainties or
assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated,
estimated or projected. Among the key factors that may have a
direct bearing on the Partnership's results of operations and
financial condition in the future are: (i) the margins between
the revenue realized by the Partnership on the sale of refined
products and the cost of those products purchased from Equilon
and the availability of such products, (ii) the sales volume at
the Products Terminals, (iii) the impact of current and future
laws and governmental regulations affecting the petroleum
industry in general and the Partnership's operations in
particular, (iv) the ability of the Partnership to sustain cash
flow from operations sufficient to realize its investment in
operating assets of the Partnership and meet its debt
obligations, and (v) fluctuations in refined product prices and
their impact on working capital and the borrowing base under the
Partnership's credit agreements. See "Management's Discussion
and Analysis of Financial Condition and Results of Operation -
Financial Condition."

Item 3. Legal Proceedings

On September 5, 1995, the Partnership filed a substantial
claim in the United States Court of Federal Claims against the
United States of America (DESC) relating to erroneous pricing of
fuel purchased over a period of several years from the
Partnership and its predecessors (the "DESC Claim"). The
Partnership seeks recovery of the difference between the fair
market value of the jet fuel and the amount originally paid by
the DESC for such jet fuel. The ultimate outcome of this matter
cannot presently be determined.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders
during fiscal year 1999.
<PAGE>

<PAGE>
PART II

Item 5. Market for Partnership's Common Units and Related
Unitholder Matters

The Partnership's Common Units are currently traded on the
NASDAQ OTC bulletin board under the symbol PRDE. Prior to August
17, 1998, the Partnership was listed on the New York Stock
Exchange but was delisted for failing to meet certain listing
requirements. The following tables set forth, for the periods
indicated, the high and low closing prices of the Common Units in
1998 as reported on the New York Stock Exchange Composite Tape
and the high and low bid information of the Common Units in 1999
and 1998 on the NASDAQ OTC bulletin board. Quotations on the
NASDAQ OTC bulletin board reflect interdealer, without retail
mark-up, mark-down, or commission, prices and may not necessarily
represent actual transactions. No distributions were made on the
Common Units during the past two fiscal years.

New York Stock Exchange Composite Tape
- --------------------------------------

1998 HIGH LOW
____ ---- ---
<S> <C> <C>
First Quarter $ 2.00 $ 1.31

Second Quarter 1.56 1.00

Third Quarter thru 8/14/98 1.13 0.44

NASDAQ OTC Bulletin Board
- -------------------------
HIGH LOW
Third Quarter beginning ---- ---
8/20/98 $ 0.50 $ 0.25

Fourth Quarter 0.41 0.13

1999 HIGH LOW
____ ____ ___

First Quarter $ 0.19 $ 0.06

Second Quarter 0.50 0.13

Third Quarter 0.33 0.09

Fourth Quarter 0.17 0.11

</TABLE>

The Unsecured Note A is convertible into 477,000 Common
Units, and the Partnership's Series B Preferred Units and Series
C Preferred Units are convertible into 1,480,000 and 794,000
Common Units, respectively. See "Management's Discussion and
Analysis of Financial Condition and Results of Operation -
Financial Condition - Financial Resources and Liquidity."
Through December 31, 1999, these securities had total accumulated
arrearages of $3.3 million.

Based on information received from its transfer agent and
servicing agent, the Partnership estimates the number of
beneficial common unitholders of the Partnership at December 31,
1999 to be approximately 4,200.

See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Financial Condition -
Financial Resources and Liquidity" for a discussion of certain
restrictions imposed by the Partnership's lenders on the payment
of distributions to unitholders throughout the term of the
Partnership's credit facility with such lenders, which terminates
on January 2, 2001.

Item 6. Selected Financial Data

The following table sets forth, for the periods and at the
dates indicated, selected financial data for the Partnership.
The table is derived from the financial statements of the
Partnership and should be read in conjunction with those
financial statements. See also "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

The earnings per unit amounts prior to 1997 have been
restated as required to comply with Statement of Financial
Accounting Standards No. 128, Earnings per Share. For further
discussion of earnings per unit, see the notes to the
consolidated financial statements.

The income statement data and balance sheet data for prior
years has been restated to reflect the Crude Gathering System as
a discontinued operation.

<PAGE>

<PAGE>
(The following table should be printed on 14" x 8.5" paper)

<TABLE>
SELECTED FINANCIAL DATA<F12>
(In thousands, except per unit amounts and footnote amounts)
<CAPTION>

Year Ended December 31,
-----------------------------------------------------------------
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues
Products Marketing Business <F1> $ 235,136 $ 294,328 $ 277,179 $ 121,189 $ 130,604
Costs of sales and operating
expenses, excluding depreciation 231,201 291,502 266,918 115,454 126,424
Refinery closure costs - - 41,396<F3> -
Marketing, general and administrative
expenses 5,707 5,512 4,769 3,761 3,700
Depreciation 4,952 4,972 4,955 1,422 1,496
-------- -------- -------- -------- --------
Operating income (loss) (6,724) (7,658) (40,859) 552 (1,016)
-------- -------- -------- -------- --------
Other net 176 156 558 322 505
Interest expense (5,981) (5,319) (4,829) (5,647)<F4> (5,095)<F4>
Credit and loan fees <F5> (1,528) (1,388) (1,242) (1,646) (2,080)
-------- -------- -------- -------- --------
Net loss from continuing operations (14,057) (14,209) (46,372) (6,419) (7,686)
Discontinued operations <F12>:
Income (loss) from operations of
the Crude Gathering System prior
to August 1, 1999 5,440 7,794 1,341 (2,138)<F2> 269<F2>
(Loss) on disposal - - - - (251)
-------- -------- -------- -------- --------
Net loss $ (8,617) $ (6,415) $ (45,031) $ (8,557) $ (7,668)
======== ======== ======== ======== ========

Before conversion <F6>:
Basic and diluted net loss from
continuing operations per unit:
Preferred Unit $ (1.38) $ (1.40) $ - $ - $ -
Old Common Unit $ (1.38) $ (1.40) $ - $ - $ -

Basic and diluted net income from
discontinued operations per
unit:
Preferred Unit $ .53 $ .77 $ - $ - $ -
Old Common Unit $ .53 $ .77 $ - $ - $ -

Basic and diluted net loss per Unit:
Preferred Unit $ (0.85) $ (0.63) $ - $ - $ -
Old Common Unit $ (0.85) $ (0.63) $ - $ - $ -

After conversion <F6>:
Basic and diluted net loss per Common
Unit:
Net loss from continuing
operations $ (2.78) $ (2.81) $ (9.18) $ (1.62) $ (1.89)
Net income (loss) from
discontinued operations $ 1.07 $ 1.54 $ .26 $ (.42) $ -
-------- -------- -------- -------- --------
Net loss $ (1.71) $ (1.27) $ (8.92) $ (2.04) $ (1.89)
======== ======== ======== ======== ========
Numerator:
Net loss from continuing operations $ (14,057) $ (14,209) $ (46,372) $ (6,419) $ (7,686)
Preferred distributions<F7> - - - (1,763) (1,854)
-------- -------- -------- -------- --------
Net loss from continuing operations
less preferred distributions (14,057) (14,209) (46,372) (8,182) (9,540)
Net loss from continuing operations
allocable to 2% general partners'
interest (281) (284) (928) (163) (191)
-------- -------- -------- -------- --------
Numerator for basic and diluted
earnings per unit from continuing
operations $ (13,776) $ (13,925) $ (45,444) $ (8,019) $ (9,349)
======== ======== ======== ======== ========
Net income (loss) from discontinued
operations $ 5,440 $ 7,794 $ 1,341 $ (2,138) $ 18
Net income (loss) from discontinued
operations allocable to 2% general
partners' interest 109 156 27 (43) -
-------- -------- -------- -------- --------
Numerator for basic and diluted
earnings per unit from discontinued
operations $ 5,331 $ 7,638 $ 1,314 $ (2,095) $ 18
======== ======== ======== ======== ========
Numerator for basic and diluted
earnings per unit $ (8,445) $ (6,287) $ (44,130) $ (10,114) $ (9,331)
======== ======== ======== ======== ========
Cash distributions declared per
Common Unit $ - $ - $ - $ - $ -

Denominator <F8>:
Denominator for basic and diluted
earnings per unit before
conversion <F6>:
Preferred Units 4,700 4,700 - - -
Old Common Units 5,250 5,250 - - -
Denominator for basic and diluted
earnings per unit after
conversion <F6>:
Common Units 4,950 4,950 4,950 4,950 4,950

Balance Sheet Data (at end of period):
Net property, plant and equipment $ 75,294 $ 70,993 $ 19,793 $ 17,518 $ 16,621
Total assets 107,822 111,587 64,804 44,107 47,506
Long-term debt (including current
maturities) <F9> 50,623 51,098 37,465 39,594 25,799
Redeemable preferred equity - - 19,529 19,529 17,079 <F10>
Partners' capital (deficiency) 36,013 29,598 (15,433) (23,990) (28,514)<F10>

Operating Data Continuing Operations (BPD):
Products Marketing Business
Product sales 13,267<F11> 14,783
Refinery
Crude oil throughput 29,806 32,555 31,449 28,090<F11> -
Products refined 29,031 31,681 30,619 27,438<F11> -
Products System
Transportation volumes 15,585 13,509 11,415 7,335<F11> -

<FN>
<F1>
Prior to mothballing the Refinery on March 22, 1998, this data represents information for the Refinery and products
pipelines and terminals.
<F2>
Discontinued operations for 1998, included a $1,197,000 lower of cost or market inventory adjustment due to the decline
in inventory values. Discontinued operations for 1999 included the reversal of a $1,197,000 lower of cost or market
inventory adjustment since the market value of the crude oil was more than its carrying value.
<F3>
Refinery closure costs for the year ended December 31, 1997 includes a $40,000,000 noncash charge for impairment of
fixed assets, $1,750,000 related to closure of the Refinery and related severance costs, and $367,000 related to the
writeoff of certain Refinery assets offset by $721,000 in accruals that were reversed as a result of the Refinery being
mothballed.
<F4>
Since a portion of the debt is subject to increasing rates of interest, the Partnership is accruing interest at the
effective rate over the term of the debt. Interest expense in 1998 and 1999 reflects an accrual of $1,030,000 and
$315,000, respectively, which is based on the difference between the effective interest rates and the stated rates.
<F5>
Credit and loan fees include costs associated with the restructuring and refinancing of the Partnership of $873,000,
$1,064,000, $613,000, $1,325,000 and $1,761,000 for 1995, 1996, 1997, 1998 and 1999, respectively.
<F6>
On December 31, 1996 after the market closed the convertible preferred limited partner units ("Preferred Units") were
converted to Common Units on a one-for-one basis. At the same time, existing common limited partner units ("Old Common
Units") were converted to Common Units on a one-for-twenty-one reverse unit split. The "Before Conversion" section
reflects the per unit information based on both the outstanding Preferred Units and Old Common Units, whereas the "After
Conversion" section reflects the pro forma per unit information based on the outstanding Common Units.
<F7>
Since cash distributions were not paid on the preferred equity, the preferred equity accumulated arrearages of
$1,763,000 and $1,854,000 for the year ended December 31, 1998 and 1999, respectively.
<F8>
In 1997, 1998 and 1999, the calculations of diluted earnings per unit exclude 300,000, 300,000 and 284,000,
respectively, officer and employee unit appreciation rights and 2,987,000, 3,027,000 and 2,751,000, respectively, units
attributed to the convertible preferred equity and convertible debt because the effect would be antidilutive. The
calculation for those three years also exclude 70,000 director unit appreciation rights because the plan states they
will be settled for cash.
<F9>
At December 31, 1995, 1996, 1997, 1998 and 1999 current maturities were $3,330,000, $6,412,000, $1,938,000, $65,000 and
$25,799,000, respectively.
<F10>
In connection with the Crude Gathering Sale, Pride SGP exchanged certain assets, receivables, and the Series E and F
Preferred Units for cash and Subordinate Preferred Units which are included in Partners' capital (deficiency) for the
year ended December 31, 1999. See "- Management's Discussion and Analysis of Financial Conditions and Results of
Operation - Factors and Trends Affecting Operating Results - Other Factors."
<F11>
Due to the Refinery being mothballed on March 22, 1998, the operating data in 1998 for the Products Marketing Business
is for the period April 1, 1998 through December 31, 1998 and for the Refinery and Products System is for the period
January 1, 1998 through March 31, 1998.
<F12>
The Crude Gathering System segment was sold on October 1, 1999. Accordingly, the segment has been presented as
discontinued operations for all periods.
</FN>
</TABLE>
<PAGE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations

Results of Operations

General

The following is a discussion of the financial condition and
results of operations of the Partnership. This discussion should
be read in conjunction with the financial statements included in
this report.

As a result of mothballing the Refinery at the end of the
first quarter of 1998 and the Crude Gathering Sale on October 1,
1999, the Partnership's operating results for the Products
Marketing Business now depend principally on (i) the margins
between the revenue realized by the Partnership on the sale of
refined products and the cost of those refined products purchased
from Equilon and (ii) the sales volume at the Products Terminals.
The price the Partnership is able to realize on the resale of its
petroleum products is influenced by the level of competition in
the Partnership's markets. Due to the change in its core
business, a comparison of the Products Marketing Business to the
Refinery and the prior products pipeline business ("Products
System") would not be meaningful and, therefore, is not included
with this Form 10-K.

Prior to mothballing the Refinery and entering into the
Equilon Agreement, the Partnership's operating results depended
principally on (i) the rate of utilization of the Refinery, (ii)
the margins between the prices of its refined petroleum products
and the cost of crude oil and (iii) the volume throughput on the
Products System.

The Crude Gathering System was sold on October 1, 1999 and
accordingly the Crude Gathering System is treated as a
discontinued operation in the financial statements of the
Partnership. The Crude Gathering System's operating results
depended principally on (i) the volume of throughput on and
margins from the transportation and resale of crude oil from the
Partnership's Crude Gathering System and (ii) the amount of crude
oil produced in the areas the Partnership gathered. Margins from
the Crude Gathering System were influenced by the level of
competition and the price of crude oil. When prices were higher,
crude oil could generally be resold at higher margins.
Additionally, transportation charges trended upward when higher
crude oil prices resulted in increased exploration and
development. Conversely, when crude oil prices decreased,
exploration and development declined and margins on the resale of
crude oil as well as transportation charges tended to decrease.

From April 1998 to September 1999, the Partnership sold
crude oil to third parties that in the past would have been
refined at the Refinery. The gross margin per barrel from such
sales was based in part on the sales price of crude oil above the
Partnership's posted price for the purchase of such crude oil
(the "Premium").

Prior to April 1998, a substantial portion of the crude
gathered by the Crude Gathering System was sold to the Refinery.
The total intrasystem pricing of crude oil between the Refinery
and the Crude Gathering System included an intracompany premium
(the "Intracompany Premium"), the Partnership's posted price and
transportation costs. An increase in the Intracompany Premium
for crude oil had a negative impact on the Refinery and a
positive impact on the Crude Gathering System. On the other
hand, a decrease in the Intracompany Premium for crude oil had a
positive impact on the Refinery and a negative impact on the
Crude Gathering System. For the first three months of 1998 and
the year ended December 31, 1997, the average Intracompany
Premium for crude oil was $1.72 and $1.91, respectively.

In evaluating the financial performance of the Partnership,
management believes it is important to look at operating income
excluding depreciation in addition to operating income which is
after depreciation. Operating income excluding depreciation
measures the Partnership's ability to generate and sustain
working capital and ultimately cash flows from operations.
However, such measure is before debt service, so it does not
indicate the amount available for distribution, reinvestment or
other discretionary uses. Gross revenues primarily reflect the
level of crude oil prices and are not necessarily an accurate
reflection of the Partnership's profitability. Also important to
the evaluation of the Refinery's performance were barrels of
crude oil refined, gross margin (revenue less cost of crude) per
barrel, and operating expenses per barrel excluding depreciation.

Year ended December 31, 1999 compared with year ended December
31, 1998.

General. Net loss for the year ended December 31, 1999 was
$7.7 million compared to net loss of $8.6 million for the year
ended December 31, 1998. The improvement for the year ended
December 31, 1999 was due to improved results from the
discontinued operation which was partially offset by weaker
results in the continuing operations.

Continuing Operations (Products Marketing Business). Net
loss from continuing operations was $7.7 million for the year
ended December 31, 1999 compared to $6.4 million for the year
ended December 31, 1998. The results for the year ended December
31, 1998 were stronger due to the results for the Refinery in the
first quarter of 1998 and the lower credit and loan fees for the
year ended December 31, 1998. Credit and loan fees for the year
ended December 31, 1999 increased due to certain deferred
financing costs being amortized over a shorter period as a result
of the new maturity date of the BankBoston facility (See "-
Financial Condition"). The stronger operating results for the
year December 31, 1998 were partially offset by lower interest
expense for the year ended December 31, 1999 due to the payment
of $15.0 million on the A Term Loan (See "- Financial Condition")
and increased interest income for the year ended December 31,
1999 resulting from the proceeds of the sale of the Crude
Gathering System.

Operating loss, depreciation expense, and operating income
excluding depreciation from continuing operations was $1.0
million, $1.5 million and $480,000, respectively, for the year
ended December 31, 1999. Operating income from continuing
operations was $552,000 for the year ended December 31, 1998
which included operating income of $1.0 million from the Refinery
and Products System for the first three months of 1998.
Depreciation expense from continuing operations was $1.4 million
for the year ended December 31, 1998 which included depreciation
expense of $368,000 from the Refinery and Products System for the
first three months of 1998. Operating income excluding
depreciation from continuing operations was $2.0 million for the
year ended December 31, 1998 which included operating income
excluding depreciation of $1.4 million from the Refinery and
Products System for the first three months of 1998. During the
year ended December 31, 1999, the Partnership marketed 14,783 BPD
of refined products compared to 17,046 BPD for the year ended
December 31, 1998. For the last nine months of 1998 which
excludes the Refinery and Products System, the Partnership
marketed 13,267 BPD of refined products. The net margin per
barrel for the year ended December 31, 1999 was negative $0.19
compared to positive $0.09 for the year ended December 31, 1998.
For the last nine months of 1998 which excludes the Refinery and
Products System, the net margin per barrel was negative $0.12.
Although the amount of refined products sold each day improved
for the year ended December 31, 1999 from the last nine months of
1998, such improvement was not enough to offset certain temporary
discounts Equilon gave the Partnership during the last nine
months of 1998 as concessions for the startup problems it
experienced when it began operating the new refined products
pipeline.

Discontinued Operations (Crude Gathering System). Net
income from discontinued operations was $269,000 for the seven
months ended July 31, 1999 compared to a loss of $2.1 million for
the year ended December 31, 1998. Net income from discontinued
operations for the year ended December 31, 1999 included the
reversal of a $1.2 million lower of cost or market inventory
adjustment since the market value of the crude oil owned by the
Partnership was more than its LIFO carrying value at September
30, 1999, whereas, net loss from discontinued operations for the
year ended December 31, 1998 included a negative $1.2 million
lower of cost or market adjustment since the market value of the
crude oil owned by the Partnership was less than its carrying
value at December 31, 1998. The results from discontinued
operations for the seven months ended July 31, 1999 included
$944,000 in higher costs of sales due to hedging losses. See
"Quantitative and Qualitative Disclosure About Market Price."
The volume of crude oil gathered by the Crude Gathering System
decreased to 38,110 BPD for the first seven months of 1999 from
43,508 BPD for the year ended December 31, 1998 due to the
elimination of marginal contracts and lower crude oil production
in the field. For the seven months ended July 31, 1999, net
margin increased to $0.12 per barrel from negative $0.04 per
barrel for the year ended December 31, 1998, which is primarily a
result of the lower of cost or market adjustments discussed
earlier.
The Partnership also realized a loss for the year ended
December 31, 1999 on the disposal of the discontinued operations
of $251,000, which includes operating losses incurred after the
measurement date of August 1, 1999 and prior to the disposal date
of October 1, 1999. From August 1, 1999 through October 1, 1999,
the Partnership incurred $1.3 million in higher costs of sales
due to hedging losses which was offset by the gain realized on
the sale of the crude oil to Sun on October 1, 1999.

Year ended December 31, 1998 compared with year ended December
31, 1997

General. Net loss for the year ended December 31, 1998
decreased to $8.6 million as compared to $45.0 million for the
year ended December 31, 1997. The results for the year ended
December 31, 1997 included $41.4 million of costs associated with
ceasing Refinery operations. Excluding the $41.4 million of
costs associated with ceasing Refinery operations, net loss was
$3.6 million for the year ended December 31, 1997. The closure
costs included a $40.0 million noncash charge for impairment of
certain Refinery fixed assets, $1.8 million related to the
closure of the Refinery and related severance costs and $367,000
related to the writeoff of certain Refinery assets offset by
$721,000 in accruals that were reversed since the Refinery was
mothballed.

Continuing Operations (Products Marketing Business). Non-
operating expenses of the continuing operations increased $1.5
million for the year ended December 31, 1998 as compared to the
same period in 1997 due to increased interest expense and credit
and loan fees. Interest expense of the continuing operations
increased $818,000 which is attributable to higher interest rates
under the new credit facilities executed December 31, 1997.
Credit and loan fees of the continuing operations increased for
the year as a result of the amortization of deferred financing
costs associated with the refinancing that occurred on December
31, 1997.

Operating income from continuing operations for the year
ended December 31, 1999 was $552,000 which includes operating
income of $1.0 million from the Refinery and Products System for
the first three months of 1998. Depreciation expense from
continuing operations was $1.4 million for the year ended
December 31, 1998 which includes depreciation expense of $368,000
from the Refinery and Products System for the first three months
of 1998. Operating income before depreciation from continuing
operations was $2.0 million for the year ended December 31, 1998
which includes operating income before depreciation of $1.4
million from the Refinery and Products System for the first three
months of 1998. During the last nine months of 1998, the
Partnership marketed 13,267 BPD of refined products through the
Products Marketing Business. For the first three months of 1998,
the Partnership marketed 28,669 BPD through the Refinery and
Products System. The gross margin per barrel for the last nine
months of 1998 for the Products Marketing Business was $1.82.
The gross margin per barrel for the first three months of 1998
for the Refinery was $1.88.

Management believes that the initial operating results of
the Products Marketing Business were significantly impacted by
product outages and other start-up problems associated with the
supply agreement with Equilon. Further, management believes
increased competition in the Partnership's operating area would
have significantly hurt operating results had the Partnership
continued to operate the Refinery.

Operating loss for the Refinery and Products System was
$40.9 million for the year ended December 31, 1997. Excluding
the $41.4 million of costs associated with ceasing Refinery
operations, operating income for the Refinery and Products System
was $537,000 for the year ended December 31, 1997. Depreciation
expense for the Refinery and Products System was approximately
$5.0 million for the year ended December 31, 1997. Operating
loss before depreciation for the Refinery and Products System was
$35.9 million for the year ended December 31, 1997. Excluding
the $41.4 million of costs associated with ceasing Refinery
operations, operating income excluding depreciation for the
Refinery and Products System was $5.5 million for the year ended
December 31, 1997.

Operating income, depreciation expense and operating income
before depreciation for the Products System was $655,000,
$870,000 and $1.5 million, respectively, for the year ended
December 31, 1997. Total transportation volumes were 11,415 for
the year ended December 31, 1997.

Operating loss for the Refinery was $41.5 million for the
year ended December 31, 1997. Excluding the $41.4 million of
costs associated with ceasing Refinery operations, operating loss
for the Refinery was $118,000 for the year ended December 31,
1997. Depreciation expense for the Refinery was $4.1 million for
the year ended December 31, 1997. Operating loss excluding
depreciation for the Refinery was $37.4 million for the year
ended December 31, 1997. Excluding the $41.4 million of costs
associated with ceasing Refinery operations, operating income
excluding depreciation for the Refinery was $4.0 million for the
year ended December 31, 1997.

Refinery gross margin per barrel was $1.76 for the year
ended December 31, 1997. Refinery throughput averaged 31,449 BPD
for the year ended December 31, 1997. Operating expenses per
barrel before depreciation were $4.61 for the year ended December
31, 1997. Excluding the $41.4 million of costs associated with
ceasing Refinery operations, operating expenses per barrel
excluding depreciation were $1.00 for the year ended December 31,
1997.

Discontinued Operations (Crude Gathering System). Net loss
from discontinued operations was $2.1 million for the year ended
December 31, 1998 compared to net income of $1.3 million for the
year ended December 31, 1997 due to a decline in crude gathering
margins. For the year ended December 31, 1998, the Premium for
crude oil sold to third parties was lower than the Intracompany
Premium and transportation revenue received from the Refinery for
the same period in 1997. In addition, net loss from discontinued
operations for the year ended December 31, 1998 included a $1.2
million lower of cost or market inventory adjustment due to the
decline in inventory values. Due to the elimination of several
marginal contracts, the volume of crude oil gathered by the Crude
Gathering System decreased to 43,508 BPD for the year ended
December 31, 1998 from 51,305 BPD for the year ended December 31,
1997.

Factors and Trends Affecting Operating Results

A number of factors have affected the Partnership's
operating results, both indirectly and directly, such as
environmental compliance, other regulatory requirements, industry
trends, price of crude oil and, with respect to certain products,
seasonality and weather. The Managing General Partner expects
that such conditions will continue to affect the Partnership's
business to varying degrees in the future. The order in which
these factors are discussed is not intended to represent their
relative significance.

Environmental Compliance. Increasing public and
governmental concern about air quality is expected to result in
continued regulation of air emissions. Regulations relating to
carbon monoxide and regulations on oxygen content in gasoline and
sulfur content in both diesel fuel and gasoline are expected to
be increasingly important in urban areas. See "Business and
Properties - Environmental Matters." In addition, the
Partnership plans to spend approximately $459,000 in 2000 and
2001 on several projects to maintain compliance with various
other environmental requirements including $212,000 related to an
investigative study by the Texas Natural Resource Conservation
Commission and $100,000 related to the cleanup of an existing
crude oil leak. The remaining $147,000 is for various normal
operating expenses to be incurred in the ordinary course of
business.

The Partnership is currently involved in Phase II of an
investigative study by the Texas Natural Resource Conservation
Commission. Management estimates the cost to comply with this
study approximates $212,000 and has accrued for this amount at
December 31, 1999. Management does not believe any significant
additional amounts will be required to maintain compliance with
this study or other environmental requirements other than
expenditures incurred in the ordinary course of business.

Effective January 1, 1995, the Clean Air Act Amendment of
1990 required that certain areas of the country use reformulated
gasoline ("RFG"). The Abilene and San Angelo market areas do not
require RFG. Collin, Dallas, Denton, and Tarrant Counties, which
comprise the Dallas-Fort Worth ("DFW") metroplex area, do require
RFG; however, the Partnership's Aledo Terminal lies outside this
area and is allowed to supply conventional gasoline that is not
destined for sale in these four counties. Beginning January 1,
2002, the Aledo Terminal will also be subject to the RFG
requirement. In addition to the requirement for RFG in certain
areas, new but much less restrictive regulations took effect that
impose new quality standards for conventional gasoline in the
rest of the country. Management does not believe that these have
had or will have a material adverse effect on the Partnership's
operations.

After the Crude Gathering Sale, the Partnership continues to
be responsible for certain environmental liabilities associated
with the Crude Gathering System including five on-going
remediation sites, any refined product contamination associated
with the assets sold and certain inactive crude gathering lines
retained by the Partnership. Other than $100,000 accrued for
remediation of the sites, the Partnership does not expect future
expenditures related to these retained environmental liabilities
to be material.

Other Regulatory Requirements. The Partnership is subject
to the rules and regulations of, among others, the Occupational
Safety and Health Administration, Texas Railroad Commission,
Texas Natural Resource Conservation Commission, and United States
Environmental Protection Agency.

Industry Trends and Price of Crude Oil. Prior to the Crude
Gathering Sale, industry trends and the price of crude oil
affected the Partnership's crude gathering business. In the
three years prior to October 1, 1999, the posting price for WTI
crude oil had varied from approximately $8.25 to $25.00 per
barrel. The general level of crude oil prices had a significant
effect on the margins in the crude gathering business. Margins
from the Crude Gathering System were influenced by the level of
competition and the price of crude oil. When prices were higher,
crude oil could generally be resold at higher margins. The
Partnership is also impacted by fluctuations in the cost of
products purchased from Equilon versus fluctuations in the price
realized by the Partnership on the sale of such products and the
amount of competition in its markets.

Seasonality and Weather. Gasoline consumption is typically
highest in the United States in the summer months and lowest in
the winter months. Diesel consumption in the southern United
States is generally higher just prior to and during the winter
months when commercial trucking is routed on southern highways to
avoid severe weather conditions further north.

Other Factors. The United States Government awarded the
Partnership the right to supply 52,270,000 gallons of military
aviation fuel for the contract period that begins April 1, 2000
and ends March 31, 2001. The award is for deliveries to Dyess,
Sheppard Air Force Base in Wichita Falls, Texas, Joint Reserve -
Fort Worth, Texas, E-Systems, Inc. in Greenville, Texas, AASF in
Grand Prairie, Texas, AASF in Dallas, Texas, and Goodfellow Air
Force Base in San Angelo, Texas. The contract is a 107% increase
over the volumes that it supplied under the contract which began
April 1, 1999 and ends March 31, 2000; however, margins under the
new contract will be below last year's contract. See "Business
and Properties - Partnership Operations and Products."

On October 1, 1999, the Partnership completed the sale of
the Crude Gathering System operating assets to Sun. The
Partnership received $29.6 million in cash proceeds from the sale
and Sun assumed certain indebtedness in the amount of $5.3
million. The sales price was determined based on a purchase
price of $24.9 million plus the value of the inventory which was
$10.0 million on October 1, 1999. The net proceeds were applied
as follows: $15.0 million principal payment on the A term loan
(See "- Financial Condition - Financial Resources and
Liquidity"), $2.0 million was paid to Pride as part of the
exchange and $10.0 million net of transaction and exit costs of
$2.6 million was retained for working capital.

The assets sold included an 800-mile pipeline system,
425,000 barrels of crude oil, 40 truck injection stations, 101
trucks used to transport crude oil and other related equipment.

In connection with the Crude Gathering Sale, Pride SGP
exchanged (a) certain trunklines and related pumping facilities
owned by Pride SGP, (b) interest payable to Pride SGP of
$548,000, (c) rentals payable to Pride SGP of $2.1 million, (d)
the Series E Cumulative Convertible Preferred Units ("Series E
Preferred Units") in the face amount of $2.0 million held by
Pride SGP, and (e) the Series F Cumulative Preferred Units
("Series F Preferred Units") in the face amount of $450,000 held
by Pride SGP for (y) $2.0 million in cash and (z) newly issued
subordinated preferred units ("Subordinated Preferred Units") in
the face amount of $3.1 million. See "- Financial
Condition - Financial Resources and Liquidity."

<PAGE>
<PAGE>
Financial Condition

Inflation

Although the Partnership's operating costs are generally
impacted by inflation, the Managing General Partner does not
expect general inflationary trends to have a material adverse
impact on the Partnership's operations.

Financial Resources and Liquidity

With respect to the Products Marketing Business, the
Partnership receives payments from the United States Government,
major oil companies, and other customers within approximately 7
to 15 days from shipment in the case of product sales. Effective
on the close of business on September 30, 1998 and extending to
December 31, 1999, Equilon maintains the refined products
inventory in tanks leased to Equilon by the Partnership at the
Partnership's marketing facilities. As a result, the Partnership
purchases product inventory daily from Equilon, thereby
eliminating most of the carrying costs, including interest costs.
Further, this arrangement substantially reduces the lag between
the time the Partnership must pay Equilon for the product, 10
days after the sale, and the time the Partnership receives
payment from its customers. Beginning January 1, 2000, the
Partnership will reimburse Equilon its carrying costs of
inventory, including interest costs.

On December 31, 1997, Varde Partners, Inc. ("Varde")
purchased and assumed the then existing lenders' rights and
obligations under the Partnership's outstanding bank debt. In
conjunction with Varde's purchase and assumption of the lenders'
rights and obligations under such bank debt, BankBoston, N.A.
("BankBoston") refinanced the Partnership's letter of credit
facility and provided a new revolver facility (the "BankBoston
Revolver") on December 31, 1997.

The BankBoston Revolver, as amended, is a $10.0 million
facility and provides for the issuance of letters of credit to
third parties to support the Partnership's purchase or exchange
of crude oil and petroleum products and direct cash borrowings
for general working capital purposes. Amounts available under
the BankBoston Revolver are subject to a borrowing base
calculated as the sum of the Partnership's cash and cash
equivalents, certain receivables, deposits, inventory and other
amounts, reduced by certain payables for refined products. The
amount available under the borrowing base net of outstanding
letters of credit and advances under the BankBoston Revolver was
$7.6 million as of December 31, 1999.

The BankBoston facility matures January 2, 2001. Though no
advances had been drawn under the letter of credit facility at
December 31, 1999, the Partnership did have approximately $7.7
million in outstanding letters of credit. The Partnership had
$18,000 in advances under the BankBoston Revolver for direct cash
borrowings as of December 31, 1999. The fee on outstanding
letters of credit was 2.5% per annum as of December 31, 1998.
There is also an issuance fee of 0.125% per annum on the face
amount of each letter of credit. The fee for the unused portion
of the BankBoston Revolver is 0.5% per annum. Under the terms
agreed to by the parties, cash borrowings under the BankBoston
Revolver will bear interest at prime plus 1.75%. The prime rate
was 8.5% at December 31, 1999. The credit agreement evidencing
the BankBoston Revolver also requires the Partnership to pay an
agency fee of $50,000 per annum and restricts the payment of
distributions to unitholders throughout the term of the credit
agreement. BankBoston also charged a $75,000 amendment fee
related to an amendment that became effective April 15, 1998 and
will be paid $100,000 related to an amendment that became
effective April 15, 1999.

As a result of Varde's assumption of the outstanding bank
debt, additional loans to the Partnership, subsequent interest
being paid in kind and proceeds from the Crude Gathering Sale
being applied to the A Term Loan, Varde now holds an A Term Loan
of $5.0 million, B Term Loan of $11.8 million, C Term Loan of
$5.7 million and Subordinate Note A of $3.0 million as of
December 31, 1999.

Under the amended terms, cash interest payments on the Varde
Revolver and A Term Loan are limited to $2.5 million per annum.
Any excess on the Varde Revolver and A Term Loan along with
interest on the B Term Loan, C Term Loan, Subordinate Note A, and
distributions on Varde's preferred securities will be paid in
kind or accumulate in arrears. The A Term Loan, B Term Loan, and
C Term Loan bear interest rates of 11%, 13%, 15%, 17% and 18% for
the first, second, third, fourth and fifth years, respectively,
except for $4.3 million of the B Term Loan which is subject to
interest rates of 18% through maturity. In addition, if the A
Term Loan is repaid or refinanced, the B Term Loan and C Term
Loan bear interest at 11% the first three years, 13% in the
fourth year and 15% in the fifth year, except for $4.3 million of
the B Term Loan which is subject to interest rates of 12% through
maturity. The Subordinate Note A is convertible into 477,000
Common Units and bears interest at prime plus one percent.

Because a portion of the debt is subject to increasing rates
of interest, the Partnership is accruing interest at the
effective rate over the term of the debt. Interest expense in
1999 and 1998 reflect an accrual of $315,000 and $1.0 million,
respectively, which is based on the difference between the
effective interest rates and the stated rates. As a result of
the cash interest payment limitations, it is likely that all
interest on the B Term Loan, C Term Loan, and Subordinate Note A
will be paid in kind and all preferred distributions will
accumulate in arrears until such time as the Partnership can
restructure its capital structure.

Effective April 15, 1999, the Partnership has a $3.0 million
revolving credit facility with Varde ("Varde Revolver").
Advances under the Varde Revolver bear interest at 11% per annum,
payable monthly. The Partnership did not have any outstanding
borrowing under the Varde Revolver as of December 31, 1999. Cash
advances under the Varde Revolver mature January 2, 2001.

Fees paid to Varde in the form of additional Series B Term
Loans were $150,000 in 1998 and $100,000 in 1999.

The A Term Loan is due on December 31, 2002. The B Term
Loan, C Term Loan and Subordinate Note A are also due December
31, 2002 if the A Term Loan has not been refinanced. If the A
Term Loan is refinanced, the B Term Loan, C Term Loan and
Subordinate Note A mature 180 days after the maturity of the new
term loan, but no later than June 30, 2003. As previously
mentioned, the Partnership is required to make quarterly
principal payments on the A Term Loan as set forth in the Varde
Agreement as well as make payments of excess cash flow for the
preceding year. Varde agreed to forego all regular principal
payments in 1998 and 1999. However, as previously mentioned in
connection with the Crude Gathering Sale, the Partnership applied
$15.0 million of the cash proceeds to the A Term Loan on October
1, 1999. As a result of applying $15.0 million from the Crude
Gathering Sale to the A Term Loan and required scheduled
principal amortization on the A Term Loan, the A Term Loan could
be paid off as early as December 31, 2000 even though the loan
matures on December 31, 2002. The Partnership will not have to
make principal payments prior to the scheduled maturity on the B
Term Loan, C Term Loan and Subordinate Note A except in the case
the Partnership receives litigation proceeds related to the DESC
Claim and certain other transactions including asset sales. See
"Legal Proceedings."

During the year ended December 31, 1999, the Partnership had
drawn up to approximately $4.2 million and $1.9 million on the
BankBoston Revolver and Varde Revolver, respectively. The
weighted average amount outstanding under the BankBoston Revolver
and Varde Revolver was approximately $110,000 and $514,000,
respectively. The weighted average interest rate during the 1999
period for the BankBoston Revolver was approximately 9.5%. The
Varde Revolver accrues interest at the rate of 11.0% per annum.
During the year ended December 31, 1998, the Partnership had
drawn up to approximately $9.8 million and $3.5 million on the
BankBoston Revolver and Varde Revolver, respectively. The
weighted average amount outstanding under the BankBoston Revolver
and Varde Revolver was approximately $1.7 million and $739,000,
respectively. The weighted average interest rate during the 1998
period for the BankBoston Revolver was approximately 10.2%. The
Varde Revolver accrues interest at the rate of 11.0% per annum.

The Partnership or management has a three-year call on
Varde's position for an amount equal to a 40% annual return to
Varde, subject to a minimum payment of $7.5 million over Varde's
cost. The securities held by Varde have certain antidilution
provisions and registration rights. Any litigation proceeds
received by the Partnership related to the DESC Claim will be
used to retire up to $6.0 million of the A Term Loan, if then
outstanding, and up to $5.0 million of the B Term Loan with any
excess divided one-third to Varde to be used to retire Varde's
most senior securities and two-thirds to the Partnership.

On December 31, 1997, certain members of management invested
an aggregate of $2.0 million in the form of a note payable to
Varde and received a one-third economic non-directive interest in
$6.0 million of the B Term Loan, C Term Loan, Subordinate Note A,
Series B Cumulative Convertible Preferred Units ("Series B
Preferred Units"), Series C Cumulative Convertible Preferred
Units ("Series C Preferred Units") and Series D Cumulative
Convertible Preferred Units ("Series D Preferred Units"). The
note payable to Varde is secured by management's interest in such
securities. Any cash yield on management's share of such
securities is paid to Varde as interest, net of applicable
federal income tax.

In conjunction with Varde's assumption of the previous bank
debt, Varde received preferred equity securities. As a result of
the assumption, Varde now holds preferred equity securities
including $9.3 million of Series B Preferred Units, $5.0 million
of Series C Preferred Units and $2.8 million of Series D
Preferred Units which are all redeemable on December 31, 2002.
The Series B Preferred Units and Series C Preferred Units are
convertible into 1,480,000 and 794,000 Common Units,
respectively. The preferential quarterly payments on the Series
B Preferred Units and Series C Preferred Units are 6% per annum
in the first three years after issuance, 12% per annum in the
fourth and fifth years and 15% per annum thereafter or at the
Partnership's option may accumulate in arrears at 8% per annum in
the first three years. The preferential quarterly payments on
the Series D Preferred Units are 11% per annum in the first three
years after issuance, 13% per annum in the fourth and fifth years
and 15% per annum thereafter or at the Partnership's option may
accumulate in arrears at 13% per annum in the first three years.
During the year ended December 31, 1999, the Partnership
accumulated arrearages of $1.7 million on these preferred equity
securities. Through December 31, 1999, these securities had
total accumulated arrearages of $3.3 million. Management
believes the amount in arrears will continue to increase until
such time as the Partnership can restructure its capital
structure.

In connection with the Crude Gathering Sale, Pride SGP
exchanged (a) certain trunklines and related pumping facilities
owned by Pride SGP, (b) interest payable to Pride SGP from the
Partnership of $548,000, (c) rentals payable to Pride SGP from
the Partnership of $2.1 million, (d) the Series E Preferred Units
in the face amount of $2.0 million held by Pride SGP, and (e) the
Series F Preferred Units in the face amount of $450,000 held by
Pride SGP for (y) $2.0 million in cash and (z) newly issued
Subordinated Preferred Units in the face amount of $3.1 million.
Through September 30, 1999, the Series E and Series F Preferred
Units had total accumulated arrearages of $343,000. On October
1, 1999, the accumulated arrearages through September 30, 1999 on
the Series E and Series F Preferred Units were canceled in
conjunction with the exchange with Pride SGP and the sale of the
Crude Gathering Business. The Subordinated Preferred Units are
subordinate to the Series B Preferred Units, Series C Preferred
Units and Series D Preferred Units and at the Partnership's
option may be redeemed on the latter of the retirement of the
senior preferred units or October 1, 2004. The Subordinated
Preferred Units will not accrue any distributions prior to
October 1, 2004. Beginning October 1, 2004, distributions will
accrue on these securities at a rate equal to the lesser of (i)
the Partnership's net income less any distributions accrued or
paid on any preferred securities issued to Varde or (ii) 10% per
annum.

Any payments of principal on the securities held by Varde
shall be applied in the following order: Varde Revolver, A Term
Loan, B Term Loan, C Term Loan, Subordinate Note A, Series B
Preferred Units, Series C Preferred Units, and Series D Preferred
Units.

The Common Units rank behind the Partnership's bank
indebtedness, its indebtedness with Varde, the Series B Preferred
Units, Series C Preferred Units, Series D Preferred Units and
Subordinated Preferred Units (collectively "Preferred Equity").
As a result of the layers of debt and the Preferred Equity above
the Common Units and taking into consideration the various
preferential calls on available cash contained in the debt
instruments and Preferred Equity instruments, it is possible that
a common unitholder could be allocated income under the
Partnership Agreement without a corresponding distribution of
cash to offset the tax liability that arises upon such allocation
of income at such time as operations or the DESC Claim generate
cash which can be used to repay indebtedness under the Varde
credit agreement or retire the Preferred Equity. The actual
impact on a common unitholder of repayment of debt and retirement
of the Preferred Equity is dependent upon each common
unitholder's personal tax basis in his or her Common Units and
his/her overall personal tax situation.

Cash flows will be significantly affected by fluctuations in
the cost and volume of refined products and the timing of
accounts receivable collections. For the year ended December 31,
1999, cash was provided by a decrease in accounts receivables and
inventory (as a result of the Crude Gathering Sale) and an
increase in accounts payable (resulting from higher refined
product prices). For the year ended December 31, 1998, cash was
provided by a decrease in accounts receivable (resulting from
lower crude oil prices and refined product prices and lower sales
due to mothballing the Refinery) and a decrease in inventories
(resulting from Equilon taking title to the refined products).
This was partially offset by a decrease in accounts payable
(resulting from the lower crude oil prices).

The Partnership must maintain compliance with certain
financial and other covenants, as defined in the credit
agreements with the lenders. In addition, the agreements contain
restrictive covenants including, among other things, provisions
concerning additional indebtedness and commitments, restriction
on payments, sale of assets, and certain affiliate transactions.
At December 31, 1999, the Partnership was not in compliance with
the earnings before interest, taxes, depreciation and
amortization covenant ("EBITDA Covenant"). Furthermore, as the
covenants in the current loan agreement for the year 2000 were
based on the combined results of the Products Marketing Business
and the Crude Gathering System, management believes it is
unlikely the Partnership can comply with its current debt
covenants. Accordingly, at December 31, 1999, all debt has been
classified as current. The Partnership will attempt to
renegotiate such covenants in the future or refinance the debt.
However, there can be no assurance that the Partnership will be
successful in renegotiating the covenants or refinancing the
debt. Substantially, all of the Partnership's assets are pledged
as collateral to Varde and BankBoston in connection with the
credit agreements.

The Partnership continues to incur operating losses and it
has a working capital deficiency. Operating results have
suffered as a result of increasing competition, depressed
operating margins and higher financing costs. Crude gathering
volumes have decreased in each of the last five years. Gasoline,
diesel and military aviation fuel sales have also declined. The
loss from continuing operations in 1999 increased to $7.7 million
from $6.4 million as a result of weaker operating results of the
Products Marketing Business in 1999. Based upon its present
capital structure, management expects that the Partnership will
continue to incur net losses. Furthermore, at December 31, 1999,
the Partnership was not in compliance with certain financial
covenants contained in the various credit agreements resulting in
the Partnership's debt being classified as current.

The losses and capital expenditures for 1999 were funded by
the increased borrowing base resulting from the higher value of
the crude oil inventory during the first three quarters of the
year and proceeds from the Crude Gathering Sale.

The Partnership's ability to generate profits is principally
dependent upon increased volumes and/or improved profit margins,
as well as continued cost control initiatives. Under a new
military aviation fuel contract with the U.S. Government which
begins April 1, 2000 and ends March 31, 2001, the Partnership
will supply approximately 52.3 million gallons which is a 107%
increase over the volumes that it supplied under the contract
which began April 1, 1999 and ends March 31, 2000; however,
margins under the new contract will be below last year's
contract.

As a result of problems associated with the startup of the
new products pipeline by Equilon in 1998, Equilon agreed to
certain contract concessions. On October 1, 1998 the Partnership
sold to Equilon the refined products held by it at the Products
Terminals and in the San Angelo Pipeline. In addition, Equilon
leased certain tankage from the Partnership and sells refined
products to the Partnership daily from such facilities, thus
eliminating the need for the Partnership to maintain its own
refined products inventory. On April 15, 1999, Equilon further
agreed to extend the lease and maintain the inventory provided
the Partnership reimburses Equilon for its carrying costs
beginning January 1, 2000, which primarily includes interest
costs. To offset such carrying costs the Partnership deposited
cash of $11.0 million in February 2000 with Equilon. As a
result, Equilon will not include interest charges in their
carrying costs of inventory. In addition, Equilon will pay the
Partnership interest on the excess of the $11.0 million cash
deposit over the value of the inventory, which was approximately
$6.0 million at February 29, 2000.

The Partnership has been able to achieve certain reductions
in operating expenses and marketing, general and administrative
expenses over the years. The expenses of the Products Marketing
Business have recently been reduced through staff reductions and
computer automation. The ability to generate profits could be
adversely affected if other Gulf Coast refiners bring refined
products into West Texas from the Gulf Coast via pipeline.

Regardless of any changes made to the Partnership operations,
the Partnership's financing arrangements will have to be
significantly restructured or refinanced before the BankBoston
facility and Varde Revolver expire January 2, 2001 and the Varde
securities mature on December 31, 2002. There can be no
assurances that the Partnership will be successful in
restructuring its obligations. Further, management is attempting
to sell the idle refining equipment to further reduce the
outstanding indebtedness.

Based on the above matters and, given the existing debt
covenant violations, the lenders have the right to refuse
additional advances under the revolving facilities as well as the
right to accelerate the maturities of the Partnership's
obligations, substantial doubt exists about the Partnership's
ability to continue as a going concern. The financial statements
do not include any adjustments to reflect the possible future
effects of recoverability and classification of assets or the
amount and classification of liabilities that may result from the
outcome of this uncertainty.

The Partnership sold the operating assets of the Crude
Gathering System to Sun on October 1, 1999. The sales price was
$24.9 million plus the value of the inventory which was $10.0
million on October 1, 1999, reduced by certain indebtedness in
the amount of $5.3 million. See "- Other Factors." The net
proceeds were applied as follows: $15.0 million principal payment
on the A Term Loan, $2.0 million was paid to Pride SGP as part of
the exchange, and $10.0 million net of transaction and exit costs
of $2.6 million was retained for working capital. This sale
resulted in a taxable loss to the unitholders. None of the
proceeds are available for distribution to unitholders.

The Partnership was delisted from trading on the New York
Stock Exchange effective August 17, 1998 for failing to meet
certain listing requirements. The Partnership is now listed on
the NASDAQ OTC bulletin board under the symbol PRDE.

Capital Expenditures

Capital expenditures totaled $1.2 million for the year ended
December 31, 1999 compared to $1.5 million for the year ended
December 31, 1998. Included in capital expenditures for the year
ended December 31, 1999 was $494,000 and $705,000 for the
Products Marketing Business and the Crude Gathering Business,
respectively. The Partnership incurred $133,000 in capital
expenditures for the year ended December 31, 1999 related to the
conversion to new accounting software.

Management anticipates spending $350,000 in 2000 for
environmental expenditures of which $262,000 was accrued at
December 31, 1999 and capital expenditures for 2000 are budgeted
at $200,000.

Year 2000 Compliance

In prior years, the Partnership discussed the nature and
progress of its plans to become year 2000 ("Year 2000") ready.
In late 1999, the Partnership completed its remediation and
testing of systems. As a result of those planning and
implementation efforts, the Partnership experienced no
significant disruptions in mission critical information
technology and non-information technology systems and believes
those systems successfully responded to the Year 2000 date
change. The Partnership incurred approximately $926,000 during
1998 and 1999 in connection with remediating its systems.
Substantially all of the $926,000 is for newly purchased software
or hardware with new features and enhancements in addition to
being Year 2000 compliant. Accordingly, substantially all the
costs were capitalized. The Partnership is not aware of any
material problems resulting from Year 2000 issues, either with
its products, its internal systems, or the products and services
of third parties. The Partnership will continue to monitor its
mission critical computer applications and those of its suppliers
and vendors throughout the year 2000 to ensure that any latent
Year 2000 matters that may arise are addressed promptly.

Item 7a. Quantitative and Qualitative Disclosures About Market
Risk

During the year ended December 31, 1999, the Partnership
hedged its crude oil inventory after an increase in crude oil
prices in 1999 from the weak prices in December 1998 to mitigate
possible future declines in crude oil prices. The Partnership
hedged the inventory to reduce the negative impact that previous
declines in crude oil prices had on the borrowing base. The
Partnership hedged between 125,000 barrels to 375,000 barrels
during 1999. The hedged position resulted in a loss of $2.3
million and was offset by an increase in the value of the 425,000
barrels of crude oil sold to Sun on October 1, 1999.

The Partnership's debt is subject to market risks based on
changes in the prime rate. The Partnership does not hedge this
market risk. Approximate debt maturities for the next five years
and applicable interest rates are as follows, assuming the
lenders do not exercise their rights to accelerate maturities due
to the present events of default:

<PAGE>

<PAGE>
(This page should be printed on 14" x 8.5" paper)
<TABLE>
<CAPTION>

2000 2001 2002
------------------ ----------------- -----------------
Amount Rate Amount Rate Amount Rate Total
----------- ---- ---------- ---- ---------- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revolver (LIBOR+3% or Prime+1.75%) $ - - $ 18,000 - $ - - $ 18,000
A Term Loan 4,973,000 15% - - - - 4,973,000
B Term Loan <F1> - 15% - 17% 11,825,000 18% 11,825,000
C Term Loan <F1> - 15% - 17% 5,666,000 18% 5,666,000
Subordinate Note A (Prime+1%) - - - - 3,002,000 - 3,002,000
Other Installment Loans (8% to 9%) 315,000 9% - - - - 315,000
---------- ---------- ---------- ------------
$ 5,288,000 $ 18,000 $ 20,493,000 $ 25,799,000
========== ========== ========== ============

<FN>
<F1>
Unless the A Term Loan is paid off or refinanced, the B and C Term Loans will bear interest at 15%, 17% and 18% in 2000,
2001 and 2002, respectively, except for $4,318,000 of the B Term Loan which bears interest at 18%. If the A Term Loan
is paid off or refinanced, the B and C Term Loans bear interest at 11%, 13% and 15% for 2000, 2001 and 2002,
respectively, except for $4,318,000 of the B Term Loan which will bear interest at 12%.

</FN>
</TABLE>
<PAGE>

<PAGE>
Given the financial condition of the Partnership as discussed in
Note 1 of Notes to Financial Statements, and because quoted
prices are not readily obtainable, management believes it is not
practicable to estimate the fair value of its debt and credit
facilities.

Item 8. Financial Statements and Supplementary Data

The financial statements of the Partnership, together with
the report thereon of Ernst & Young LLP, appear after the
signature pages. See the Index to Financial Statements at the
beginning of the Financial Statements.

The financial statements for the year ended December 31,
1999, include a going concern qualification and reference
conditions that raise substantial doubt about the Partnership's
ability to continue as a going concern.

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure

None.
<PAGE>
PART III

Item 10. Directors and Executive Officers of the Partnership

Set forth below is certain information concerning the
executive officers and directors of the Managing General Partner
as of December 31, 1999 who are responsible for the operations of
the Partnership. All directors of the Managing General Partner
are elected by its shareholders. All officers of the Managing
General Partner serve at the discretion of the board of directors
of the Managing General Partner.

POSITION WITH THE
NAME AGE MANAGING GENERAL PARTNER
____ ___ ________________________

E. Peter Corcoran 71 Chairman of the Board

Brad Stephens 49 Chief Executive Officer, Treasurer,
Assistant Secretary and Director

D. Wayne Malone 56 President, Chief Operating Officer,
Assistant Secretary and Director

Douglas Y. Bech 54 Director

Clark Johnson 54 Director

Robert Rice 77 Director

Craig Sincock 47 Director

Dave Caddell 50 Vice President, General Counsel
and Assistant Secretary

George Percival 40 Chief Financial Officer

E. Peter Corcoran. Mr. Corcoran served as a director of
Pride Pipeline Company, an affiliate of the Partnership, from
1985 to 1990 and became a director of the Managing General
Partner in 1990. In March 1994, he became Chairman. In 1991, Mr.
Corcoran retired from Lazard Freres & Co., having been a limited
partner thereof since 1983 and a general partner from 1968 until
1983. Mr. Corcoran serves as a member of the Audit and Conflicts
Committee of the Board of Directors of the Managing General
Partner.

Brad Stephens. Mr. Stephens served as Vice President of one
of the predecessor companies of the Partnership ("Predecessor
Companies") from 1988 until June 1989, when he became Executive
Vice President and Chief Financial Officer. In March 1994, he
became Chief Executive Officer. Prior to 1988, Mr. Stephens was
President of Independent Bankshares and First State Bank of
Abilene, where he had been employed since 1978. Mr. Stephens is
a Certified Public Accountant and prior to 1978, he was employed
by the accounting firm of Deloitte Haskins & Sells.

D. Wayne Malone. Mr. Malone has been associated with the
Predecessor Companies since 1979 and has been an officer,
director, and shareholder of the various companies since 1981.
Mr. Malone became President of Pride Pipeline Company in 1980,
President of Pride Marketing of Texas, Inc. in 1984 in charge of
retail, wholesale, and aviation fuel sales, and President of a
predecessor of Pride SGP in March 1988, adding the
responsibilities of refining and product trucking. Mr. Malone
also served as President of Carswell Pipeline Company. In March
1994, he became President and Chief Operating Officer.

Douglas Y. Bech. Mr. Bech became a director of the Managing
General Partner in 1993. He is Chairman and Chief Executive
Officer of Raintree Resorts International, Inc. and the founding
partner of Raintree Capital Company, L.L.C., a merchant banking
firm. From 1994 to 1997, Mr. Bech was a partner in the law firm
of Akin, Gump, Strauss, Hauer & Feld, L.L.P., and from 1993 to
1994 he was a partner in the law firm of Gardere & Wynne, L.L.P.
From 1970 to 1993, he was associated with and a senior partner of
the law firm of Andrews & Kurth, L.L.P. Mr. Bech is also a
director of Frontier Oil Corporation and efax.com, Inc. Mr. Bech
serves as a member of the Compensation Committee of the Board of
Directors of the Managing General Partner.

Clark Johnson. Mr. Johnson became a director of the
Managing General Partner in 1993. He is President and CEO of
Frontier Refining and Marketing, Inc., a refining and marketing
company which is a subsidiary of Frontier Oil Corporation. He
also serves as Senior Vice President of Frontier Oil. Prior to
those positions, he held the positions of Executive Vice
President and Chief Operations Officer of Kerr-McGee Refining
Corporation, and senior management positions with Coastal
Corporation and Tenneco Oil Company. Mr. Johnson serves as a
member of the Audit and Conflicts Committee and as Chairman of
the Compensation Committee of the Managing General Partner.

Robert Rice. Mr. Rice became a director of the Managing
General Partner in 1990. He is an independent investor. Mr.
Rice serves as Chairman of the Audit and Conflicts Committee and
as a member of the Compensation Committee of the Board of
Directors of the Managing General Partner.

Craig Sincock. Mr. Sincock became a director of the
Managing General Partner in February, 1994. He is President and
a director of Avfuel Corporation, a privately held corporation
and independent supplier of aviation fuel headquartered in Ann
Arbor, Michigan. He has been associated with Avfuel Corporation
since the early 1980's and is an active real estate investor.
Mr. Sincock serves as a member of the Audit and Conflicts
Committee of the Board of Directors of the Managing General
Partner.

Dave Caddell. Mr. Caddell is Vice President and General
Counsel. He practiced general corporate law as a sole
practitioner from November 1992 to March 1994. Previously, he
served as Vice President and General Counsel of the Predecessor
Companies and the Partnership from 1985 to October 1992.

George Percival. Mr. Percival, a Certified Public
Accountant, came to the Partnership in June 1990, and has served
as Chief Financial Officer since August of 1994. Prior to
joining the Partnership, he was with Computer Language Research
(d.b.a. Fast-Tax), where he had been the Senior Tax Manager since
1987. Prior to that he was employed by the accounting firms of
Coopers & Lybrand (1984 to 1987), and Fox and Company (1981 to
1984).

Item 11. Executive Compensation

(a) Compensation of the General Partners. In respect of
their general partner interests in the Partnership, the General
Partners are allocated an aggregate of 2% of the income, gains,
losses and deductions arising from the Partnership's operations
and receive an aggregate of 2% of any distributions. For the
year ended December 31, 1999, the General Partners did not
receive any distributions in respect of their 2% general partner
interest in the Partnership. The compensation set forth below
under Officers' Compensation is in addition to any 2%
distribution to the General Partners. The General Partners are
not required to make any contributions to the capital of the
Partnership, beyond those made upon formation of the Partnership,
to maintain such 2% interest in allocations and distributions of
the Partnership. The General Partners do not receive, as general
partners of the Partnership, any compensation other than amounts
attributable to their 2% general partner interest in the
Partnership. Additionally, the Special General Partner is
allocated a portion of the income, gains, losses and deductions
arising from the Partnership's operations in respect of its
Common Units. The Managing General Partner did receive a
$300,000 bonus related to the Crude Gathering Sale.

For the year ended December 31, 1999, the Special General
Partner did not receive any distributions in respect of the
Common Units. The Partnership reimburses the General Partners
for all their direct and indirect costs (including general and
administrative costs) allocable to the Partnership. See "Certain
Relationships and Related Transactions."

(b) Summary Officers' Compensation Table. The following
table sets forth certain compensation paid during fiscal 1999,
1998 and 1997 by the Partnership to the executive officers of the
Managing General Partner:
<PAGE>
(The following table should be printed on 11" x 8.5" paper)

<TABLE>

SUMMARY COMPENSATION TABLE
<CAPTION>

All Other
Year Salary Bonus Compensation<F1>
---- -------- -------- ------------
<S> <C> <C> <C> <C>

Brad Stephens 1999 $225,000 $127,900 <F2> $ 26,900
Chief Executive Officer 1998 225,000 12,500 27,300
1997 225,000 - 28,800

D. Wayne Malone 1999 225,000 127,900 <F2> 26,900
Chief Operating Officer 1998 225,000 12,500 27,300
1997 225,000 - 28,900

Dave Caddell 1999 165,000 67,900 <F2> 26,700
Vice President/General 1998 165,000 10,000 27,200
Counsel 1997 165,000 - 27,300

George Percival 1999 115,000 40,000 <F2> 4,600
Chief Financial Officer 1998 115,000 20,000 4,900
1997 100,000 - 4,000

<FN>
<F1>
In this column is the Partnership's contribution to the Section 401(k) Plan for each
officer, reimbursement of income taxes on certain perquisites and directors and advisor
fees for Messrs. Stephens, Malone and Caddell. See "- Benefit Plans - Section 401(k)
Plan" and "- Compensation of Directors" below.
<F2>
In connection with the Crude Gathering Sale, the Managing General Partner was paid a
$300,000 bonus. Subsequently, the Managing General Partner paid Messrs. Caddell and
Percival a bonus in the amount of $18,700 and $30,000, respectively, and a cash
distribution to Messrs. Corcoran, Stephens, Malone and Caddell in the amount of $16,300,
$97,900, $97,900 and $39,200, respectively. Messrs. Stephens, Malone, Caddell and
Percival also received a bonus of $30,000, $30,000, $10,000 and $10,000, respectively, in
February 2000, which was accrued as of December 31, 1999, related to meeting certain
expense reduction goals.

</FN>
</TABLE>
<PAGE>
(c) Benefit Plans. In order to attract, retain and motivate
officers and other employees who provide administrative and
managerial services, the Partnership provides incentives for key
executives and middle managers employed by the Partnership
through an Annual Incentive Plan. The Plan provides for certain
key executives to share in a bonus pool which varies in size with
the Partnership's operating income plus depreciation, calculated
after bonus accrual, after payments under the Partnership's unit
appreciation plan, and after proceeds of litigation, to the
extent not otherwise included in operating income ("Cash Flow").
Provided that Cash Flow exceeds $2 million, the key executive
bonus pool includes 8% of an amount equal to the Partnership's
first $2 million of Cash Flow in excess of $2 million, plus 12%
of the next $4 million of Cash Flow, plus 15% of any Cash Flow in
excess of $8 million.

Unit Appreciation Rights. During 1996, the Partnership
implemented a Unit Appreciation Rights Plan for officers and key
employees. Under the plan, individual employees can be granted
UARs whereby the holder of the UARs is entitled to receive in
cash or in Common Units the increase, if any, between the
exercise price, as determined by the board of directors of the
Managing General Partner at the date of grant, and the fair
market value on the exercise date. The employees awarded and the
number of UARs awarded to the employees are subject to the
discretion of the board of directors of the Managing General
Partner. The term of all awards is for ten years from the grant
date. It is anticipated that UARs aggregating approximately 10%
of the total units will be reserved for issuance to key
employees. However, no Common Units are expected to be issued
under this plan.

On December 9, 1996, four officers and twelve employees were
awarded a total of 292,760 UARs at an exercise price of $3.75 per
unit. Because the fair market value of the UARs did not exceed
the exercise price at December 9, 1996, no compensation expense
was accrued. Effective December 31, 1997, the number of UARs was
increased to 299,996, reallocated among four officers and eleven
employees, and the exercise price was reduced to $1.94 per unit.
The UARs of one employee were terminated in 1999 in connection
with the Crude Gathering Sale thus reducing the total outstanding
UARs to the officers and employees to 284,128 at December 31,
1999. A one-time award of 70,000 UARs was made in 1996 to five
non-employee directors at an exercise price of $3.75 which were
fully vested on December 31, 1997. Effective December 31, 1997,
the exercise price was amended and reduced to $1.94 per unit.
The UARs were fully vested on December 31, 1998; however, none
have been exercised as of December 31, 1999.

Section 401(k) Plan. The Pride Employees' 401(k) Retirement
Plan and Trust ("Plan") is a defined contribution plan covering
substantially all full-time employees. Under the Plan, the
Partnership must make a mandatory contribution each year equal to
3% of a participant's compensation and may make discretionary
matching contributions of up to an additional 3% of a
participant's compensation depending on the Partnership's cash
flow for such year. The participant's contribution to the plan
may not exceed the limitation as outlined under Internal Revenue
Code section 402(g). The Partnership's contributions vest over a
seven-year period, subject to immediate vesting upon retirement.
The Summary Compensation Table above includes amounts contributed
to the plan by the Partnership on behalf of the four most highly
compensated executive officers in the column titled "All Other
Compensation."

The Partnership also has in effect, for the benefit of its
employees, a Long-term Disability Plan, a Safety Incentive Plan,
Accidental Death and Dismemberment Insurance, Life Insurance,
Group Hospitalization Insurance, Dental Plan, Cancer Plan,
Medical Reimbursement Plan and Dependent Care Plan.

(d) Compensation of Directors. The Chairman of the Managing
General Partner receives an annual retainer of $42,000, $2,000
for each board meeting attended and is reimbursed for travel and
lodging expenses incurred to attend board meetings. Members of
the board of directors of the Managing General Partner receive an
annual retainer of $12,000, $2,000 for each board meeting
attended and are reimbursed for travel and lodging expenses
incurred to attend board meetings. Dave Caddell, an advisor to
the Board of Directors of the Managing General Partner, receives
an annual retainer of $12,000, $2,000 for each board meeting
attended and is reimbursed for travel and lodging expenses to
attend board meetings. Directors have also received UARs as
discussed under Benefit Plans.

Item 12. Security Ownership of Certain Beneficial Owners and
Management

a) Security Ownership of Certain Beneficial Owners as of
February 28, 2000.

The following table sets forth certain information with
respect to each person known by the Partnership to own
beneficially 5% or more of the Common Units as of February 28,
2000.

Percent
of
Title of Class Name and Address Amount Class
______________ ________________ ______ _______

Common Units Estate of James B. Stovell 930,000 18.8%
Mountain Lake
Lake Wales, FL 33859

Common Units Pride SGP, Inc. 250,000 5.1%
1209 North Fourth Street
Abilene, TX 79601

Common Units Varde Partners, Inc. 2,751,000 <F1>
3600 West 80th Street
Suite 425
Minneapolis, MN 55431

[FN]
<F1>
In conjunction with Varde's assumption of the outstanding bank
debt on December 31, 1997, Varde holds preferred equity
securities including $9.3 million of Series B Preferred Units and
$5.0 million of Series C Preferred Units which are convertible
into 1,480,000 and 794,000 Common Units, respectively.
Additionally, Varde purchased and assumed a note from the
previous lenders which was converted to the Subordinate Note A
and is further convertible into 477,000 Common Units. If all
such securities were converted as of December 31, 1998, such 2.8
million Common Units would represent 35.7% of the 7.7 million
potentially outstanding Common Units as a result of the
conversion of all convertible securities. See "Financial
Condition - Financial Resources and Liquidity."
</FN>

b) Security Ownership of Management

The following table sets forth certain information, as of
February 28, 2000, concerning the beneficial ownership of Common
Units by each director of the Managing General Partner and by all
directors and officers of the Managing General Partner as a
group.

Percentage of
Name Number of Common Units<F1> Class
- ---- ---------------------- -------------

E. Peter Corcoran - -
Brad Stephens 1,100 <F2>
D. Wayne Malone 4,135 <F2>
Douglas Y. Bech 300 <F2>
Clark Johnson - -
Robert Rice - -
Craig Sincock - -
Dave Caddell - -
George Percival - -
------ -----
All directors and officers
as a group 5,535 0.1%
(10 persons) ====== =====

[FN]
<F1>
Unless otherwise indicated, the persons named above have sole
voting and investment power over the Common Units reported.
<F2>
Each of these directors and officers of the Managing General
Partners owned beneficially, as of February 28, 2000, less than
1% of the Common Units outstanding on such date.
</FN>

The foregoing does not include any Common Units which would
be obtained by those members of management as a consequence of
their purchase of an interest from Varde in the B Term Note, C
Term Loan, Subordinate Note A, Series B Preferred Units, Series C
Preferred Units and Series D Preferred Units. See "Financial
Condition - Financial Resources and Liquidity."

Item 13. Certain Relationships and Related Transactions

The Partnership is managed by the Managing General Partner
pursuant to the Third Amended and Restated Agreement of Limited
Partnership of the Partnership. See "Business and Properties -
General" and "Executive Compensation - Compensation of the
General Partners" for certain information related to compensation
and reimbursement of the General Partners. The Special General
Partner is beneficially owned approximately 18% by Mr. Schumacher
(a past officer and director of the Managing General Partner),
11% by Mr. W.E. Rector (a business partner of Mr. Schumacher),
10% by Mr. Malone, 7% by Mr. Stephens, 5% by Mr. T.M. Broyles (a
past officer of the Managing General Partner), 2% by Mr. Caddell,
35% by trusts established for the relatives of certain deceased
members of management, and 12% by relatives of certain deceased
members of management. The Managing General Partner is
beneficially owned approximately 39% by Mr. Malone, 39% by Mr.
Stephens, 16% by Mr. Caddell, and 6% by Mr. Corcoran.

Pride SGP made two unsecured loans to the Partnership on
March 26, 1993 and September 7, 1995 in the aggregate principal
amount of $2.5 million and required the Partnership to pay
interest only during the term of such loans. The loans were used
to fund working capital. Beginning the latter part of 1995, the
Partnership ceased interest payments on the loans to Pride SGP in
accordance with an amendment to the then existing credit
agreement. Accrued interest payable at December 31, 1998 was
$548,000 and has been included in other long-term liabilities.
On December 31, 1997, the two unsecured loans were converted into
the Series E Preferred Units of $2.0 million and the Series F
Preferred Units of $450,000. The Series E Preferred Units were
convertible into 317,000 common units.

In connection with the Crude Gathering Sale, Pride SGP
exchanged (a) the pipeline mentioned above, (b) interest payable
to Pride SGP of $548,000, (c) rentals payable to Pride SGP of
$2.1 million, (d) the Series E Preferred Units in the face amount
of $2.0 million held by Pride SGP, and (e) the Series F Preferred
Units in the face amount of $450,000 held by Pride SGP for (y)
$2.0 million in cash and (z) newly issued Subordinated Preferred
Units in the face amount of $3.1 million.

The Partnership utilizes an airplane from time to time, as
needed, on a per hour market rate basis from an entity controlled
by Messrs. Malone and Stephens. Payments to this entity totaled
$70,000, $70,000 and $83,000, during 1999, 1998 and 1997,
respectively.

The Partnership leases property from a relative of Mr.
Stephens. Lease payments were approximately $40,000, $40,000 and
$38,000 in 1999, 1998 and 1997, respectively.

Firms associated with Mr. Bech were paid $55,000 for legal
services during 1997.

The Managing General Partner has a 1.9% interest in the
income and cash distributions of the Partnership, subject to
certain adjustments. Certain members of the management of the
Managing General Partner are also members of the management of
Pride SGP, which has a 0.1% general partner interest and 4.9%
limited partner interest in the Partnership. Compensation of
directors and officers of the Managing General Partner and any
other expenses incurred on behalf of the Partnership by the
Managing General Partner and Pride SGP are paid by the
Partnership.

On December 31, 1997, certain members of management invested
an aggregate of $2.0 million in the form of a note payable to
Varde and received a one-third economic non-directive interest in
$6.0 million of the B Term Loan, C Term Loan, Subordinate Note A,
Series B Preferred Units, Series C Preferred Units and Series D
Preferred Units. The note payable to Varde is secured by
management's interest in such securities. Any cash yield on
management's share of such securities is paid to Varde as
interest, net of applicable federal income tax.

Varde and management of the Managing General Partner have the
right to receive a total of up to 35.7% of the Partnership's
Common Units, through the conversion of redeemable preferred
equity and convertible debt as described in the Partnership's
1996 consent solicitation. See "Management's Discussion and
Analysis of Operations and Financial Condition - Financial
Resources and Liquidity."

<PAGE>
<PAGE>
PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K

(a) The following documents are filed as a part of this Report:

(1) Financial Statements and (2) Financial Statement
Schedules: See Index to Financial Statements after the
signatures pages for financial statements filed as a part of this
Report.

(3) Exhibits: See Index to Exhibits after the Financial
Statement for a description of the exhibits filed as a part of
this Report.

(b) Reports on Form 8-K filed during the quarter ended
December 31, 1999:

On October 15, 1999, the Partnership filed Form 8-K
to report the sale on October 1, 1999 of the Crude
Gathering System's operating assets to Sun.

All schedules are omitted because they are not applicable or
the required information is shown elsewhere in this report.

<PAGE>

<PAGE>
SIGNATURES

Pride Companies, L.P., pursuant to the requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, has
duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.

PRIDE COMPANIES, L.P.
(Registrant)
By: Pride Refining, Inc.
as Managing General Partner

By: /s/Brad Stephens
Chief Executive Officer, Treasurer, and Director

DATED: March 30, 2000

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Brad Stephens
and D. Wayne Malone and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any
and all capacities, to sign any or all amendments in connection
herewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or either of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.

Pursuant to the requirements of the Securities Exchange Act
of 1934, this report and power of attorney has been signed below
by the following persons on behalf of the Partnership and in the
capacities and on the date indicated.
<PAGE>

<PAGE>
PRIDE REFINING, INC.

Signature Title Date
_________ _____ ____

/s/E. Peter Corcoran Chairman and Director March 30, 2000

/s/Brad Stephens Chief Executive Officer, March 30, 2000
Treasurer, and Director

/s/D. Wayne Malone President, Chief Operating March 30, 2000
Officer, and Director

/s/Douglas Y. Bech Director March 30, 2000

/s/Clark Johnson Director March 30, 2000

/s/Robert Rice Director March 30, 2000

/s/Craig Sincock Director March 30, 2000

/s/Dave Caddell Vice President and March 30, 2000
General Counsel

/s/George Percival Chief Financial Officer March 30, 2000
(Principal Financial Officer
and Accounting Officer)
/
<PAGE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS

Report of Ernst and Young LLP, Independent Auditors

Balance Sheets at December 31, 1999 and 1998

Statements of Operations for the years ended
December 31, 1999, 1998 and 1997

Statements of Changes in Partners' Capital(Deficiency)
for the years ended December 31, 1999, 1998 and 1997

Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997

Notes to Financial Statements

<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors of the
Managing General Partner

We have audited the accompanying balance sheets of Pride
Companies, L.P. (the "Partnership") as of December 31, 1999 and
1998, and the related statements of operations, changes in
partners' capital (deficiency), and cash flows for each of the
three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Pride Companies, L.P. at December 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United
States.

The accompanying financial statements have been prepared assuming
Pride Companies, L.P. will continue as a going concern. As more
fully described in Note 1, the Partnership has incurred operating
losses and has not complied with certain covenants of loan
agreements with lenders. These conditions raise substantial
doubt about the Partnership's ability to continue as a going
concern. The financial statements do not include any adjustments
to reflect the possible future effects of recoverability and
classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.

ERNST & YOUNG LLP

Fort Worth, Texas
February 11, 2000.

<TABLE>
BALANCE SHEETS

PRIDE COMPANIES, L.P.
At December 31, 1999 and 1998
(In thousands, except unit amounts)
<CAPTION>

1999 1998
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents--Note 2 $ 16,183 $ 2,592
Accounts receivable, less allowance
for doubtful accounts of $99 for
1999 and 1998--Note 6 6,513 2,788
Inventories--Note 2 180 250
Prepaid expenses 158 459
Net current assets of
discontinued operations--Note 11 - 693
-------- --------
TOTAL CURRENT ASSETS 23,034 6,782

PROPERTY, PLANT AND EQUIPMENT, net--Note 3 16,621 17,518

ASSETS NO LONGER USED IN THE
BUSINESS--Note 3 4,235 4,301

DEFERRED FINANCING COSTS--Note 1 3,546 5,307

OTHER ASSETS 70 271

NET LONG-TERM ASSETS OF
DISCONTINUED OPERATIONS--Note 11 - 9,928
-------- --------
$ 47,506 $ 44,107
======== ========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable $ 16,714 $ 3,553
Accrued payroll and related
benefits 552 781
Accrued taxes 2,659 2,329
Other accrued liabilities 724 733
Net current liabilities of
discontinued operations--Note 11 2,837 -
Current portion of long-term debt--Note 4 25,799 65
-------- --------
TOTAL CURRENT LIABILITIES 49,285 7,461

LONG-TERM DEBT--Note 4 - 39,529

OTHER LONG-TERM LIABILITIES--Note 2 1,345 1,578

NET LONG-TERM LIABILITIES OF
DISCONTINUED OPERATIONS--Note 11 8,311 -

COMMITMENTS AND CONTINGENCIES--Note 5

REDEEMABLE PREFERRED EQUITY, including
$2,450 at December 31, 1998
to the Special General
Partner--Notes 7 and 8 17,079 19,529

PARTNERS' CAPITAL (DEFICIENCY)
Preferred Units to the Special
General Partner (3,145 and 0, units
authorized and 3,144 and 0, units
outstanding at December 31, 1999 and
1998, respectively)--Notes 5, 8 and 9 3,144 -
Common Units (5,275,000 units
authorized and 4,950,000 units
outstanding)--Notes 4 and 9 (30,557) (23,042)
General partners' interest (1,101) (948)
-------- --------
$ 47,506 $ 44,107
======== ========

See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS

PRIDE COMPANIES, L.P.
Years ended December 31, 1999, 1998 and 1997
(In thousands, except per unit amounts)
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues--Note 6:
Refinery and Products Marketing
Business $ 130,604 $ 121,189 $ 277,179

Cost of sales and operating expenses,
excluding depreciation--Note 7 126,424 115,454 266,918
Refinery closure costs--Note 2 - - 41,396
Marketing, general and administrative
expenses--Note 7 3,700 3,761 4,769
Depreciation 1,496 1,422 4,955
--------- --------- ---------
OPERATING INCOME (LOSS) (1,016) 552 (40,859)

Other income (expense):
Interest income 441 98 44
Interest expense (including interest
paid in kind of $2,691 and $1,344 and
increasing rate accrued interest of
$315 and $1,030 in 1999 and 1998,
respectively) (5,095) (5,647) (4,829)
Credit and loan fees (including
amortization of $1,761 and $1,323
and credit and loan fees paid in
kind of $100 and $150 in 1999 and
1998, respectively) (2,080) (1,646) (1,242)
Other - net 64 224 514
--------- --------- ---------
(6,670) (6,971) (5,513)
--------- --------- ---------
NET LOSS FROM CONTINUING
OPERATIONS (7,686) (6,419) (46,372)

Discontinued operations:
Income (loss) from operations of
the Crude Gathering System prior
to August 1, 1999 269 (2,138) 1,341
Loss on disposal (251) - -
--------- --------- ---------
NET LOSS $ (7,668) $ (8,557) $ (45,031)
========= ========= =========

Basic and diluted loss
per Common Unit:
Net loss from continuing
operations $ (1.89) $ (1.62) $ (9.18)

Discontinued operations:
Net income (loss) from
discontinued operations
and loss on disposal - (.42) .26
--------- --------- ---------
Net loss $ (1.89) $ (2.04) $ (8.92)
========= ========= =========

Numerator:
Net loss from continuing
operations $ (7,686) $ (6,419) $ (46,372)
Preferred distributions (1,854) (1,763) -
--------- --------- ---------
Net loss from continuing
operations less preferred
distributions (9,540) (8,182) (46,372)

Net loss from continuing
operations allocable to 2%
general partner interest (191) (163) (928)
--------- --------- ---------
Numerator for basic and diluted
earnings per unit from
continuing operations $ (9,349) $ (8,019) $ (45,444)
========= ========= =========

Net income (loss) from
discontinued operations
and loss on disposal $ 18 $ (2,138) $ 1,341
Net income (loss) from
discontinued operations
and loss on disposal
allocable to 2% general
partner interest - (43) 27
--------- --------- ---------
Numerator for basic and diluted
earnings per unit from
discontinued operations and
loss on disposal $ 18 $ (2,095) $ 1,314
========= ========= =========

Numerator for basic and
diluted earnings per unit $ (9,331) $ (10,114) $ (44,130)
========= ========= =========
Denominator:
Denominator for basic and diluted
earnings per unit 4,950 4,950 4,950
========= ========= =========

See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIENCY)

PRIDE COMPANIES, L.P.
Years ended December 31, 1999, 1998 and 1997
(In thousands)
<CAPTION>
General
Preferred Common Partners'
Units Units Interest Total
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ - $ 29,474 $ 124 $ 29,598

Net loss - (44,130) (901) (45,031)
--------- --------- --------- ---------
Balance at December 31, 1997 - (14,656) (777) (15,433)

Net loss - (8,386) (171) (8,557)
--------- --------- --------- ---------
Balance at December 31, 1998 - (23,042) (948) (23,990)

Issuance of Preferred Units
Notes 7 and 9 3,144 - - 3,144

Net loss - (7,515) (153) (7,668)
--------- --------- --------- ---------
Balance at December 31, 1999 $ 3,144 $ (30,557) $ (1,101) $ (28,514)
========= ========= ========= =========

See accompanying notes.
</TABLE>

<PAGE>
<TABLE>
STATEMENTS OF CASH FLOWS

PRIDE COMPANIES, L.P.
Years ended December 31, 1999, 1998 and 1997
(In thousands)
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7,668) $ (8,557) $(45,031)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation 2,992 3,438 6,872
Amortization of loan costs 1,761 1,323 -
Deferred tax benefit (98) (110) (185)
(Gain) loss on sale of property,
plant and equipment 93 (223) (99)
(Gain) loss on disposal of
discontinued operations (1,226) - -
Asset impairment - - 40,000
Paid in kind interest and
credit and loan fees 2,791 1,494 -
Increasing rate accrued interest 315 1,030 -
Lower of cost or market adjustment (1,197) 1,197 -
Net effect of changes in:
Accounts receivable 3,276 4,491 3,620
Inventories 2,228 4,257 6,135
Prepaid expenses 546 76 506
Accounts payable and other
long-term liabilities 2,737 (9,902) (5,667)
Accrued liabilities (929) (3,205) (73)
-------- -------- --------
Total adjustments 13,289 3,866 51,109
-------- -------- --------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 5,621 (4,691) 6,078

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment (1,245) (1,541) (2,087)
Proceeds from asset disposals 391 3,453 450
Transaction with the Special
General Partner (2,000) - -
Transaction and exit costs related
to sale of discontinued operations (2,040) - -
Proceeds from sale of
discontinued operations 29,595 - -
Other 23 (8) 144
-------- -------- --------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 24,724 1,904 (1,493)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt and credit
facilities 17,025 87,247 134,919
Payments on debt and credit
facilities (33,779) (86,816) (132,452)
Deferred financing costs - (60) (2,516)
-------- -------- --------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (16,754) 371 (49)

-------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 13,591 (2,416) 4,536

Cash and cash equivalents at beginning
of the period 2,592 5,008 472
-------- -------- --------
CASH AND CASH EQUIVALENTS AT
END OF THE PERIOD $ 16,183 $ 2,592 $ 5,008
======== ======== ========

See accompanying notes.
</TABLE>
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS

NOTE 1--NATURE OF OPERATIONS

Organization and Nature of Operations: Pride Companies, L.P. (the
"Partnership") was formed as a limited partnership under the laws of the
State of Delaware in January 1990. The Partnership owns and operates a
common carrier products pipeline system and three products terminals in
Abilene, Texas (the "Abilene Terminal"); San Angelo, Texas (the "San Angelo
Terminal"); and Aledo, Texas (the "Aledo Terminal") (collectively the
"Products Terminals") that are used to market conventional gasoline, low
sulfur diesel fuel, and military aviation fuel (the "Products Marketing
Business"). The Partnership also owns a modern simplex petroleum refinery
facility (the "Refinery") which was mothballed on March 22, 1998. In April
1998, the Partnership began purchasing refined products from Equilon, a
refining and marketing joint venture between Royal Dutch/Shell Group and
Texaco, Inc. (the "Equilon Agreement") to market through its products
pipeline and Products Terminals.
Prior to October 1, 1999, the Partnership also owned and operated a
crude oil gathering business that gathered, transported, resold and
redelivered crude oil in the Texas market (the "Crude Gathering System").
On October 1, 1999, the Partnership sold the operating assets utilized by
the Crude Gathering System to Sun Pipe Line Services, Inc. ("Sun") for
$29,595,000 in cash proceeds and the assumption by Sun of certain
indebtedness in the amount of $5,334,000 (the "Crude Gathering Sale"). See
- --Notes 4 and 11. Accordingly, the Crude Gathering System has been
presented as discontinued operations for all periods.
The Products Marketing Business operates the Products Terminals and
one common carrier products pipeline, that originates at the Abilene
Terminal and terminates at the San Angelo Terminal (the "San Angelo
Pipeline"). The Partnership's operations are conducted primarily in the
State of Texas.
Pride Refining, Inc., a Texas corporation, (the "Managing General
Partner") owns a 1.9% general partner interest in and serves as the
managing general partner of the Partnership. Pride SGP, Inc. ("Special
General Partner" or "Pride SGP") owns a 0.1% general partner interest in
and serves as the special general partner of the Partnership. The Managing
General Partner and Pride SGP (collectively the "General Partners")
collectively own a 2% general partner interest. In addition to its general
partner interest, Pride SGP owns a 4.9% interest in the Partnership through
ownership of common limited partner units ("Common Units"). Public
ownership represented by the remaining Common Units is 93.1%. In
accordance with the Third Amended and Restated Agreement of Limited
Partnership of Pride Companies, L.P. (the "Partnership Agreement"), the
Managing General Partner conducts, directs and exercises control over
substantially all of the activities of the Partnership. The Partnership
has no directors or officers; however, directors and officers of the
Managing General Partner are employed by the Partnership to function in
this capacity.
The financial statements of the Partnership include all of its wholly
owned subsidiaries including partnership interests. All significant
intercompany transactions have been eliminated.

Going Concern and Operating Environment: The Partnership continues to incur
operating losses. Operating results have suffered as a result of
increasing competition, depressed operating margins and higher financing
costs. Crude gathering volumes have decreased in each of the last five
years. Gasoline, diesel and military aviation fuel sales have also
declined. The loss from continuing operations in 1999 increased to
$7,686,000 from $6,419,000 as a result of weaker operating results of the
Products Marketing Business in 1999. Based upon its present capital
structure, management expects that the Partnership will continue to incur
net losses. Furthermore, at December 31, 1999, the Partnership was not in
compliance with certain financial covenants contained in the various credit
agreements resulting in the Partnership's debt being classified as current.
The losses and capital expenditures for 1999 were funded by the
increased borrowing base resulting from the higher value of the crude oil
inventory during the first three quarters of the year and proceeds from the
Crude Gathering Sale.
The Partnership's ability to generate profits is principally dependent
upon increased volumes and/or improved profit margins, as well as continued
cost control initiatives. Under a new military aviation fuel contract with
the U. S. Government which begins April 1, 2000 and ends March 31, 2001,
the Partnership will supply approximately 52,270,000 gallons which is a
107% increase over the volumes that it supplied under the contract which
began April 1, 1999 and ends March 31, 2000; however, margins under the new
contract are below last year's contract.
As a result of problems associated with the startup of a new products
pipeline by Equilon in 1998, Equilon agreed to certain contract
concessions. On October 1, 1998 the Partnership sold to Equilon the
refined products held by it at the Products Terminals and in the San Angelo
Pipeline. In addition, Equilon leased certain tankage from the Partnership
and sells refined products to the Partnership daily from such facilities,
thus eliminating the need for the Partnership to maintain its own refined
products inventory. On April 15, 1999, Equilon further agreed to extend
the lease and maintain the inventory provided the Partnership reimburses
Equilon for its carrying costs beginning January 1, 2000, which primarily
includes interest costs.
The Partnership has been able to achieve certain reductions in
marketing, general and administrative expenses over the years. The
expenses of the Products Marketing Business have recently been reduced
through staff reductions and computer automation. The ability to generate
profits could be adversely affected if other Gulf Coast refiners bring
refined products into West Texas from the Gulf Coast via pipeline.
Regardless of any changes made to the Partnership operations, the
Partnership's financing arrangements will have to be significantly
restructured or refinanced before the BankBoston facility and Varde
Revolver expire January 2, 2001 and the Varde securities mature on December
31, 2002. There can be no assurances that The Partnership will be
successful in restructuring its obligations. Furthermore, management is
attempting to sell the idle refining equipment to further reduce the
outstanding indebtedness.
Based on the above matters and, given the existing debt covenant
violations, the lenders have the right to refuse additional advances under
the revolving facilities as well as the right to accelerate the maturities
of the Partnership's obligations, substantial doubt exists about the
Partnership's ability to continue as a going concern. The financial
statements do not include any adjustments to reflect the possible future
effects of recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.

1999 Sale of Operating Assets Utilized by the Crude Gathering System: As
previously discussed, the Partnership sold the operating assets of the
Crude Gathering System to Sun on October 1, 1999. See Notes 4 and 11. The
net proceeds were applied as follows: $15,000,000 principal payment on the
A Term Loan (see Note 4), $2,000,000 was paid to Pride SGP as part of the
exchange (see Note 8), and $10,007,000 net of transaction and exit costs of
$2,588,000 was retained for working capital. This sale resulted in a
taxable loss allocable to the unitholders. None of the proceeds are
available for distribution to unitholders.
In connection with the Crude Gathering Sale, Pride SGP exchanged (a)
certain trunklines and related pumping facilities owned by Pride SGP, (b)
interest payable to Pride SGP from the Partnership of $548,000, (c) rentals
payable to Pride SGP from the Partnership of $2,146,000, (d) the Series E
Cumulative Convertible Preferred Units ("Series E Preferred Units") in the
face amount of $2,000,000 held by Pride SGP, and (e) the Series F
Cumulative Preferred Units ("Series F Preferred Units") in the face amount
of $450,000 held by Pride SGP for (y) $2,000,000 in cash and (z) newly
issued subordinated preferred units ("Subordinated Preferred Units") in the
face amount of $3,144,000.

1997 Restructuring and Recapitalization: Effective December 31, 1997,
Varde Partners, Inc. ("Varde") purchased and assumed the then existing
lenders' rights and obligations under the Partnership's outstanding bank
debt ("Old Bank Debt"). In conjunction with Varde's purchase and
assumption of the lenders' rights and obligations under such bank debt,
BankBoston, N.A. ("BankBoston") refinanced the Partnership's letter of
credit facility and provided a new revolver facility on December 31, 1997.
Pride SGP converted two notes into redeemable preferred equity securities
(see Note 8). The Partnership incurred cost of $60,000 in 1998 and
$6,570,000 in 1997 (including $3,257,000 in noncash fees) related to the
restructuring and recapitalization which are included in deferred financing
costs. During 1999, 1998 and 1997, the Partnership expensed $1,761,000
(all of which was amortization of the deferred financing costs), $1,325,000
(of which $1,323,000 was amortization of the deferred financing costs), and
$613,000, respectively, related to the restructuring and recapitalization.
In addition to the assumption by Varde of the Old Bank Debt, Varde
loaned the Partnership an additional $4,693,000 for working capital
purposes (the "New Loan"), including fees and costs associated with the
restructuring and recapitalization. After completion of the restructuring
and recapitalization, Varde held the following securities, in order of
seniority:
(i) Series A Term Loan ("A Term Loan") maturing December 31, 2002;
(ii) Series B Term Loan ("B Term Loan") maturing December 31, 2002 in
the amount of $9,500,000;
(iii) Series C Term Loan ("C Term Loan") maturing December 31, 2002 in
the amount of $4,689,000;
(iv) Series A Unsecured Loan ("Subordinate Note A") in the amount of
$2,500,000 maturing December 31, 2002;
(v) Series B Cumulative Convertible Preferred Units ("Series B
Preferred Units") in the amount of $9,322,000, which are subject
to mandatory redemption at December 31, 2002;
(vi) Series C Cumulative Convertible Preferred Units ("Series C
Preferred Units") in the amount of $5,000,000, which are subject
to mandatory redemption at December 31, 2002, and
(vii) Series D Cumulative Preferred Units ("Series D Preferred Units")
in the amount of $2,757,000 which are subject to mandatory
redemption at December 31, 2002.
On December 31, 1997, certain members of management invested an
aggregate of $2,000,000 in the form of a note payable to Varde and received
a one-third economic non-directive interest in $6,000,000 of the B Term
Loan, C Term Loan, Subordinate Note A, Series B Preferred Units, Series C
Preferred Units and Series D Preferred Units. The note payable to Varde is
secured by Management's interest in such securities. Any cash yield on
Management's share of such securities is paid to Varde as interest, net of
applicable federal income tax.
The Partnership or management has a three-year call on Varde's
position for an amount equal to a 40% annual return to Varde, subject to a
minimum payment of $7,500,000 over Varde's cost. The securities held by
Varde have certain antidilution provisions and registration rights. Any
litigation proceeds received by the Partnership related to the claim
against the Defense Energy Support Center (see Note 5) will be used to
retire up to $6,000,000 of the A Term Loan, if then outstanding, and up to
$5,000,000 of B Term Loan with any excess divided one-third to Varde to be
used to retire Varde's most senior securities and two-thirds to the
Partnership.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

Revenue Recognition: Revenue is recognized from the sale of refined
products at the time of delivery to the customer. Transportation fees are
recognized when the refined products are delivered to the contracted
destination.

Net Loss Per Unit: Basic net loss per common unit is computed using the
weighted average number of common units outstanding. The convertible
securities and unit appreciation rights (see Note 10) were antidilutive in
1999, 1998 and 1997.

Inventories: Inventories are stated at the lower of average cost or market
value.

Property, Plant and Equipment and Assets No Longer Used In The Business:
Property, plant and equipment is stated at cost. Depreciation is computed
by the straight-line method based upon the estimated useful lives of the
various assets (see Note 3).
Maintenance, repairs, minor renewals and replacements are charged to
expense when incurred. Betterments, major renewals and replacements are
capitalized. Repairs and maintenance expense for continuing operations for
the years ended December 31, 1999, 1998 and 1997 was $589,000, $822,000,
and $1,471,000, respectively.
Assets no longer used in the business are stated at estimated fair
value. On March 22, 1998, the Partnership mothballed the refinery;
however, some refinery assets are still used in connection with the Equilon
Supply Agreement. Accordingly, the Partnership evaluated the ongoing value
of the refinery assets that would no longer be used in the business in
accordance with Statement of Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of" ("FAS 121"). Based on this evaluation, the Partnership
determined that assets with a carrying amount of $47,353,000 were impaired
and wrote them down by $40,000,000 to their estimated fair value. Fair
value was based on independent appraisals discounted at a market rate of
interest. As a result of the sale of miscellaneous equipment during the
year ended December 31, 1999, assets no longer used in the business has
been reduced by $66,000. The Partnership is in the process of marketing
these assets to potential buyers; however, there can be no assurance that
these efforts will be successful.

Other Long-Term Liabilities: Other long-term liabilities consist primarily
of interest accruals to Varde of $1,345,000 and $1,030,000 for increasing
rate accrued interest at December 31, 1999 and 1998, respectively (see Note
4).

Income Taxes: As a limited partnership, the Partnership is not a taxable
entity for federal income tax purposes and any federal income taxes are the
direct responsibility of the individual partners. Accordingly, no federal
income tax provision is made in the accompanying statement of operations
related to the operations of the Partnership itself. The Partnership's tax
bases in assets and liabilities are greater than the bases for financial
reporting purposes by approximately $8,463,000 at December 31, 1999. The
taxable loss reported by the Partnership for the year ended December 31,
1999 is $6,192,000. The major reconciling items between the net loss for
financial purposes and tax purposes are as follows: cost of goods sold for
tax purposes is $5,307,000 less than for financial purposes due to
different inventory methods, depreciation for tax purposes is $2,390,000
greater than for financial purposes, the gain from the sale of the
operating assets utilized by the Crude Gathering System for tax purposes is
$1,765,000 less than for financial purposes and accrued expenses for tax
purposes is $615,000 less than for financial purposes.
Deferred income taxes were previously provided for Pride Borger, Inc.,
a corporate subsidiary, which was a separate taxable entity. The
subsidiary was disposed of as part of the sale of the Crude Gathering
System in 1999 and the tax effects are included in discontinued operations.

Retirement Plan: The Pride Employees' 401(k) Retirement Plan and Trust
("Plan") is a defined contribution plan covering substantially all
full-time employees. Under the Plan, the Partnership must make a
mandatory contribution equal to 3% of a participant's compensation and may
make discretionary matching contributions of up to an additional 3% of a
participant's compensation depending on the Partnership's cash flow for
such year. The Partnership's contributions vest over a seven year period,
subject to immediate vesting upon retirement. Retirement plan expense for
continuing operations for the years ended December 31, 1999, 1998 and 1997
was $0, $72,000 and $5,000, respectively.

Incentive Compensation Plan: The Partnership has elected to follow
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees" (APB 25) and related Interpretations in accounting for its Unit
Appreciation Rights ("Rights"). Under APB 25, if the exercise price of the
Rights equals or exceeds the market of the underlying units on the date of
grant, no compensation expense is recognized at the date of grant. To the
extent the price of the Partnership's units increase above that at the
grant date, such excess value to be paid upon exercise is charged to
operations over the respective vesting period.

Fair Value of Financial Instruments: The carrying amount of cash and cash
equivalents, receivables, and accounts payable approximates fair value.
Given the financial condition of the Partnership as discussed in Note 1,
and because quoted prices are not readily obtainable, management believes
it is not practicable to estimate the fair value of its debt and credit
facilities.

Statements of Cash Flows: For purposes of the statements of cash flows,
management considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.

Restrictions on Certain Cash Balances: The Partnership is required to
maintain a restricted money market account with Alexander Insurance Group
with a balance of $165,000 and $583,000 at December 31, 1999 and 1998, and
$70,000 in escrow with American International Recovery at December 31, 1999
and 1998 as a condition of its insurance policies.

Changes in Presentation: Certain prior year amounts have been reclassified
to conform to the 1999 presentation.

NOTE 3--PROPERTY, PLANT AND EQUIPMENT AND ASSETS NO LONGER USED IN
THE BUSINESS

A summary of property, plant and equipment at December 31 follows (in
thousands):
Estimated
Useful
1999 1998 Lives
-------- -------- ----------
Terminal and storage facilities $ 7,027 $ 6,712 4-30 years
Pipelines and related facilities 11,495 11,745 5-30 years
Transportation and terminal equipment 8,510 8,375 3-5 years
Marketing facilities and equipment 978 1,018 3-5 years
Administrative facilities and equipment 2,317 2,020 2-5 years
Construction-in-progress 342 124
-------- --------
30,669 29,994
Less accumulated depreciation 14,048 12,476
-------- --------
$ 16,621 $ 17,518
======== ========

NOTE 4--DEBT AND CREDIT FACILITIES

As previously mentioned (see Note 1), Varde purchased and assumed the
then existing lenders' rights and obligations under the Partnership's Old
Bank Debt. In conjunction with Varde's purchase and assumption of the
lenders' rights and obligations under the Old Bank Debt, BankBoston
refinanced the Partnership's letter of credit facility and provided a new
revolver facility (the "BankBoston Revolver") on December 31, 1997.
The BankBoston Revolver, as amended, is a $10,000,000 facility and
provides for the issuance of letters of credit to third parties to support
the Partnership's purchase or exchange of petroleum products and direct
cash borrowings for general working capital purposes. Amounts available
under the BankBoston Revolver are subject to a borrowing base calculated as
the sum of the Partnership's cash and cash equivalents, certain
receivables, deposits, inventory and other amounts, reduced by certain
payables for refined products. The amount available under the borrowing
base net of outstanding letters of credit and advances under the BankBoston
Revolver was $7,622,000 as of December 31, 1999.
The BankBoston facility matures January 2, 2001. Though no advances
had been drawn under the letter of credit facility at December 31, 1999,
the Partnership did have approximately $7,742,000 in outstanding letters of
credit. The Partnership had $18,000 in advances under the BankBoston
Revolver for direct cash borrowings as of December 31, 1999. The fee on
outstanding letters of credit was 2.5% per annum as of December 31, 1999.
There is also an issuance fee of 0.125% per annum on the face amount of
each letter of credit. The fee for the unused portion of the BankBoston
Revolver is 0.5% per annum. Under the terms agreed to by the parties, cash
borrowings under the BankBoston Revolver will bear interest at prime plus
1.75%. The prime rate was 8.5% at December 31, 1999. The credit agreement
evidencing the BankBoston Revolver also requires the Partnership to pay an
agency fee of $50,000 per annum and restricts the payment of distributions
to unitholders throughout the term of the credit agreement. BankBoston
also charged a $75,000 amendment fee related to an amendment that became
effective April 15, 1998 and will be paid $100,000 related to an amendment
that became effective April 15, 1999.
As a result of Varde's assumption of the outstanding bank debt,
additional loans to the Partnership, subsequent interest being paid in kind
and proceeds from the Crude Gathering Sale being applied to the A Term
Loan, Varde now holds an A Term Loan of $4,973,000, B Term Loan of
$11,825,000, C Term Loan of $5,666,000 and Subordinate Note A of $3,002,000
as of December 31, 1999.
Under the amended terms, cash interest payments on the Varde Revolver
and A Term Loan are limited to $2,500,000 per annum. Any excess on the
Varde Revolver and A Term Loan along with interest on the B Term Loan, C
Term Loan, Subordinate Note A, and distributions on Varde's preferred
securities will be paid in kind or accumulate in arrears. The A Term Loan,
B Term Loan, and C Term Loan bear interest rates of 11%, 13%, 15%, 17% and
18% for the first, second, third, fourth and fifth years, respectively,
except for $4,318,000 of the B Term Loan which is subject to interest rates
of 18% through maturity. In addition, if the A Term Loan is repaid or
refinanced, the B Term Loan and C Term Loan bear interest at 11% the first
three years, 13% in the fourth year and 15% in the fifth year, except for
$4,318,000 of the B Term Loan which is subject to interest rates of 12%
through maturity. The Subordinate Note A is convertible into 477,000
Common Units and bears interest at prime plus one percent.
Because a portion of the debt is subject to increasing rates of
interest, the Partnership is accruing interest at the effective rate over
the term of the debt. Interest expense in 1999 and 1998 reflect an accrual
of $315,000 and $1,030,000, respectively, which is based on the difference
between the effective interest rates and the stated rates. As a result of
the cash interest payment limitations, it is likely that all interest on
the B Term Loan, C Term Loan, and Subordinate Note A will be paid in kind
and all preferred distributions will accumulate in arrears until such time
as the Partnership can restructure its capital structure.
Effective April 15, 1999, the Partnership has a $3,000,000 revolving
credit facility with Varde ("Varde Revolver"). Advances under the Varde
Revolver bear interest at 11% per annum, payable monthly. The Partnership
did not have any outstanding borrowing under the Varde Revolver as of
December 31, 1999. Cash advances under the Varde Revolver mature January
2, 2001.
Fees paid to Varde in the form of additional Series B Term Loans were
$150,000 in 1998 and $100,000 in 1999.
The A Term Loan is due on December 31, 2002. The B Term Loan, C Term
Loan and Subordinate Note A are also due December 31, 2002 if the A Term
Loan has not been refinanced. If the A Term Loan is refinanced, the B Term
Loan, C Term Loan and Subordinate Note A mature 180 days after the maturity
of the new term loan, but no later than June 30, 2003. As previously
mentioned, the Partnership is required to make quarterly principal payments
on the A Term Loan as set forth in the Varde Agreement as well as make
payments of excess cash flow for the preceding year. Varde agreed to
forego all regular principal payments in 1998 and 1999. However, as
previously mentioned in connection with the Crude Gathering Sale, the
Partnership applied $15,000,000 of the cash proceeds to the A Term Loan on
October 1, 1999. As a result of applying $15,000,000 from the Crude
Gathering Sale to the A Term Loan and required scheduled principal
amortization on the A Term Loan, the A Term Loan could be paid off as early
as December 31, 2000 even though the loan matures on December 31, 2002.
The Partnership will not have to make principal payments prior to the
scheduled maturity on the B Term Loan, C Term Loan and Subordinate Note A
except in the case the Partnership receives litigation proceeds related to
the DESC Claim (see Note 5) and certain other transactions including asset
sales.
The Partnership must maintain compliance with certain financial and
other covenants, as defined in the credit agreements with the lenders. In
addition, the agreements contain restrictive covenants including, among
other things, provisions concerning additional indebtedness and
commitments, restriction on payments, sale of assets, and certain affiliate
transactions. At December 31, 1999, the Partnership was not in compliance
with the earnings before interest, taxes, depreciation and amortization
covenant ("EBITDA Covenant"). Furthermore, as the covenants in the current
loan agreement for the year 2000 were based on the combined results of the
Products Marketing Business and the Crude Gathering System, management
believes it is unlikely the Partnership can comply with its current debt
covenants in the future. Accordingly, at December 31, 1999, all debt has
been classified as current. The Partnership will attempt to renegotiate
such covenants or refinance the debt. However, there can be no assurance
that the Partnership will be successful in renegotiating the covenants or
refinancing the debt. Substantially, all of the Partnership's assets are
pledged as collateral to Varde and BankBoston in connection with the credit
agreements.
At December 31, 1998, the Partnership had a $6,000,000 nonrecourse
note, due 2014, payable monthly with interest at 8% and a balance of
$5,502,000 and is included in net long-term assets of the discontinued
operations on the balance sheet. The Partnership classified $172,000 as
current at December 31, 1998 and included such amount in net current assets
of the discontinued operations on the balance sheet. The note was assumed
by Sun as part of the Crude Gathering Sale.
Amounts outstanding under these credit facilities at December 31 (in
thousands):

1999 1998
-------- --------
Revolver $ 18 $ 45
Varde Revolver - 1,375
A Term Loan 4,973 20,000
B Term Loan 11,825 10,111
C Term Loan 5,666 4,979
Subordinate Note A 3,002 2,745
Other Installment Loans 315 339
-------- --------
25,799 39,594
Less current portion 25,799 65
-------- --------
$ - $39,529
======== ========

Approximate scheduled debt maturities are as follows: 2000-$5,288,000,
2001-$18,000 and 2003-$20,493,000.
Interest paid (excluding interest on the note assumed by Sun) for the
years ended December 31, 1999, 1998 and 1997 was $2,040,000, $3,274,000 and
$4,654,911, respectively.

NOTE 5--COMMITMENTS AND CONTINGENCIES

At December 31, 1999, the Partnership is committed to operating leases
which require fixed monthly rentals for administrative office space,
transportation equipment, computers and related equipment and other
miscellaneous equipment, some of which contain residual value guarantees.
Excluding rentals accrued to Pride SGP prior to October 1, 1999 (see Note
7) for certain pipeline segments, rental expense for the continuing
operations for the years ended December 31, 1999, 1998 and 1997 was
$194,000, $208,000, and $355,000, respectively. The minimum future rentals
under noncancelable operating leases at December 31, 1999 are as follows
(in thousands):

2000 $ 99
2001 66
2002 48
2003 43
2004 22
Thereafter 22
-------
$ 300
=======

The Partnership is involved in various claims and routine litigation
incidental to its business for which damages are sought. Management
believes that the outcome of all claims and litigation is either adequately
insured or will not have a material adverse effect on the Partnership's
financial position or results of operations.
The Partnership is currently involved in Phase II of an investigative
study by the Texas Natural Resource Conservation Commission. Management
estimates the cost to comply with this study approximates $212,000 and has
accrued for this amount at December 31, 1999. Management does not believe
any significant additional amounts will be required to maintain compliance
with this study or other environmental requirements other than routine
expenditures in the ordinary course of business.
The Partnership has filed a substantial claim against the U. S.
Government Defense Energy Support Center ("DESC") relating to erroneous
pricing of fuel purchased over a period of several years from the
Partnership. The ultimate outcome of this matter cannot presently be
determined.

NOTE 6--MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK

One of the Partnership's major customers is the DESC. Revenues from
the DESC comprised 13.6%, 26.4% and 22.0% of total revenues from continuing
operations in 1999, 1998 and 1997, respectively.
At December 31, 1999, the Partnership had $283,000 in receivables from
the DESC. In some cases, the Partnership requires letters of credit from
customers. Historically, the Partnership's credit losses have been
insignificant.

NOTE 7--RELATED PARTY TRANSACTIONS

Prior to the Crude Gathering Sale, the Partnership had an agreement
with Pride SGP to lease defined segments of the Crude Gathering System. As
consideration for this lease, the Partnership agreed to perform all routine
and emergency maintenance and repair operations to the pipelines. The
value of such services was approximately $300,000 annually. In addition,
the Partnership paid the taxes, insurance, and other costs. Rentals
accruing to Pride SGP from the Partnership for the years ended December 31,
1999, 1998 and 1997 totaled approximately $300,000, $400,000 and $788,000,
respectively, for the lease of the pipeline and are included in income
(loss) from discontinued operations in the statements of operations. For
certain periods between August 1995 and December 1997, payments to Pride
SGP were suspended pursuant to the terms of an amendment to the then
existing credit agreement. Beginning January 1, 1999, rental payments to
Pride SGP were suspended again. Approximately $1,846,000 was included in
net long-term assets (liabilities) of discontinued operations at December
31, 1998 related to unpaid rentals. The lease agreement with Pride SGP was
not entered into on an arm's-length basis. While management was not able
to determine whether the terms of the lease were comparable to those which
could have been obtained by unaffiliated parties, management believed such
terms were fair and reasonable given the importance to the Partnership of
the Hearne to Comyn pipeline segment which enabled the Partnership to
gather and transport a greater supply of high quality crude oil for sale to
other refiners.
Pride SGP made two unsecured loans to the Partnership on March 26,
1993 and September 7, 1995 in the aggregate principal amount of $2,450,000
and required the Partnership to pay interest only during the term of such
loans. The loans were used to fund working capital. Beginning the latter
part of 1995, the Partnership ceased interest payments on the loans to
Pride SGP in accordance with an amendment to the then existing credit
agreement. Accrued interest payable at December 31, 1998 was $548,000 and
has been included in other long-term liabilities. On December 31, 1997,
the two unsecured loans were converted into the Series E Preferred Units of
$2,000,000 and the Series F Preferred Units of $450,000. The Series E
Preferred Units were convertible into 317,000 common units (see Note 8).
In connection with the Crude Gathering Sale, Pride SGP exchanged (a)
the pipeline mentioned above, (b) interest payable to Pride SGP of
$548,000, (c) rentals payable to Pride SGP of $2,146,000, (d) the Series E
Preferred Units in the face amount of $2,000,000 held by Pride SGP, and (e)
the Series F Preferred Units in the face amount of $450,000 held by Pride
SGP for (y) $2,000,000 in cash and (z) newly issued Subordinated Preferred
Units in the face amount of $3,144,000 (see Note 9).
The Partnership utilizes an airplane from time to time, as needed, on
a per hour market rate basis from an entity controlled by two officers of
the Managing General Partner. Payments to this entity totaled $70,000,
$70,000 and $83,000, during 1999, 1998 and 1997, respectively.
The Partnership leases property from a relative of one of the officers
of the Managing General Partner. Lease payments were approximately
$40,000, $40,000 and $38,000 in 1999, 1998 and 1997, respectively.
Firms associated with a director of the Managing General Partner were
paid $55,000 for legal services during 1997.
The Managing General Partner has a 1.9% interest in the income and
cash distributions of the Partnership, subject to certain adjustments.
Certain members of the management of the Managing General Partner are also
members of the management of Pride SGP, which has a 0.1% general partner
interest and 4.9% limited partner interest in the Partnership as discussed
in Note 9. Compensation of directors and officers of the Managing General
Partner and any other expenses incurred on behalf of the Partnership by the
Managing General Partner and Pride SGP are paid by the Partnership.
Varde and management of the Managing General Partner ("Management")
have the right to receive a total of up to approximately 35.7% of the
Partnership's Common Units, through the conversion of redeemable preferred
equity and convertible debt as described in the Partnership's 1996 consent
solicitation.
Certain conflicts of interest, including potential non-arm's-length
transactions, could arise as a result of the relationships described above.
The Board of Directors and management of the Managing General Partner have
a duty to manage the Partnership in the best interests of the Unitholders
and, consequently, must exercise good faith and integrity in handling the
assets and affairs of the Partnership.

NOTE 8--REDEEMABLE PREFERRED EQUITY

Effective April 15, 1999, the Partnership amended the terms of its
Partnership Agreement and preferred equity securities effective as of
January 1, 1998. As a result of the amendment, preferred equity securities
are treated as accumulated arrearages rather than being considered paid in
kind. This reduces the amount of preferred equity on the balance sheet and
also affects the tax treatment of the distributions to the unitholders and
holders of the preferred equity securities.
In conjunction with Varde's assumption of the Old Bank Debt, Varde
received preferred equity securities. As a result of the assumption,
Varde now holds preferred equity securities including $9,322,000 of Series
B Preferred Units, $5,000,000 of Series C Preferred Units and $2,757,000 of
Series D Preferred Units which are all redeemable on December 31, 2002.
The Series B Preferred Units and Series C Preferred Units are convertible
into 1,480,000 and 794,000 Common Units, respectively. The preferential
quarterly payments on the Series B Preferred Units and Series C Preferred
Units are 6% per annum in the first three years after issuance, 12% per
annum in the fourth and fifth years and 15% per annum thereafter or at the
Partnership's option may accumulate in arrears at 8% per annum in the first
three years. The preferential quarterly payments on the Series D Preferred
Units are 11% per annum in the first three years after issuance, 13% per
annum in the fourth and fifth years and 15% per annum thereafter or at the
Partnership's option may accumulate in arrears at 13% per annum in the
first three years. During the year ended December 31, 1999, the
Partnership accumulated arrearages of $1,707,000 on these preferred equity
securities. Through December 31, 1999, these securities had total
accumulated arrearages of $3,275,000. Management believes the amount in
arrears will continue to increase until such time as the Partnership can
restructure its capital structure.
Through September 30, 1999, the Series E and F Preferred Units had
total accumulated arrearages of $343,000. On October 1, 1999, the
accumulated arrearages through September 30, 1999 on the Series E and F
Preferred Units were canceled in conjunction with the exchange with Pride
SGP and the sale of the Crude Gathering System.

Redeemable preferred equity outstanding at December 31 (in thousands):

1999 1998
-------- --------
Series B Preferred Units $ 9,322 $ 9,322
Series C Preferred Units 5,000 5,000
Series D Preferred Units 2,757 2,757
Series E Preferred Units - 2,000
Series F Preferred Units - 450
-------- --------
$ 17,079 $ 19,529
======== ========

NOTE 9--PARTNERS' CAPITAL (DEFICIENCY)
At December 31, 1999, Pride SGP held the Subordinated Preferred Units
in the face amount of $3,144,000. The Subordinated Preferred Units are
subordinate to the Series B Preferred Units, Series C Preferred Units and
Series D Preferred Units and at the Partnership's option may be redeemed on
the latter of the retirement of the senior preferred units or October
1,2004. The Subordinated Preferred Units will not accrue any distributions
prior to October 1, 2004. Beginning October 1, 2004, distributions will
accrue on these securities at a rate equal to the lesser of (i) the
Partnership's net income less any distributions accrued or paid on any
preferred securities issued to Varde or (ii) 10% per annum.
At December 31, 1999 and 1998, 4,950,000 Common Units are outstanding,
representing a 98% limited partner interest. Pride SGP and the public own
250,000 and 4,700,000 Common Units, respectively.
Under the terms of the Partnership's credit agreement, the bank
restricted the payment of distributions to unitholders throughout the term
of the credit agreement. Future distributions will be dependent on, among
other things, payment in full of the bank debt, expiration of all
liabilities related to letters of credit, the termination of the credit
agreement and the payment of all preferred arrearages.
The Series B Preferred Units, Series C Preferred Units and Subordinate
Note A held by Varde are convertible into 2,751,000 Common Units. If Varde
converted all their securities into Common Units, the number of Common
Units outstanding would increase from 4,950,000 Common Units to 7,701,000
Common Units.

NOTE 10--UNIT APPRECIATION RIGHTS

During 1996, the Partnership implemented an incentive compensation
plan for officers and key employees. Under the plan, individual employees
can be granted unit appreciation rights ("Rights") whereby the holder of
the Rights is entitled to receive in cash or in Common Units the increase,
if any, between the exercise price, as determined by the board of directors
of the Managing General Partner at the date of grant, and the fair market
value on the exercise date. The employees awarded and the number of Rights
awarded to the employees are subject to the discretion of the board of
directors of the Managing General Partner. The term of all awards is for
ten years from the grant date.
Rights transactions from December 6, 1996 are as follows:

<TABLE>
<CAPTION>
Officers/
Employees Directors Total
--------- --------- ---------
<S> <C> <C> <C>
Granted December 6, 1996 and
outstanding at December 31, 1996 292,760 70,000 362,760
Granted 7,236 - 7,236
Exercised - - -
Terminated - - -
-------- -------- --------
Outstanding at December 31, 1997
and 1998 299,996 70,000 369,996
Granted - - -
Exercised - - -
Terminated (15,868) - (15,868)
-------- -------- --------
Outstanding at December 31, 1999 284,128 70,000 354,128
======== ======== ========

</TABLE>

On December 9, 1996, four officers and twelve employees were awarded a
total of 292,760 Rights at an exercise price of $3.75 per unit. Because
the fair market value of the Rights did not exceed the exercise price at
December 9, 1996, no compensation was accrued. Effective December 31,
1997, the number of Rights was increased to 299,996, reallocated among four
officers and eleven employees and the exercise price was reduced to $1.94
per unit. The Rights of one employee were terminated in 1999 in connection
with the Crude Gathering Sale thus reducing the total outstanding Rights to
the officers and employees to 284,128 at December 31, 1999. A one-time
award of 70,000 Rights was made in 1996 to five non-employee directors at
an exercise price of $3.75 which were fully vested on December 31, 1997.
Effective December 31, 1997, the exercise price was amended and reduced to
$1.94 per unit.
The Rights were fully vested on December 31, 1998; however, none were
exercised. Rights exercisable under the plan were 354,128, 369,996 and
195,000 at December 31, 1999, 1998 and 1997, respectively. Since the fair
market value of the Rights did not exceed the exercise price at the grant
date nor at the repricing date, no compensation expense has been accrued in
accordance with APB 25.
The weighted average fair value of the Rights granted is approximately
$1.40 per Right and the pro forma effect (as required by Statement 123) is
not material to the operations of the Partnerhsip.

NOTE 11--DISCONTINUED OPERATIONS

As previously discussed, on October 1, 1999, the Partnership sold the
operating assets utilized by the Crude Gathering System to Sun for
$29,595,000 in cash proceeds and the assumption by Sun of certain
indebtedness in the amount of $5,334,000. Accordingly, the assets,
liabilities and operating results of the Crude Gathering System have been
segregated from the continuing operations and are reported as discontinued
operations. Interest expense, except for interest on the note assumed by
Sun, and general corporate administrative expenses was not allocated to the
discontinued operations. However, management does expect that interest
expense related to continuing operations will be reduced since $15,000,000
of the proceeds were used to reduce debt.

After the sale, the Partnership continues to be responsible for
certain environment liabilities associated with the Crude Gathering System
including five on-going remediation sites, any refined product
contamination associated with the assets sold and certain inactive crude
gathering lines retained by the Partnership. Other than $100,000 accrued
for remediation of the sites, the Partnership does not expect future
expenditures related to these retained environmental liabilities to be
material.
The measurement date used to determine the net loss on disposal was
August 1, 1999. At August 1, 1999, management estimated a net gain on
disposal of $48,000 including an estimate of net loss from discontinuing
operation from August 1, 1999 to the disposal date. The Partnership
actually incurred a net loss on disposal of $251,000 which includes a loss
from the discontinued operations from August 1, 1999 to September 30, 1999
of $1,477,000 and a gain of $1,226,000 on the sale of certain operating
assets utilized on the Crude Gathering System. The gain on the sale of
certain operating assets included a $5,043,000 effect of a LIFO inventory
liquidation.
Revenues for the Crude Gathering System were $241,483,000,
$259,438,000 and $257,718,000 for the nine months ended September 30, 1999
and the twelve months ended December 31, 1998 and 1997, respectively.
Under the terms of the asset sale, the Partnership retained receivables of
$13,669,000, other payables excluding suspense liability of $20,410,000,
and crude suspense liability of $10,935,000 as of the disposal date of
October 1, 1999.
In connection with the Crude Gathering System operations, as first
purchaser of crude oil the Partnership was responsible for distribution of
payments to the various revenue and royalty interest owners. Often, the
legal rights of the interest owners were unclear or the owners could not be
located for long periods of time. When such was the case, the Partnership
retained the liability for the payments until the ownership interest was
clarified or the owners located, at which time payment was made. When an
owner could not be located, state statutes generally required that the
unpaid amounts be escheated to the state after the passage of a specified
number of years. Because such liabilities take years to be resolved and
paid, an estimate has been made of the amounts expected to be paid during
the next year and included in net current assets (liabilities) of
discontinued operations with the remainder included in net long-term assets
(liabilities) of discontinued operations. At December 31, 1999 and 1998,
net long-term assets (liabilities) of discontinued operations included
$8,392,000 and $8,736,000, respectively, related to crude suspense
liabilities.
Net current assets (liabilities) of discontinued operations included
the following components as of December 31 (in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Accounts receivable $ 263 $ 7,264
Inventories - 7,332
Prepaid expenses - 245
Accounts payable (1,109) (10,895)
Crude suspense liability (1,531) (2,125)
Accrued payroll and related benefits (398) (122)
Accrued taxes - (643)
Other accrued liabilities (62) (191)
Current portion long-term debt - (172)
-------- --------
$ (2,837) $ 693
======== ========

Net long-term assets (liabilities) of discontinued operations included
the following components as of December 31 (in thousands):

1999 1998
-------- --------
<S> <C> <C>
Property, plant and equipment,
net of accumulated depreciation $ - $ 28,016
Other Assets 81 119
Long-term debt - (5,330)
Deferred income tax - (2,295)
Other long-term liabilities - (1,846)
Crude suspense liability (8,392) (8,736)
-------- --------
$ (8,311) $ 9,928
======== ========
</TABLE>
<PAGE>
INDEX TO EXHIBITS TO REPORT ON FORM 10-K

Exhibit Number
(Reference to
Item 601 of
Regulation S-K) Description
_______________ ___________

3.1 Certificate of Limited Partnership of the Partnership
(incorporated by reference to Exhibit 3.1 of the Partnership's
Annual Report on Form 10-K for the fiscal year ended December 31,
1990 (Commission File No. 1-10473)).

3.2 Second Amended and Restated Agreement of Limited Partnership of
the Partnership.

3.3 Third Amended and Restated Agreement of Limited Partnership of
the Partnership.

4.1 Deposit Agreement among the Partnership and the Depository
(incorporated by reference to Exhibit 4.1 of the Partnership's
Annual Report on Form 10-K for the fiscal year ended December 31,
1990 (Commission File No. 1-10473)).

4.2 Transfer Application (included as Exhibit A to the Deposit
Agreement, which is incorporated by reference to Exhibit 4.2
of the Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990 (Commission File No. 1-10473)).

4.4 Form of Depositary Receipt for Old Common Units of Pride
Companies, L.P. (included as Exhibit B to the Deposit Agreement,
which is incorporated by reference to Exhibit 4.1 of the
Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990 (Commission File No. 1-10473)).

4.5 Form of Depositary Receipt for Common Units of Pride Companies,
L.P. (incorporated by reference to Exhibit 4.5 of the
Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996 (Commission File No. 1-10473)).

10.1 Pipeline Lease Agreement by and between the Partnership and Pride
SGP, Inc. (incorporated by reference to Exhibit 10.2 of the
Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990 (Commission File No. 1-10473)).

10.2 Amendment 1 to Pipeline Lease Agreement by and between the
Partnership and Pride SGP, Inc. (incorporated by reference to
Exhibit 10.3 of the Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 (Commission File No.
1-10473)).

10.3 Registration Rights Agreement dated March 30, 1990, by and
between the Partnership and Pride SGP, Inc. (incorporated by
reference to Exhibit 10.5 of the Partnership's Registration
Statement on Form S-1 (Commission File No. 33-42115), as
amended).

10.5 Promissory Note between Pride SGP, Inc. ("Lender") and the
Partnership ("Borrower") dated March 26, 1993 (incorporated by
reference to Exhibit 10.14 of the Partnership's Annual Report on
Form 10K for the fiscal year ended December 31, 1992 (Commission
File No. 1-10473)).

10.6 Amendment 2 to Pipeline Lease Agreement by and between the
Partnership and Pride SGP, Inc. (incorporated by reference to
Exhibit 10.16 of the Partnership's Annual Report on Form 10K for
the fiscal year ended December 31, 1992 (Commission File No. 1-
10473)).

10.7 Partnership Agreement for Desulfur Partnership, dated as of
August 10, 1993, which is 99% owned by the Partnership and 1%
owned by Pride Marketing of Texas, a wholly-owned subsidiary of
the Partnership (incorporated by reference to Exhibit 28.1 of the
Partnership's Quarterly Report on Form 10Q for the quarter ended
September 30, 1993 (Commission File No. 1-10473)).

10.8 Bill of Sale, dated as of August 10, 1993, for the sale of the
desulfurization unit by the Partnership to the Desulfur
Partnership, a subsidiary of the Partnership (incorporated by
reference to Exhibit 28.2 of the Partnership's Quarterly Report
on Form 10Q for the quarter ended September 30, 1993 (Commission
File No. 1-10473)).

10.9 Promissory Note, dated as of August 10, 1993, related to the sale
of the desulfurization unit by the Partnership ("Payee") to the
Desulfur Partnership ("Maker") (incorporated by reference to
Exhibit 28.3 of the Partnership's Quarterly Report on Form 10Q
for the quarter ended September 30, 1993 (Commission File No. 1-
10473)).

10.10 Master Lease Agreement, dated as of August 10, 1993, between the
Partnership (Lessee) and the Desulfur Partnership (a subsidiary
partnership) (Lessor), for the lease of the desulfurization unit
(incorporated by reference to Exhibit 28.4 of the Partnership's
Quarterly Report on Form 10Q for the quarter ended September 30,
1993 (Commission File No. 1-10473)).

10.11 Letter, dated November 10, 1993, from Ernst & Young (the
Partnership's independent auditors) to the Partnership concerning
the change to the LIFO method of accounting for inventories
(incorporated by reference to Exhibit 28.7 of the Partnership's
Quarterly Report on Form 10Q for the quarter ended September 30,
1993 (Commission File No. 1-10473)).

10.12 Stock Purchase Agreement, dated as of September 1, 1994, between
Pride Refining, Inc. (Purchaser), Diamond Shamrock Refining and
Marketing Company (Seller), and D-S Pipeline Corporation
(Acquired Company) (incorporated by reference to Exhibit 10.15 of
the Partnership's Annual Report on Form 10K for the fiscal year
ended December 31, 1994 (Commission File No. 1-10473)).

10.13 First Amendment to Stock Purchase Agreement between Pride
Refining, Inc. (Purchaser), Diamond Shamrock Refining and
Marketing Company (Seller), and D-S Pipeline Corporation
(Acquired Company) (incorporated by reference to Exhibit 10.16 of
the Partnership's Annual Report on Form 10K for the fiscal year
ended December 31, 1994 (Commission File No. 1-10473)).

10.14 Promissory Note dated as of January 9, 1995, between United Bank
& Trust ("Lender") and the Partnership ("Borrower") related to
the renovation and refinancing of the Partnership's
administrative offices (incorporated by reference to Exhibit 28.1
of the Partnership's Quarterly Report on Form 10Q for the quarter
ended June 30, 1995 (Commission File No. 1-10473)).

10.15 Promissory Note between Pride SGP, Inc. ("Lender") and the
Partnership ("Borrower") dated September 7, 1995 (incorporated by
reference to Exhibit 28.2 of the Partnership's Quarterly Report
on Form 10Q for the quarter ended September 30, 1995 (Commission
File No. 1-10473)).

10.16 Note Agreement dated August 13, 1996, among the Partnership
("Borrower"), Pride Refining, Inc., Pride SGP, Inc., Desulfur
Partnership, Pride Marketing of Texas (Cedar Wind), Inc., and
Pride Borger, Inc. (collectively Guarantors), and NationsBank of
Texas, N.A. as Agent, and NationsBank of Texas, N.A. and Bank One
Texas, N.A. as Lenders (incorporated by reference to Exhibit 28.2
of the Partnership's Quarterly Report on Form 10Q for the quarter
ended June 30, 1996 (Commission File No. 1-10473)).

10.17 Unit Appreciation Rights Plan (incorporated by reference to
Exhibit 10.26 of the Partnership's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996 (Commission File No. 1-
10473)).

10.18 Sixth Restated and Amended Credit Agreement, dated as of December
30, 1997, by and among Pride Companies, L.P. ("Borrower"), Pride
Refining, Inc., Pride SGP, Inc., Desulfur Partnership, Pride
Marketing of Texas (Cedar Wind), Inc., and Pride Borger, Inc., as
Guarantors, and Varde Partners, Inc. as Lender (incorporated by
reference to Exhibit 10.29 of the Partnership's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997 (Commission
File No. 1-10473)).

10.19 Seventh Amendment to the Fifth Restated and Amended Credit
Agreement, dated as of December 30, 1997, by and among Pride
Companies, L.P. ("Borrower"), Pride Refining, Inc., Pride SGP,
Inc., Desulfur Partnership, Pride Marketing of Texas (Cedar
Wind), Inc., and Pride Borger, Inc., as Guarantors, and Varde
Partners, Inc. as Lender (incorporated by reference to Exhibit
10.30 of the Partnership's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 (Commission File No. 1-
10473)).

10.20 Restructuring and Override Agreement, dated as of December 30,
1997, by and among Varde Partners, Inc., Pride Companies, L.P.,
Pride Refining, Inc., and Pride SGP, Inc. (Commission File No. 1-
10473).

10.21 Certificates of Designation - Series B and Series C Cumulative
Convertible Preferred Units of Pride Companies, L.P., pursuant to
the Second Amended and Restated Agreement of Limited Partners,
effective as of December 30, 1997 (Commission File No. 1-10473).

10.22 Revolving Credit and Term Loan Agreement, dated as of December
30, 1997, among Pride Companies, L.P., Pride SGP, Inc., Pride
Refining, Inc., Desulfur Partnership, Pride Borger, Inc. and
Pride Marketing of Texas (Cedar Wind), Inc., BankBoston, N.A., as
an Agent and as a Lender, Lehman Commercial Paper Inc., as a
Lender and as Documentation Agent (Commission File No. 1-10473).

10.23 Guarantee and Security Agreement, dated as of December 30, 1997,
among Pride Companies, L.P., Pride SGP, Inc., Pride Refining,
Inc., Desulfur Partnership, Pride Marketing of Texas (Cedar
Wind), Inc., Pride Borger, Inc. and BankBoston, N.A., as Agent.
(Commission File No. 1-10473).

10.24 Intercreditor and Agency Agreement, dated as of December 30,
1997, among BankBoston, N.A., as Agent and Collateral Agent,
Varde Partners, Inc., as Term Lender, and acknowledged and
consented to by Pride Companies, L.P., as Company, and Pride SGP,
Inc., Pride Refining, Inc., Pride Borger, Inc., Desulfur
Partnership, and Pride Marketing of Texas (Cedar Wind), Inc., as
Guarantors (Commission File No. 1-10473).

10.25 Pride SGP Subordination Agreement, dated December 30, 1997, among
Pride Companies, L.P., Pride Refining, Inc., Pride Borger, Inc.,
Desulfur Partnership, Pride Marketing of Texas (Cedar Wind),
Inc., as the Obligors, Pride SGP, Inc., and BankBoston, N.A., as
Agent (Commission File No. 1-10473).

10.26 Varde Subordination Agreement, dated as of December 30, 1997,
among Pride Companies, L.P., Pride SGP, Inc., Pride Refining,
Inc., Pride Borger, Inc., Desulfur Partnership, Pride Marketing
of Texas (Cedar Wind), Inc., as Obligors, Varde Partners, Inc.,
and BankBoston, N.A., as Agent (Commission File No. 1-10473).

10.27 Equity Conversion Agreement, dated December 31, 1997, between
Pride SGP, Inc., Pride Companies, L.P., and Varde Partners, Inc.
(Commission File No. 1-10473).

10.28 Amendment No. 3 to Pipeline Lease Agreement, effective as of
December 31, 1997, between Pride SGP, Inc. and Pride Companies,
L.P.(Commission File No. 1-10473).

10.29 First Amendment to Sixth Restated and Amended Credit Agreement
dated as of April 15, 1998, by and among Pride Companies, L.P.
("Borrower"), Pride Refining, Inc., Pride SGP, Inc., Desulfur
Partnership, Pride Marketing of Texas (Cedar Wind), Inc., and
Pride Borger, Inc. (collectively Guarantors) and Varde Partners,
Inc. as Lender (incorporated by reference to Exhibit 28.1 of the
Partnership's Quarterly Report on Form 10Q for the quarter ended
June 30, 1998 (Commission File No. 1-10473)).

10.30 Amendment No. 1 to the Revolving Credit and Term Loan Agreement,
dated as of April 15, 1998, among Pride Companies, L.P., Pride
SGP, Inc., Pride Refining, Inc., Desulfur Partnership, Pride
Borger, Inc., Pride Marketing of Texas (Cedar Wind), Inc., and
BankBoston, N.A., as an Agent and as a Lender, Lehman Brothers
Commercial Paper, Inc. as a Lender and as a Documentation Agent
(incorporated by reference to Exhibit 28.2 on Form 10Q for the
quarter ended June 30, 1998 (Commission File No. 1-10473)).
10.31 Waiver dated as of October 29, 1998 to the First Amendment to
Sixth Restated and Amended Credit Agreement among Pride
Companies, L.P. as borrower, Pride Refining, Inc., Pride SGP,
Inc., Desulfur Partnership, Pride Marketing of Texas (Cedar
Wind), Inc. and Pride Borger, Inc., as guarantors, and Varde
Partners, Inc., as lender (incorporated by reference to Exhibit
28.1 of the Partnership's Quarterly Report on Form 10Q for the
quarter ended September 30, 1998 (Commission File No. 1-10473)).

10.32 Waiver dated as of August 1, 1998 to the Revolving Credit and
Term Loan Agreement dated December 30, 1997, as amended, among
Pride Companies, L.P., as borrower, Pride SGP, Inc., Pride
Refining, Inc., Desulfur Partnership, Pride Borger, Inc. and
Pride Marketing of Texas (Cedar Wind), Inc., BankBoston, N.A., as
Agent, Lehman Commercial Paper, Inc., as Documentation Agent, and
BankBoston, N.A., Lehman Commercial Paper Inc. and Union Bank of
California, N.A. (incorporated by reference to Exhibit 28.2 of
the Partnership's Quarterly Report on Form 10Q for the quarter
ended September 30, 1998 (Commission File No. 1-10473)).

10.33 Second Amendment to the Sixth Restated and Amended Credit
Agreement dated as of November 20, 1998 by and among Pride
Companies, L.P. ("Borrower"), Pride Refining, Inc., Pride SGP,
Inc., Desulfur Partnership, Pride Marketing of Texas (Cedar
Wind), Inc., and Pride Borger, Inc. (collectively Guarantors) and
Varde Partners, Inc. as Lender (incorporated by reference to
Exhibit 10.33 of the Partnership's Annual Report on Form 10K for
the year ended December 31, 1998 (Commission File No. 1-10473)).

10.34 Third Amendment to the Sixth Restated and Amended Credit
Agreement dated as of December 1, 1998 by and among Pride
Companies, L.P. ("Borrower"), Pride Refining, Inc., Pride SGP,
Inc., Desulfur Partnership, Pride Marketing of Texas (Cedar
Wind), Inc., and Pride Borger, Inc. (collectively Guarantors) and
Varde Partners, Inc. as Lender (incorporated by reference to
Exhibit 10.34 of the Partnership's Annual Report on Form 10K for
the year ended December 31, 1998 (Commission File No. 1-10473)).

10.35 Fourth Amendment to the Sixth Restated and Amended Credit
Agreement dated as of December 31, 1998 by and among Pride
Companies, L.P. ("Borrower"), Pride Refining, Inc., Pride SGP,
Inc., Desulfur Partnership, Pride Marketing of Texas (Cedar
Wind), Inc., and Pride Borger, Inc. (collectively Guarantors) and
Varde Partners, Inc. as Lender (incorporated by reference to
Exhibit 10.35 of the Partnership's Annual Report on Form 10K for
the year ended December 31, 1998 (Commission File No. 1-10473)).

10.36 Fifth Amendment to the Sixth Restated and Amended Credit
Agreement dated as of March 1999 by and among Pride Companies,
L.P. ("Borrower"), Pride Refining, Inc., Pride SGP, Inc.,
Desulfur Partnership, Pride Marketing of Texas (Cedar Wind),
Inc., and Pride Borger, Inc. (collectively Guarantors) and Varde
Partners, Inc. as Lender (incorporated by reference to Exhibit
10.36 of the Partnership's Annual Report on Form 10K for the year
ended December 31, 1998 (Commission File No. 1-10473)).

10.37 Amendment No. 2 to the Revolving Credit and Term Loan Agreement,
dated as of November 20, 1998, among Pride Companies, L.P., Pride
SGP, Inc., Pride Refining, Inc., Desulfur Partnership, Pride
Borger, Inc., Pride Marketing of Texas (Cedar Wind), Inc., and
BankBoston, N.A., as an Agent and as a Lender, Lehman Brothers
Commercial Paper, Inc. as a Lender and as a Documentation Agent
(incorporated by reference to Exhibit 10.37 of the Partnership's
Annual Report on Form 10K for the year ended December 31, 1998
(Commission File No. 1-10473)).

10.38 Amendment No. 3 to the Revolving Credit and Term Loan Agreement,
dated as of December 31, 1998, among Pride Companies, L.P., Pride
SGP, Inc., Pride Refining, Inc., Desulfur Partnership, Pride
Borger, Inc., Pride Marketing of Texas (Cedar Wind), Inc., and
BankBoston, N.A., as an Agent and as a Lender, Lehman Brothers
Commercial Paper, Inc. as a Lender and as a Documentation Agent
(incorporated by reference to Exhibit 10.38 of the Partnership's
Annual Report on Form 10K for the year ended December 31, 1998
(Commission File No. 1-10473)).

10.39 Amendment No. 4 to the Revolving Credit and Term Loan Agreement,
dated as of March 1999, among Pride Companies, L.P., Pride SGP,
Inc., Pride Refining, Inc., Desulfur Partnership, Pride Borger,
Inc., Pride Marketing of Texas (Cedar Wind), Inc., and
BankBoston, N.A., as an Agent and as a Lender, Lehman Brothers
Commercial Paper, Inc. as a Lender and as a Documentation Agent
(incorporated by reference to Exhibit 10.39 of the Partnership's
Annual Report on Form 10K for the year ended December 31, 1998
(Commission File No. 1-10473)).

10.40 Amendment No. 5 to the Revolving Credit and Term Loan Agreement
dated as of April 15, 1999 among Pride Companies, L.P., Pride
SGP, Inc., Pride Refining, Inc., Desulfur Partnership, Pride
Borger, Inc., Pride Marketing of Texas (Cedar Wind), Inc., and
BankBoston, N.A., as an Agent and as a Lender, Lehman Brothers
Commercial Paper, Inc. as a Lender and as a Documentation Agent
(incorporated by reference to Exhibit 10.1 of the Partnership's
Quarterly Report on Form 10Q for the quarter ending March 31,
1999 (Commission File No. 1-10473)).

10.41 The Sixth Amendment to the Sixth Restated and Amended Credit
Agreement as of April 15, 1999 among Pride Companies,L.P. (the
"Borrower"), Pride Refining, Inc., Pride SGP, Inc., Desulfur
Partnership, Pride Marketing of Texas (Cedar Wind), Inc. and
Pride Borger, Inc. (collectively, the "Guarantors"), and Varde
Partners, Inc. (incorporated by reference to Exhibit 10.1 of the
Partnership's Quarterly Report on Form 10Q for the quarter ending
June 30, 1999 (Commission File No. 1-10473)).

10.42 Amended and Restated Certificates of Designation of Series B, C,
D, E and F Cumulative Convertible Preferred Units of Pride
Companies, L.P. pursuant to the Third Amended and Restated
Agreement of Limited Partnership effective as of April 15, 1999
(incorporated by reference to Exhibit 10.2 of the Partnership's
Quarterly Report on Form 10Q for the quarter ending June 30 1999
(Commission File No. 1-10473)).

10.43 Purchase and Sale Agreement dated August 4, 1999 by and among
Pride Companies, L.P. and Pride SGP, Inc., as Sellers, and Sun
Pipe Line Services Co., as Buyer (incorporated by reference to
Exhibit 10.3 of the Partnership's Quarterly Report on Form 10Q
for the quarter ending June 30, 1999 (Commission File No. 1-
10473)).

10.44 Waiver and Consent dated as of October 1, 1999 among Pride
Companies, L.P. (the "Borrower"), Pride Refining, Inc., Pride
SGP, Inc., Pride Marketing of Texas (Cedar Wind), Inc. and Pride
Borger, Inc. (collectively, the "Guarantors"), and Varde
Partners, Inc., ("Lender") (incorporated by reference to Exhibit
10.1 of the Partnership's Quarterly Report on Form 10Q for the
quarter ending September 30, 1999 (Commission File No. 1-10473)).

10.45 Amendment No. 6 to the Revolving Credit and Term Loan Agreement,
dated as of October 1, 1999 among Pride Companies, L.P., Pride
SGP, Inc., Pride Refining, Inc., Desulfur Partnership, Pride
Borger, Inc., Pride Marketing of Texas (Cedar Wind), Inc., and
BankBoston, N.A., as Agent and as a Lender, Lehman Brothers
Commercial Paper, Inc. as a Lender and as a Documentation Agent
(incorporated by reference to Exhibit 10.2 of the Partnership's
Quarterly Report on Form 10Q for the quarter ending September 30,
1999 (Commission File No. 1-10473)).

10.46 Certificates of Designation of Series G Subordinate Preferred
Units of Pride Companies, L.P. pursuant to the Third Amended and
Restated Agreement of Limited Partnership effective as of October
1, 1999.

25.1 Power of Attorney (included on the signature page of this
Report).

27.1 Financial Data Schedule.

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 16,183
<SECURITIES> 0
<RECEIVABLES> 6,612
<ALLOWANCES> 99
<INVENTORY> 180
<CURRENT-ASSETS> 23,034
<PP&E> 30,669
<DEPRECIATION> 14,048
<TOTAL-ASSETS> 47,506
<CURRENT-LIABILITIES> 49,285
<BONDS> 0
17,079
3,144
<COMMON> (30,557)
<OTHER-SE> (1,101)
<TOTAL-LIABILITY-AND-EQUITY> 47,506
<SALES> 130,604
<TOTAL-REVENUES> 130,604
<CGS> 126,424
<TOTAL-COSTS> 126,424
<OTHER-EXPENSES> 1,496
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,095
<INCOME-PRETAX> (7,686)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,686)
<DISCONTINUED> 18
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,668)
<EPS-BASIC> (1.89)
<EPS-DILUTED> (1.89)

</TABLE>