Results of Operations - Three Months Ended September 30, 2008 and 2007

                         Sunoco Logistics Partners L.P.

                              Operating Highlights

                 Three Months Ended September 30, 2008 and 2007



                                                              Three Months Ended
                                                                 September 30,
                                                               2008         2007
Eastern Pipeline System:(1)
Total shipments (barrel miles per day)(2)                   62,856,632   67,671,264
Revenue per barrel mile (cents)                                  0.549        0.498
Terminal Facilities:
Terminal throughput (bpd):
Refined product terminals(3)                                   437,018      442,054
Nederland terminal                                             545,105      490,272
Refinery terminals(4)                                          646,478      727,870
Western Pipeline System:(1)
Crude oil pipeline throughput (bpd)                            492,823      528,407
Crude oil purchases at wellhead (bpd)                          176,739      177,025
Gross margin per barrel of pipeline throughput (cents)(5)         62.0         38.3

(1) Excludes amounts attributable to equity ownership interests in corporate joint ventures.

(2) Represents total average daily pipeline throughput multiplied by the number of miles of pipeline through which each barrel has been shipped.

(3) Includes results from the Partnership's purchase of a 50% undivided interest in a refined products terminal in Syracuse, New York in June 2007.

(4) Consists of the Partnership's Fort Mifflin Terminal Complex, the Marcus Hook Tank Farm and the Eagle Point Dock.

(5) Represents total segment sales minus cost of products sold and operating expenses and depreciation and amortization divided by crude oil pipeline throughput.

Analysis of Consolidated Net Income

Net income was $50.3 million for the third quarter 2008 as compared with $37.5 million for the third quarter 2007, an increase of $12.8 million. The increase was the result of continued margin improvement across all segments, increased volumes within certain pipelines of the Western Pipeline system and additional tankage placed into service at the Nederland terminal. These increases were partially offset by lower volumes within certain terminal facilities and the Eastern Pipeline along with a $2.5 million charge associated with property damages caused by the hurricanes experienced during the quarter.

Net interest expense decreased $0.9 million to $7.5 million for the third quarter 2008 from $8.4 million for the prior year's quarter primarily due to lower interest rates and decreased borrowings under the Partnership's Credit Facility.

Analysis of Segment Operating Income

Eastern Pipeline System

Operating income for the Eastern Pipeline System increased $2.7 million to $17.4 million for the third quarter 2008 from $14.7 million for the third quarter 2007. Sales and other operating revenue increased by $0.7 million to $31.7 million due primarily to higher fees across the Partnership's refined product and crude oil pipelines, partially offset by decreased volumes. Other income decreased $1.9 million compared to the prior year's quarter due primarily to decreased refined product volumes experienced during 2008 by the Partnership's joint venture interests. Operating expenses decreased by $4.5 million to $9.0 million compared to the prior year's quarter due primarily to the impact of increased crude oil and refined product prices on operating gains and a decreased level of environmental charges.

Terminal Facilities

The Terminal Facilities business segment had operating income of $13.7 million for the third quarter 2008, as compared to $12.6 million for the prior year's third quarter. Sales and other operating revenue increased by $4.8 million to $40.6 million due primarily to increased terminal fees, the addition of tankage at the Nederland terminal and increased refined product additive revenues. These increases were partially offset by decreased throughput within the refinery and refined product terminals. Operating expenses increased by $3.1 million to $17.9 million for the third quarter of 2008 due primarily to damages incurred from hurricanes during the third quarter, increased product additive costs and higher utility costs. These higher costs were partially offset by product overages which were favorably impacted by the increased price of crude oil.

Western Pipeline System

Operating income for the Western Pipeline System increased $8.1 million to $26.7 million for the third quarter of 2008 compared to the prior year's quarter due primarily to the establishment of a bi-directional pipeline connection to the Partnership's Nederland terminal, increased volumes on certain pipeline segments, increased pipeline fees and higher lease acquisition margins.

Higher crude oil prices were a key driver of the overall increase in total revenue, cost of products sold and operating expenses from the prior year's quarter. The average price of West Texas Intermediate crude oil at Cushing, Oklahoma increased to $118.13 per barrel for the third quarter of 2008 from $75.33 per barrel for the third quarter of 2007.

Results of Operations - Nine Months Ended September 30, 2008 and 2007

                         Sunoco Logistics Partners L.P.

                              Operating Highlights

                 Nine Months Ended September 30, 2008 and 2007



                                                               Nine Months Ended
                                                                 September 30,
                                                               2008         2007
Eastern Pipeline System:(1)
Total shipments (barrel miles per day)(2)                   61,428,075   64,820,837
Revenue per barrel mile (cents)                                  0.532        0.485
Terminal Facilities:
Terminal throughput (bpd):
Refined product terminals(3)                                   428,146      432,685
Nederland terminal                                             541,517      521,147
Refinery terminals(4)                                          647,891      686,033
Western Pipeline System:(1)
Crude oil pipeline throughput (bpd)                            530,109      532,656
Crude oil purchases at wellhead (bpd)                          175,173      180,826
Gross margin per barrel of pipeline throughput (cents)(5)         55.3         27.8

(1) Excludes amounts attributable to equity ownership interests in corporate joint ventures.

(2) Represents total average daily pipeline throughput multiplied by the number of miles of pipeline through which each barrel has been shipped.

(3) Includes results from the Partnership's purchase of a 50% undivided interest in a refined products terminal in Syracuse, New York.

(4) Consists of the Partnership's Fort Mifflin Terminal Complex, the Marcus Hook Tank Farm and the Eagle Point Dock.

Analysis of Consolidated Net Income

Net income was $139.2 million for the nine month period ended September 2008 as compared with $85.1 million for the comparable period in 2007. The increase was the result of higher margins and fees across all segments, increased volumes within certain pipelines of the Western Pipeline system and additional tankage placed into service at the Nederland terminal. These improvements to operating income were partially offset by lower volumes within certain terminal facilities and the Eastern Pipeline, a $5.7 million non-cash impairment charge related to a cancelled project and property damages caused by the hurricanes noted above. Decreased interest expense contributed further to the $54.1 million increase in net income.

Net interest expense decreased $3.2 million to $23.3 million for the first nine months of 2008 from $26.5 million for the first nine months of 2007 due to decreased borrowings and lower interest rates related to the Partnership's Credit Facility.

Analysis of Segment Operating Income

Eastern Pipeline System

Operating income for the Eastern Pipeline System increased $7.5 million to $42.7 million for the first nine months of 2008 from $35.2 million for the first nine months of 2007. Sales and other operating revenue increased from $85.9 million for the prior year's period to $89.6 million for the nine months ended September 30, 2008 due mainly to higher fees across the Partnership's refined product and crude oil pipelines, partially offset by decreased volumes. Other income decreased by $3.9 million to $6.5 million for the first nine months of 2008 from $10.4 million for the prior year period due mainly to a decrease in equity income associated with the Partnership's joint venture interests. Operating expenses decreased by $8.1 million to $31.0 million due primarily to the impact of increased crude oil and refined product prices on operating gains and a decreased level of environmental charges.

Terminal Facilities

The Terminal Facilities segment had operating income of $42.9 million for the nine months ended September 2008, as compared to $40.3 million for the first nine months of 2007. Operating income was reduced during the first nine months of 2008 due to a $5.7 million non-cash impairment charge related to the Partnership's decision to discontinue efforts to expand LPG storage capacity at its Inkster, Michigan facility. Sales and other operating revenue increased $15.3 million to $119.3 million for the first nine months of 2008 due primarily to the addition of new tankage at the Nederland terminal, higher fees at the Partnership's Nederland and refined products terminals and increased product additive revenues. The increases were partially offset by decreased volumes in the Partnership's refinery and refined product terminals. Other income increased $0.8 million from the first nine months of 2008 as a result of an insurance recovery recorded during the second quarter associated with hurricane damage sustained in 2005. Cost of goods sold and operating expenses increased by $5.4 million to $45.5 million for the nine months ended September 2008 due primarily to increased product additive costs, damages incurred at the Partnership's Nederland terminal from the hurricanes experienced during the third quarter, higher utility costs and timing of maintenance activity. These higher costs were partially offset by product overages which were favorably impacted by the increased price of crude oil. Selling, general and administrative expenses increased by $1.7 million to $13.9 million for the nine months ended September 30, 2008. During 2007, expenses were reduced by $0.9 million in connection with an insurance recovery.

Western Pipeline System

Operating income for the Western Pipeline System increased $40.9 million to $76.9 million for the first nine months of 2008 from $36.0 million for the first nine months of 2007. The increase was due primarily to the establishment of a bi-directional pipeline connection to the Partnership's Nederland terminal, increased volumes on certain pipeline segments, increased pipeline fees and higher lease acquisition margins. Other income also contributed to the increased profitability due to increased equity income associated with the Partnership's joint venture interests and the gain on an insurance recovery discussed above.

Higher crude oil prices were a key driver of the overall increase in total revenue, cost of products sold and operating expenses from the prior year period. The average price of West Texas Intermediate crude oil at Cushing, Oklahoma increased to $113.38 per barrel for the first nine months of 2008 from $66.26 per barrel for the first nine months of 2007.

Liquidity and Capital Resources

Liquidity

Cash generated from operations and borrowings under the credit facilities are the Partnership's primary sources of liquidity. At September 30, 2008, the Partnership had available borrowing capacity under the credit facilities of $394.0 million. The Partnership's working capital position reflects crude oil inventories based on historical costs under the LIFO method of accounting. If the inventories had been valued at their current replacement cost, the Partnership would have had working capital of $92.1 million at September 30, 2008.

On April 28, 2008, Sunoco Pipeline L.P., a subsidiary of the Partnership, entered into a definitive agreement to acquire a refined products pipeline system and certain other real and personal property interests and assets from Mobil Pipe Line Company. In addition to the pipeline system, Sunoco Partners Marketing & Terminals L.P., a subsidiary of the Partnership, entered into definitive agreements with Exxon Mobil Corporation, Mobil Pipe Line Company and ExxonMobil Oil Corporation, to acquire six refined products terminal facilities. Subject to necessary regulatory filings and approvals and the satisfaction of certain closing conditions, the transactions, with a combined purchase price of approximately $200.0 million, are expected to be completed in the fourth quarter of 2008. These acquisitions are expected to be funded through a combination of cash on hand and the Partnership's revolving credit facilities and other borrowings. For further information on these transactions see "Item 1. Notes to Condensed Consolidated Financial Statements (unaudited)-Note 2."

Capital Resources

The Partnership periodically supplements its cash flows from operations with proceeds from debt and equity financing activities.

$400 Million Credit Facility

Sunoco Logistics Partners Operations L.P. (the "Operating Partnership"), a wholly-owned entity of the Partnership, has a five-year $400 million revolving Credit Facility, which is available to fund the Operating Partnership's working capital requirements, to finance future acquisitions, to finance future capital projects and for general partnership purposes. The Credit Facility, which has a syndicate of 10 participating banks, matures in November 2012. At December 31, 2007, there was $91.0 million outstanding under the Credit Facility. During the first nine months of 2008, the Partnership had net borrowings of $10.0 million resulting in an outstanding balance of $101.0 million at September 30, 2008.

The Credit Facility bears interest at the Operating Partnership's option, at either (i) LIBOR plus an applicable margin, (ii) the higher of the federal funds rate plus 0.50 percent or the Citibank prime rate (each plus the applicable margin) or (iii) the federal funds rate plus an applicable margin.

The Credit Facility contains various covenants limiting the Operating Partnership's ability to a) incur indebtedness, b) grant certain liens, c) make certain loans, acquisitions and investments, d) make any material change to the nature of its business, e) acquire another company, or f) enter into a merger or sale of assets, including the sale or transfer of interests in the Operating Partnership's subsidiaries. The Credit Facility also requires the Operating Partnership to maintain, on a rolling four-quarter basis, a maximum total debt to EBITDA ratio of 4.75 to 1, which can generally be increased to 5.25 to 1 during an acquisition period. The Operating Partnership is in compliance with this requirement as of September 30, 2008. The Partnership's ratio of total debt to EBITDA was 2.1 to 1 at September 30, 2008.

In September 2008, Lehman Brothers, one of the participating banks with a commitment under the Credit Facility amounting to $5.0 million declared bankruptcy and the Partnership believes Lehman Brothers will not fund future draw requests. In October 2008, Wachovia, another participant with a $40.0 million commitment agreed to be acquired by Wells Fargo after experiencing financial difficulties. Under this transaction, the Partnership believes Wells Fargo will honor Wachovia's commitment under the facility. However, the Partnership can not make any assurances that this transaction will close.

$100 Million Credit Facility

In anticipation of the pending MagTex Acquisition, the Operating Partnership entered into a $100 million 364 day revolving credit facility ("$100 million Credit Facility") on May 28, 2008. This $100 million Credit Facility is available to fund the same activities as the Credit Facility described above. If the MagTex Acquisition is terminated, this new revolver will be terminated. The $100 million Credit Facility matures in May 2009 and can be prepaid at any time. Interest on outstanding borrowings is calculated, at the Operating Partnership's option, using either (i) LIBOR plus and applicable margin or (ii) the higher of
(a) the federal funds rates plus 0.50 percent plus an applicable margin, and
(b) the Citibank prime rate plus an applicable margin. The $100 million Credit Facility contains the same covenant requirements as the Credit Facility described above. As of September 30, 2008 there were no borrowings outstanding under the $100 million Credit Facility.

Cash Flows and Capital Expenditures

Net cash provided by operating activities for the nine months ended September 30, 2008 was $196.9 million compared with $103.8 million of net cash provided by operating activities for the first nine months of 2007. Net cash provided by operating activities for the first nine months of 2008 was primarily the result of net income of $139.2 million, depreciation and amortization of $29.5 million, the $5.7 million impairment charge, and a $23.8 million decrease in working capital. The decrease in working capital was the result of an increase in accounts payable and a decrease in accounts receivable activity driven primarily by commodity prices, partially offset by a increase in accounts receivable from affiliated companies and inventory. Net cash provided by operating activities for the first nine-months of 2007 was primarily the result of net income of $85.1 million and depreciation and amortization of $27.9 million, partially offset by a $19.8 million increase in working capital. The increase in working capital was primarily attributable to an increase in accounts receivable due to higher revenues, partially offset by a decrease in inventory associated with the reduction of contango inventory positions.

Net cash used in investing activities for the first nine months of 2008 was $99.5 million compared with $87.1 million for the first nine months of 2007.

Net cash used in financing activities for the first nine months of 2008 was $97.4 million compared with $24.1 million net cash used in financing activities for the first nine months of 2007. Net cash used in financing activities for the first nine months of 2008 resulted from $100.1 million in distributions paid to limited partners and the general partner and an increase in advances to affiliates of $8.8 million. This use of cash was partially offset by a $10.0 million increase in net borrowings under the Partnership's credit facilities to fund the Partnership's organic growth capital program. Net cash used in financing activities for the first nine months of 2007 was the result of $87.0 million in distributions paid to limited partners and the general partner, and $21.0 million in net advances to affiliates. This use of cash was partially offset by an $84.3 million increase in net borrowings under the Partnership's credit facilities to fund the Partnership's organic growth capital program, contango inventory positions, and to purchase a 50% undivided interest in a refined products terminal located in Syracuse, New York.

Under a treasury services agreement with Sunoco, the Partnership participates in Sunoco's centralized cash management program. Advances from affiliates in the Partnership's condensed consolidated balance sheets at September 30, 2008 represent amounts due to Sunoco under this agreement. Advances to affiliates at December 31, 2007 represent amounts due from Sunoco under this agreement.

Capital Requirements

The pipeline, terminalling, and crude oil transport operations are capital intensive, requiring significant investment to maintain, upgrade or enhance existing operations and to meet environmental and operational regulations. The capital requirements have consisted, and are expected to continue to consist, primarily of:

• Maintenance capital expenditures, such as those required to maintain equipment reliability, tankage and pipeline integrity and safety, and to address environmental regulations; and

• Expansion capital expenditures to acquire assets to grow the business and to expand existing and construct new facilities, such as projects that increase storage or throughput volume.

The following table summarizes maintenance and expansion capital expenditures, including net cash paid for acquisitions, for the periods presented (in thousands of dollars):

                                         Nine Months Ended
                                           September 30,
                                          2008        2007
                         Maintenance   $   15,655   $ 14,562
                         Expansion         73,389     72,528

                                       $   89,044   $ 87,090

Management anticipates maintenance capital expenditures to be approximately $27.0 million for the year ended December 31, 2008, excluding reimbursements from Sunoco in accordance with the terms of certain agreements. Maintenance capital expenditures for both periods presented include recurring expenditures such as pipeline integrity costs, pipeline relocations, repair and upgrade of field instrumentation, including measurement devices, repair and replacement of tank floors and roofs, upgrades of cathodic protection systems, crude trucks and related equipment, and the upgrade of pump stations.

Expansion capital expenditures for the nine months ended September 30, 2008 were $73.4 million compared to $72.5 million for the first nine months of 2007. Expansion capital for 2008 includes construction in progress, in connection with the Partnership's agreement with Motiva Enterprises LLC, of three crude oil storage tanks at its Nederland Terminal and a crude oil pipeline from Nederland to Motiva's Port Arthur, Texas refinery. Expansion capital also includes construction of five additional crude oil storage tanks at Nederland, for a total of eight crude oil storage tanks under various levels of construction at Nederland during 2008. These eight crude oil storage tanks will have a combined shell capacity of approximately 4.8 million barrels. Expansion capital for 2007 included the $13.4 million acquisition of a 50 percent interest in the Syracuse, New York refined products terminal.

The Partnership expects to fund capital expenditures, including pending and future acquisitions, from both cash provided by operations and, to the extent necessary, from the proceeds of borrowings under the Partnership's Credit Facilities, other borrowings and the issuance of additional common units.