UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                    FORM 10-Q


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

     For the quarterly period ended June 30, 2005

                                       OR

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

     For the transition period from           to
                                    ----------   ---------------

                       Commission file number:  000-50394

                         RIO VISTA ENERGY PARTNERS L.P.
             (Exact Name of Registrant as Specified in Its Charter)

             DELAWARE                               20-0153267
  (State or Other Jurisdiction of       (I.R.S. Employer Identification No.)
  Incorporation or Organization)

820 GESSNER ROAD, SUITE 1285, HOUSTON, TEXAS                       77024
  (Address of Principal Executive Offices)                       (Zip Code)

Registrant's Telephone Number, Including Area Code:    (713) 467-8235

     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 whether the registrant is an accelerated filer (as
defined  in  Rule  12b-2  of  the  Exchange  Act).
Yes       No  X
    ---      ---

     The number of common units outstanding on August 12, 2004 was 1,910,656.


                                        1
<PAGE>
<TABLE>
<CAPTION>
                            RIO VISTA ENERGY PARTNERS L.P.  AND  SUBSIDIARIES
                                            TABLE OF CONTENTS


         ITEM                                                                            PAGE NO.
         ----                                                                            --------
<S>      <C>  <C>                                                                        <C>
Part I    1.  Financial Statements

              Independent Certified Public Accountants' Review Report                        3

              Consolidated Balance Sheets as of December 31, 2004 and
              June 30, 2005 (unaudited)                                                     4-5

              Unaudited Consolidated Statements of Operations for the three months
              and six months ended June 30, 2004 and 2005                                    6

              Unaudited Consolidated Statement of Partners' Capital for the six months
              ended  June 30, 2005                                                           7

              Unaudited Consolidated Statements of Cash Flows for the six months
              ended June 30, 2004 and 2005                                                   8

              Notes to Consolidated Financial Statements (unaudited)                        9-24

          2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                                    25-45

          3.  Quantitative and Qualitative Disclosures About Market Risk                     46

          4.  Controls and Procedures                                                        46

Part II   1.  Legal Proceedings                                                              47

          2.  Unregistered Sales of Equity Securities and Use of Proceeds                    47

          3.  Defaults Upon Senior Securities                                                47

          4.  Submission of Matters to a Vote of Security Holders                            47

          5.  Other Information                                                              47

          6.  Exhibits                                                                      47-48

         Signatures                                                                          49
</TABLE>


                                        2
<PAGE>
PART  I
ITEM  1.

             Independent Certified Public Accountants' Review Report
             -------------------------------------------------------


To the Board of Managers of Rio Vista GP LLC,
  General Partner of Rio Vista Energy Partners L.P.

We  have  reviewed  the  consolidated balance sheet of Rio Vista Energy Partners
L.P.  and  subsidiaries  (Rio  Vista)  as  of  June  30,  2005, the consolidated
statements of operations for the three months and six months ended June 30, 2004
and  2005,  the  consolidated  statement of partners' capital for the six months
ended  June  30, 2005, and the consolidated statements of cash flows for the six
months  ended  June  30, 2004 and 2005.  These consolidated financial statements
are  the  responsibility  of  Rio  Vista's  management.

We  conducted  our review in accordance with the standards of the Public Company
Accounting  Oversight  Board  (United  States).  A  review  of interim financial
information  consists  principally  of applying analytical procedures and making
inquiries  of  persons  responsible for financial and accounting matters.  It is
substantially  less  in  scope  than  an  audit conducted in accordance with the
standards  of  the  Public  Company Accounting Oversight Board, the objective of
which  is  the expression of an opinion regarding the financial statements taken
as  a  whole.  Accordingly,  we  do  not  express  such  an  opinion.

Based  on our review, we are not aware of any material modifications that should
be  made to the consolidated financial statements referred to above for it to be
in  conformity  with  United  States  generally  accepted accounting principles.

We  have  previously  audited,  in  accordance  with the standards of the Public
Company  Accounting  Oversight  Board  (United States), the consolidated balance
sheet of Rio Vista Energy Partners L.P. and subsidiaries as of December 31, 2004
and  the  related  consolidated  statements of operations, partners' capital and
cash  flows  for the year ended December 31, 2004 (not presented herein); and in
our  report dated February 2, 2005, we expressed an unqualified opinion on those
consolidated financial statements.  In our opinion, the information set forth in
the  accompanying  consolidated balance sheet as of December 31, 2004, is fairly
stated.

Our auditors' report on Rio Vista's financial statements as of December 31, 2004
included  an  explanatory paragraph referring to the matters discussed in Note N
of  those  financial statements which raised substantial doubt about Rio Vista's
ability  to  continue  as  a  going  concern.  As  indicated  in  Note  K to the
accompanying  unaudited  interim  consolidated  financial statements, conditions
continue  to  exist  which  raise substantial doubt about Rio Vista's ability to
continue  as  a  going  concern.

                                      /s/  BURTON McCUMBER & CORTEZ, L.L.P.

Brownsville, Texas
August 3, 2005


                                        3
<PAGE>
<TABLE>
<CAPTION>
                              RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

                                        CONSOLIDATED BALANCE SHEETS



                                                  ASSETS


                                                                                                June 30,
                                                                               December 31,       2005
                                                                                   2004       (Unaudited)
                                                                               -------------  ------------
<S>                                                                            <C>            <C>
Current Assets
    Cash                                                                       $      13,000  $     17,000
    Restricted cash                                                                3,983,000       946,000
    Trade accounts receivable (less allowance for doubtful accounts of $0 at
    2004 and 2005)                                                                 5,785,000     1,746,000
    Inventories                                                                      198,000       202,000
    Prepaid expenses and other current assets                                          9,000       265,000
                                                                               -------------  ------------
      Total current assets                                                         9,988,000     3,176,000
Property, plant and equipment - net                                               14,244,000    13,744,000
Other non-current assets                                                              12,000         8,000
                                                                               -------------  ------------
        Total assets                                                           $  24,244,000  $ 16,928,000
                                                                               =============  ============
</TABLE>




   The accompanying notes and accountants' report are an integral part of these
                                   statements.


                                        4
<PAGE>
<TABLE>
<CAPTION>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS


                        LIABILITIES AND PARTNERS' CAPITAL


                                                                  June 30,
                                                 December 31,       2005
                                                     2004       (Unaudited)
                                                 -------------  ------------
<S>                                              <C>            <C>
Current Liabilities
    Due to Penn Octane Corporation, net          $   8,632,000  $  2,151,000
    Accounts payable                                   290,000       463,000
    Mexican taxes payable                               27,000        25,000
    Accrued liabilities                                382,000       484,000
                                                 -------------  ------------
      Total current liabilities                      9,331,000     3,123,000
Commitments and contingencies                                -             -
Partners' Capital
    Common units                                    14,615,000    13,529,000
    General partner's equity                           298,000       276,000
                                                 -------------  ------------
      Total partners' capital                       14,913,000    13,805,000
                                                 -------------  ------------
        Total liabilities and partners' capital  $  24,244,000  $ 16,928,000
                                                 =============  ============
</TABLE>




   The accompanying notes and accountants' report are an integral part of these
                                   statements.


                                        5
<PAGE>
<TABLE>
<CAPTION>
                          RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

                               CONSOLIDATED STATEMENTS OF OPERATIONS

                                            (UNAUDITED)

                                                   Three Months Ended        Six Months Ended
                                                  -----------------------  -----------------------
                                                  June 30,     June 30,    June 30,     June 30,
                                                    2004         2005        2004         2005
                                                  ---------  ------------  ---------  ------------
<S>                                               <C>        <C>           <C>        <C>
Revenues                                          $       -  $18,309,000   $       -  $46,866,000
Cost of goods sold                                        -   17,770,000           -   45,008,000
                                                  ---------  ------------  ---------  ------------
    Gross profit                                          -      539,000           -    1,858,000
Selling, general and administrative expenses
    Legal and professional fees                           -      401,000           -      643,000
    Salaries and payroll related expenses                 -      356,000           -      750,000
    Other                                                 -      330,000           -      721,000
                                                  ---------  ------------  ---------  ------------
                                                          -    1,087,000           -    2,114,000
                                                  ---------  ------------  ---------  ------------
       Operating loss                                     -     (548,000)          -     (256,000)
Other income (expense)
    Interest and LPG financing expense                    -     (155,000)          -     (273,000)
                                                  ---------  ------------  ---------  ------------
      Loss before taxes                                   -     (703,000)          -     (529,000)
Provision (benefit) for Mexican income taxes              -       25,000           -       26,000
                                                  ---------  ------------  ---------  ------------
      Net loss                                    $       -  $  (728,000)  $       -  $  (555,000)
                                                  =========  ============  =========  ============

Net loss allocable to the partners                $       -  $  (728,000)  $       -  $  (555,000)
    Less general partner's interest in net loss           -       15,000           -       11,000
                                                  ---------  ------------  ---------  ------------
Net loss allocable to the common units            $       -  $  (713,000)  $       -  $  (544,000)
                                                  =========  ============  =========  ============

Net loss per common unit                          $       -  $     (0.37)  $       -  $     (0.28)
                                                  =========  ============  =========  ============
Net loss per common unit assuming dilution        $       -  $     (0.37)  $       -  $     (0.28)
                                                  =========  ============  =========  ============
Weighted average common units outstanding                 -    1,910,656           -    1,910,656
                                                  =========  ============  =========  ============
</TABLE>




   The accompanying notes and accountants' report are an integral part of these
                                   statements.


                                        6
<PAGE>
<TABLE>
<CAPTION>
                      RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL



                                                COMMON UNITS
                                           ----------------------
                                                                                  TOTAL
                                                                     GENERAL    PARTNERS'
                                             UNITS       AMOUNT      PARTNER     CAPITAL
                                           ---------  ------------  ---------  ------------
<S>                                        <C>        <C>           <C>        <C>

BALANCE AS OF DECEMBER 31, 2004            1,910,656  $14,615,000   $298,000   $14,913,000
Net loss                                           -     (544,000)   (11,000)     (555,000)
Cash distribution to partners                      -     (955,000)   (20,000)     (975,000)
Loan discount on Penn Octane
Corporation's debt related to detachable
warrants                                           -      413,000      9,000       422,000
                                           ---------  ------------  ---------  ------------

BALANCE AS OF JUNE 30, 2005
(UNAUDITED)                                1,910,656  $13,529,000   $276,000   $13,805,000
                                           =========  ============  =========  ============
</TABLE>



   The accompanying notes and accountants' report are an integral part of these
                                   statements.


                                        7
<PAGE>
<TABLE>
<CAPTION>
                         RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

                              CONSOLIDATED STATEMENTS OF CASH FLOWS

                                           (UNAUDITED)

                                                                            Six Months Ended
                                                                          -----------------------
                                                                          June 30,     June 30,
                                                                            2004         2005
                                                                          ---------  ------------
<S>                                                                       <C>        <C>
Cash flows from operating activities:
Net loss                                                                  $       -  $  (555,000)
Adjustments to reconcile net income  to net cash  provided by  (used in)
operating activities:
    Depreciation                                                                  -      409,000
    Amortization of loan discount related to detachable warrants                  -      173,000
    Gain on sale of assets                                                        -     ( 24,000)
Changes in current assets and liabilities:
    Trade accounts receivable                                                     -    4,039,000
    Inventories                                                                   -       (4,000)
    Prepaid expenses and other current assets                                     -       (6,000)
    Trade accounts payable                                                        -            -
    Due to Penn Octane Corporation, net                                           -   (6,481,000)
    Accounts payable and accrued liabilities                                      -      275,000
    Mexican taxes payable                                                         -       (3,000)
                                                                          ---------  ------------
Net cash provided by (used in) operating activities                               -   (2,177,000)
Cash flows from investing activities:
    Capital expenditures                                                          -      (60,000)
    Proceeds from the sale of land                                                -      175,000
    Other non-current assets                                                      -        4,000
                                                                          ---------  ------------
    Net cash used in investing activities                                         -      119,000
Cash flows from financing activities:
    Increase in restricted cash                                                   -    3,037,000
    Initial capitalization                                                        -            -
    Cash distributions to partners                                                -     (975,000)
                                                                          ---------  ------------
    Net cash provided by (used) in financing activities                           -    2,062,000
                                                                          ---------  ------------
        Net increase in cash                                                      -        4,000
Cash at beginning of period                                                   2,000       13,000
                                                                          ---------  ------------
Cash at end of period                                                     $   2,000  $    17,000
                                                                          =========  ============
Supplemental disclosures of cash flow information:
    Cash paid during the year for:
    Interest and LPG financing expense                                    $       -  $         -
                                                                          =========  ============
Supplemental disclosures of noncash transactions:
    Units and warrants issued and other                                   $       -  $   422,000
                                                                          =========  ============
</TABLE>




   The accompanying notes and accountants' report are an integral part of these
                                   statements.


                                        8
<PAGE>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  A  -  ORGANIZATION

     Rio Vista Energy Partners L.P. (Rio Vista), a Delaware limited partnership,
     was  formed  by  Penn Octane Corporation (Penn Octane) on July 10, 2003 and
     was  a wholly owned subsidiary of Penn Octane until September 30, 2004, the
     date  that Penn Octane completed a series of transactions involving (i) the
     transfer  of substantially all of its owned pipeline and terminal assets in
     Brownsville, Texas and Matamoros, Mexico and certain immaterial liabilities
     (Assets)  to  Rio Vista Operating Partnership L.P. (RVOP) (ii) the transfer
     of  its  99.9%  interest in RVOP to Rio Vista and (iii) the distribution of
     all of its limited partnership interests (Common Units) in Rio Vista to its
     common  stockholders (Spin-Off), resulting in Rio Vista becoming a separate
     public company. The Common Units represented 98% of Rio Vista's outstanding
     capital  and  100%  of  Rio  Vista's  limited  partnership  interests.  The
     remaining  2%,  which  is  the  general  partner  interest,  is  owned  and
     controlled by Rio Vista GP LLC (General Partner), a wholly owned subsidiary
     of  Penn  Octane.  The General Partner is responsible for the management of
     Rio Vista. Rio Vista Energy Partners L.P. and its consolidated subsidiaries
     are  collectively  hereinafter  referred  to  as  "Rio  Vista".

     As  a  result  of  the  Spin-Off,  Rio  Vista  is  engaged in the purchase,
     transportation  and  sale  of liquefied petroleum gas (LPG). Rio Vista owns
     and  operates  LPG  terminal  facilities in Brownsville, Texas (Brownsville
     Terminal Facility) and in Matamoros, Tamaulipas, Mexico (Matamoros Terminal
     Facility)  and  approximately 23 miles of pipelines (US - Mexico Pipelines)
     which  connect  the Brownsville Terminal Facility to the Matamoros Terminal
     Facility. The primary market for Rio Vista's LPG is the northeastern region
     of  Mexico,  which  includes  the  states  of  Coahuila,  Nuevo  Leon  and
     Tamaulipas.  Rio Vista's primary customer for LPG is P.M.I. Trading Limited
     (PMI).  PMI is a subsidiary of Petroleos Mexicanos, the state-owned Mexican
     oil  company, which is commonly known by its trade name "PEMEX." PMI is the
     exclusive importer of LPG into Mexico. PMI sells the LPG purchased from Rio
     Vista  to  PEMEX  which distributes the LPG into the northeastern region of
     Mexico.

     All  of  Rio  Vista's LPG operations are conducted through, and Rio Vista's
     LPG operating assets are owned by, RVOP. The General Partner is entitled to
     receive  distributions  on  its general partner interest as provided for in
     Rio Vista's partnership agreement (Agreement). The General Partner has sole
     responsibility  for  conducting  Rio  Vista's business and for managing Rio
     Vista's  operations  in  accordance  with  the  Agreement.  Other  than the
     foregoing  distributions, the General Partner does not receive a management
     fee  or other compensation in connection with its management of Rio Vista's
     business,  but  is  entitled  to  be reimbursed for all direct and indirect
     expenses  incurred  on  Rio  Vista's  behalf.

     Rio Vista purchases LPG from Penn Octane under a long-term supply agreement
     (LPG  Supply  Agreement). The purchase price of the LPG from Penn Octane is
     determined based on the cost of LPG under Penn Octane's agreements with its
     LPG suppliers for volumes sold to Rio Vista for sale to PMI or to other Rio
     Vista  customers,  other direct costs related to PMI and other LPG sales of
     Rio  Vista  and  a formula that takes into consideration operating costs of
     Penn  Octane  and  Rio  Vista.

     Historically,  up  until the date of the Spin-Off, Penn Octane has sold LPG
     primarily  to PMI. Penn Octane has a long-term lease agreement, expiring in
     December  2013,  for  approximately  132  miles  of pipeline which connects
     ExxonMobil  Corporation's  (Exxon)  King Ranch Gas Plant in Kleberg County,
     Texas  and Duke Energy's La Gloria Gas Plant in Jim Wells County, Texas, to
     Rio Vista's Brownsville Terminal Facility (Leased Pipeline). In addition at
     the  discretion  of Exxon, Penn Octane has access to a twelve-inch pipeline
     which  connects  Exxon's Viola valve station in Nueces County, Texas to the
     inlet  of  the  King  Ranch Gas Plant (ECCPL) as well as existing and other
     potential  propane  pipeline suppliers which have the ability to access the
     ECCPL.  In  connection  with  Penn  Octane's lease agreement for the Leased
     Pipeline,  Penn  Octane  has  access  to storage in Markham, Texas (Markham
     Storage)  which has a capacity of up to approximately 21,000,000 gallons of
     storage,  as  well  as  other  potential  propane  pipeline  suppliers, via
     approximately  155 miles of pipeline located between Markham, Texas and the
     Exxon  King  Ranch  Gas  Plant. Penn Octane's long term supply agreement in
     effect  as  of  June  30,  2005 with Exxon requires Penn Octane to purchase
     minimum  quantities  of  LPG  totaling  up to 13,900,000 gallons of LPG per
     month  although  actual quantities supplied under such agreement during the
     six  months  ended  June  30, 2005 were approximately 9,100,000 gallons per
     month.


                                        9
<PAGE>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE A - ORGANIZATION - CONTINUED

     BASIS  OF  PRESENTATION
     -----------------------

     The  accompanying  consolidated  financial statements include Rio Vista and
     its  United  States subsidiaries including RVOP, Rio Vista Operating GP LLC
     and  Penn  Octane International, L.L.C., and its Mexican subsidiaries, Penn
     Octane de Mexico, S. de R.L. de C.V. (PennMex) and Termatsal, S. de R.L. de
     C.V. (Termatsal) and its consolidated affiliate, Tergas, S. de R.L. de C.V.
     (Tergas).  All  significant  intercompany  accounts  and  transactions  are
     eliminated.

     The unaudited consolidated balance sheet as of June 30, 2005, the unaudited
     consolidated  statements  of  operations for the three and six months ended
     June  30,  2004  and  2005 and the unaudited consolidated statement of cash
     flows  for  the six months ended June 30, 2004 and 2005, have been prepared
     by  Rio  Vista  without  audit. In the opinion of management, the unaudited
     consolidated  financial  statements  include all adjustments (which include
     only  normal  recurring  adjustments)  necessary  to  present  fairly  the
     unaudited consolidated financial position of Rio Vista as of June 30, 2005,
     the  unaudited  consolidated results of operations for the three months and
     six  months  ended  June  30,  2004 and 2005 and the unaudited consolidated
     statement  of  cash  flows for the six months ended June 30, 2004 and 2005.
     Rio  Vista  was inactive until September 30, 2004, the date of the Spin-Off
     and  operations  did not commence until October 1, 2004. Accordingly, there
     are  no  results of operations during the three months and six months ended
     June  30,  2004.

     Certain  information  and  footnote  disclosures  normally  included  in
     consolidated  financial  statements  prepared in accordance with accounting
     principles  generally  accepted  in  the United States of America have been
     omitted.  These  unaudited consolidated financial statements should be read
     in conjunction with the Rio Vista's Annual Report on Form 10-K for the year
     ended  December 31, 2004 filed with the Securities and Exchange Commission.


NOTE B - UNIT BASED COMPENSATION

     Under  the guidance provided by SFAS 123, Rio Vista has elected to continue
     to  account  for employee unit-based compensation using the intrinsic value
     method  prescribed in Accounting Principles Board (APB) 25, "Accounting for
     Stock  Issued  to  Employees",  and  related  Interpretations.


                                       10
<PAGE>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE B - UNIT BASED COMPENSATION - CONTINUED

     Had  compensation  cost  related  to the warrants granted to employees been
     determined  based on the fair value at the grant dates, consistent with the
     provisions  of  SFAS  123, Rio Vista's pro forma net income (loss), and net
     income  (loss)  per  common  unit  would have been as follows for the three
     months  and  six  months  ended  June  30,:

<TABLE>
<CAPTION>
                                          Three Months Ended  Six Months Ended
                                           -----------------  -----------------
                                           2004      2005     2004      2005
                                           -----  ----------  -----  ----------
<S>                                        <C>    <C>         <C>    <C>
Net income (loss) as reported              $   -  $(728,000)  $   -  $(555,000)

Add:  Unit-based employee compensation
expense included in reported net loss          -          -       -          -

Less:  Total unit-based employee
compensation expense determined under
fair value based method for all awards         -    (12,000)      -   (297,000)
                                           -----  ----------  -----  ----------
Net income (loss) pro forma                    -   (740,000)      -   (852,000)

Net income (loss) allocable to the common
units pro forma                                -   (725,000)      -   (835,000)

Net income (loss) per common unit, as
reported                                       -      (0.37)      -      (0.28)

Net income (loss) per common unit, pro
forma                                          -      (0.38)      -      (0.44)

Net income (loss) per common unit
assuming dilution, as reported                 -      (0.37)      -      (0.28)

Net income (loss) per common unit
assuming dilution, pro forma                   -      (0.38)      -      (0.44)
</TABLE>


     The  following assumptions were used for grants of warrants to employees in
     the  six  months  ended  June  30,  2005,  to compute the fair value of the
     warrants  using  the  Black-Scholes option-pricing model; dividend yield of
     7.7%;  expected  volatility of 48.4%; risk free interest rate of 3.05%; and
     expected  life  of  3  years.

     During  December  2004,  the  Financial  Accounting  Standards Board (FASB)
     issued  Statement  of  Financial Accounting Standard No. 123 (revised 2004)
     "Share-Based Payment" (SFAS 123R). SFAS 123R replaces SFAS 123, "Accounting
     for  Stock-Based  Compensation", and supercedes APB Opinion 25, "Accounting
     for  Stock  Issued to Employees" (APB 25). SFAS 123R requires that the cost
     of  share-based  payment  transactions  (including those with employees and
     non-employees)  be  recognized  in the financial statements as compensation
     cost.  That  cost  will  be  measured  based on the fair value of equity or
     liability instrument issued. SFAS 123R is effective for Rio Vista beginning
     January  1,  2006.  Rio Vista will apply the modified prospective method as
     provided  for  in  SFAS 123R, and therefore the financial statements of Rio
     Vista  for  interim  and  annual periods prior to the adoption of SFAS 123R
     will  not  reflect  any  restatements.


                                       11
<PAGE>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE C - INCOME (LOSS) PER COMMON UNIT

     Income (loss) per common unit is computed on the weighted average number of
     units  outstanding. During periods in which Rio Vista incurs losses, giving
     effect  to  common  unit  equivalents  is  not  presented  as  it  would be
     antidilutive.

     The  following tables present reconciliations from income (loss) per common
     unit to income (loss) per common unit assuming dilution (see note G for the
     warrants):

<TABLE>
<CAPTION>
                                                 For the three months ended June 30, 2005
                                                 -----------------------------------------
                                                 Income (Loss)      Shares       Per-Unit
                                                  (Numerator)    (Denominator)    Amount
                                                 --------------  -------------  ----------
<S>                                              <C>             <C>            <C>
Net income (loss) allocable to the common units  $    (713,000)

BASIC EPS
Net income (loss) allocable to the common units       (713,000)      1,910,656  $   (0.37)
                                                                                ==========
EFFECT OF DILUTIVE SECURITIES
Warrants                                                     -               -

DILUTED EPS
Net income (loss) allocable to the common units            N/A             N/A         N/A
</TABLE>

<TABLE>
<CAPTION>
                                                  For the six months ended June 30, 2005
                                                 -----------------------------------------
                                                 Income (Loss)      Shares       Per-Unit
                                                  (Numerator)    (Denominator)    Amount
                                                 --------------  -------------  ----------
<S>                                              <C>             <C>            <C>
Net income (loss) allocable to the common units  $    (544,000)

BASIC EPS
Net income (loss) allocable to the common units       (544,000)      1,910,656  $   (0.28)
                                                                                ==========
EFFECT OF DILUTIVE SECURITIES
Warrants                                                     -               -

DILUTED EPS
Net income (loss) allocable to the common units            N/A             N/A         N/A
</TABLE>


                                       12
<PAGE>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE D - PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment consists of the following:

<TABLE>
<CAPTION>
                                                     December 31,    June 30,
                                                        2004           2005
                                                   --------------  ------------
<S>                                                <C>             <C>
Brownsville Terminal Facility
    Building                                       $     173,000   $   173,000
    Terminal facilities                                3,631,000     3,631,000
    Tank Farm                                            374,000       374,000
    Leasehold improvements                               319,000       319,000
    Equipment                                            226,000       226,000
    Truck                                                 26,000        26,000
                                                   --------------  ------------
                                                       4,749,000     4,749,000
                                                   --------------  ------------
US - Mexico Pipelines and Matamoros Terminal
Facility:  (a)

U.S. Pipelines and Rights of Way                       6,775,000     6,835,000
Mexico Pipelines and Rights of Way                       993,000       993,000
Matamoros Terminal Facility                            5,876,000     5,876,000
Land                                                     856,000       705,000
                                                   --------------  ------------
                                                      14,500,000    14,409,000
                                                   --------------  ------------
      Total                                           19,249,000    19,158,000
                                                   --------------  ------------


Less:  accumulated depreciation and amortization      (5,005,000)   (5,414,000)
                                                   --------------  ------------

                                                   $  14,244,000   $13,744,000
                                                   ==============  ============
</TABLE>


(a)  Rio  Vista  owns,  leases,  or  is  in the process of obtaining the land or
     rights  of  way  used  related  to  the  US-Mexico  Pipelines.


                                       13
<PAGE>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE D - PROPERTY, PLANT AND EQUIPMENT - CONTINUED

     Property,  plant  and  equipment, net of accumulated depreciation, includes
     $5,745,000  and $5,542,000 of costs, located in Mexico at December 31, 2004
     and  June  30,  2005,  respectively.


NOTE E - INVENTORIES

     Inventories  are  valued  at  the  lower  of  FIFO cost or market (LCM) and
     consist  of  the  following:

<TABLE>
<CAPTION>
                                        December 31, 2004    June 30, 2005
                                        -----------------  -----------------
                                        Gallons    LCM     Gallons    LCM
                                        -------  --------  -------  --------
<S>                                     <C>      <C>       <C>      <C>
     LPG:
       Brownsville Terminal Facility
       and Matamoros Terminal Facility  239,000  $198,000  239,000  $202,000
                                        =======  ========  =======  ========
</TABLE>


NOTE F - INCOME TAXES


     Rio  Vista is taxed as a Partnership under Code Section 701 of the Internal
     Revenue  Code.  All  of  Rio  Vista's income is taxed at the partner level,
     therefore,  Rio  Vista  has  no  U.S.  income tax expense or liability. Rio
     Vista's  Mexican  subsidiaries  incur income tax expense in Mexico on their
     taxable  income.  Mexican  income  tax expense for the three months and six
     months  ended  June  30,  2005  was  $25,000  and $26,000, respectively. No
     deferred  Mexican  income tax expense was recorded for the six months ended
     June  30,  2005.


NOTE G - PARTNERS' CAPITAL

     COMMON  UNITS
     -------------

     In  connection  with  the  Spin-Off on September 30, 2004, Rio Vista issued
     1,910,656  common  units  to  the  holders  of  Penn  Octane  common stock.

     The  common  units  represent  limited  partner interests in Rio Vista. The
     holders  of  common  units  are  entitled  to  participate  in  Rio Vista's
     distributions  and  exercise  the rights or privileges available to limited
     partners under the Agreement. The holders of common units have only limited
     voting  rights on matters affecting Rio Vista. Holders of common units have
     no right to elect the General Partner or its managers on an annual or other
     continuing  basis.  Penn Octane elects the managers of the General Partner.
     Although  the General Partner has a fiduciary duty to manage Rio Vista in a
     manner  beneficial  to  Rio  Vista and its unitholders, the managers of the
     General Partner also have a fiduciary duty to manage the General Partner in
     a  manner  beneficial  to  Penn  Octane  and  its stockholders. The General
     Partner generally may not be removed except upon the vote of the holders of
     at  least 80% of the outstanding common units; provided, however, if at any
     time  any  person  or  group,  other  than  the  General  Partner  and  its
     affiliates,  or a direct or subsequently approved transferee of the General
     Partner or its affiliates, acquires, in the aggregate, beneficial ownership
     of 20% or more of any class of units then outstanding, that person or group
     will  lose voting rights on all of its units and the units may not be voted
     on  any  matter  and  will not be considered to be outstanding when sending
     notices  of  a  meeting  of  unitholders,  calculating  required  votes,
     determining  the  presence  of  a  quorum  or  for  other similar purposes.


                                       14
<PAGE>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE G - PARTNERS' CAPITAL - CONTINUED

     In  addition,  the  partnership  agreement contains provisions limiting the
     ability  of  holders  of  common  units  to  call  meetings  or  to acquire
     information  about  Rio  Vista's  operations,  as  well as other provisions
     limiting  the  holders  of  common units ability to influence the manner or
     direction  of  management.

     GENERAL PARTNER INTEREST
     ------------------------

     The  General Partner of Rio Vista owns a 2% general partner interest in Rio
     Vista.  The  General  Partner  is currently 100% owned by Penn Octane. Penn
     Octane  has  granted  options  to Jerome B. Richter, former Chief Executive
     Officer  of  Penn  Octane,  and  to  Shore  Capital LLC (Shore Capital), an
     affiliate of Richard Shore, Jr., former President of Penn Octane and former
     Chief  Executive  Officer  of  the  General Partner, to purchase 50% of its
     general  partner  interest.  The options expire on July 10, 2006. Following
     the  exercise  of  any  of  these  options,  Penn Octane will retain voting
     control  of  the  General  Partner  pursuant  to  a  voting  agreement.

     The  General  Partner generally has unlimited liability for the obligations
     of  Rio  Vista, such as its debts and environmental liabilities, except for
     those  contractual obligations of Rio Vista that are expressly made without
     recourse  to  the  General  Partner.

     OPTIONS AND WARRANTS
     --------------------

     Rio  Vista has no U.S. employees and is managed by its General Partner. Rio
     Vista  applies APB 25 for warrants granted to employees and managers of the
     General  Partner  and  SFAS  123  for  warrants issued to acquire goods and
     services  from  non-employees.

     COMMON UNIT WARRANTS

     In  connection  with  an employment agreement with Mr. Shore, Shore Capital
     received  warrants  to  acquire  97,415  common  units of Rio Vista with an
     exercise  price  of  $8.47  per  common  unit. The warrants are exercisable
     beginning  on  October  1,  2004  and  expire  on  July  10,  2006.

     LOAN  DISCOUNT  ON  PENN  OCTANE  CORPORATION'S  DEBT RELATED TO DETACHABLE
     WARRANTS

     During  January  2004, in connection with $1,805,000 of debt obligations of
     Penn  Octane,  Penn  Octane agreed to issue, in the future, an aggregate of
     110,250  warrants  to purchase Rio Vista common units (Rio Vista Warrants).
     The exercise price of the warrants was to be determined based on the amount
     of  the  first quarterly distribution paid by Rio Vista. As a result of the
     approval  of  the payment of Rio Vista's first cash distribution on January
     14,  2005  (see  below),  Rio  Vista  granted  the  immediately exercisable
     warrants  having  an  exercise  price  of  $5.00 and recorded a discount of
     approximately  $422,000  which  is  reflected  as  interest expense ratably
     amortized from the grant date of January 14, 2005 to December 15, 2005, the
     maturity  date of the debt obligations. For the three months and six months
     ended  June  30,  2005  amortization  expense  was  $115,000  and $173,000,
     respectively.  The  Rio  Vista  Warrants  will expire on December 15, 2006.


                                       15
<PAGE>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE G - PARTNERS' CAPITAL - CONTINUED

     EQUITY INCENTIVE PLAN

     On March 9, 2005, the board of managers of the General Partner approved the
     Rio Vista 2005 Equity Incentive Plan (2005 Plan). The 2005 Plan permits the
     grant  of  common unit options, common unit appreciation rights, restricted
     common  unit  and  phantom  common  units  to any person who is an employee
     (including  to  any  executive  officer)  or consultant of Rio Vista or the
     General  Partner  or any affiliate of Rio Vista or the General Partner. The
     2005  Plan  provides that each outside manager of the General Partner shall
     be  granted  a  common  unit option once each fiscal year for not more than
     5,000  common  units,  in  an  equal  amount  as determined by the board of
     managers.  The  aggregate number of common units authorized for issuance as
     awards under the 2005 Plan is 750,000. The 2005 Plan shall remain available
     for  the  grant  of awards until March 9, 2015, or such earlier date as the
     board  of  managers  may  determine.  The  2005 Plan is administered by the
     compensation  committee  of  the  board of managers. Under the terms of the
     Agreement  and  applicable rules of the Nasdaq Stock Market, no approval by
     the  common  unitholders  of  Rio  Vista  was  required.

     On March 9, 2005, the board of managers of the General Partner approved the
     grant of options to purchase a total of 108,750 common units under the 2005
     Plan.  Of  the  total  number  of  options  granted, 93,750 were granted to
     executive  officers  of the General Partner and Mr. Richter and 15,000 were
     issued  to  outside managers of the General Partner. The exercise price for
     the options is $12.51 per common unit, which is the average of the high and
     low sales prices for Rio Vista common units as reported by the Nasdaq Stock
     Market  on  March  9,  2005.  The  options  granted  to  executive officers
     (including Mr. Richter) were fully vested on the date of grant. The options
     granted  to  outside  managers  vest  in  equal monthly installments over a
     period  of  12  months  from  the  date  of grant. All options become fully
     exercisable  upon a change in control event and expire three years from the
     date  of  grant.

     DISTRIBUTIONS OF AVAILABLE CASH
     -------------------------------

     All  unitholders  have the right to receive distributions from Rio Vista of
     "available cash" as defined in the partnership agreement in an amount equal
     to  the  minimum  distribution  of  $0.25  per  quarter  per unit, plus any
     arrearages  in  the  payment  of  the minimum quarterly distribution on the
     units  from  prior  quarters.  The  General Partner receives a distribution
     corresponding to its 2% General Partnership Interest. The distributions are
     to  be  paid  45  days after the end of each calendar quarter. However, Rio
     Vista  is  prohibited  from  making  any distributions to unitholders if it
     would  cause an event of default, or an event of default is existing, under
     any  obligation of Penn Octane which Rio Vista has guaranteed (see note H).

     Cash  distributions  from Rio Vista are shared by the holders of the common
     units  and  the  General  Partner  interest as described in the partnership
     agreement  based  on  a  formula  whereby  the  General  Partner  receives
     disproportionately  more  distributions  per  percentage  interest than the
     holders  of  the  common  units as annual cash distributions exceed certain
     milestones.

     On  both  February  14,  2005  and  May  13,  2005,  Rio  Vista made a cash
     distribution of $487,000. Rio Vista has not declared a distribution for the
     quarter  ended  June  30,  2005.


                                       16
<PAGE>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE H - COMMITMENTS AND CONTINGENCIES

     CREDIT FACILITY, LETTERS OF CREDIT AND OTHER

     Rio  Vista's LPG purchases are financed entirely by Penn Octane through its
     credit  facility  with  RZB  Finance,  LLC  (RZB).

     As of June 30, 2005, Penn Octane had a $20,000,000 credit facility with RZB
     for  demand  loans  and  standby letters of credit (RZB Credit Facility) to
     finance  Penn  Octane's purchases of LPG and gasoline and diesel fuel (Fuel
     Products)  in  connection  with  Penn Octane's fuel sales business. The RZB
     Credit  facility  is  an  uncommitted  facility  under which the letters of
     credit  have an expiration date of no more than 90 days and the facility is
     reviewed annually at March 31. As a result of the financing provided to Rio
     Vista  by  Penn  Octane,  Rio  Vista  has agreed to guarantee Penn Octane's
     obligations with respect to the RZB Credit Facility. In connection with Rio
     Vista's  guaranty, Rio Vista granted RZB a security interest and assignment
     in  any  and  all  of  Rio  Vista's  accounts,  inventory,  real  property,
     buildings,  pipelines,  fixtures and interests therein or relating thereto,
     including,  without  limitation,  the lease with the Brownsville Navigation
     District  of  Cameron  County for the land on which Rio Vista's Brownsville
     Terminal  Facility  is  located,  and  has  entered into leasehold deeds of
     trust,  security  agreements, financing statements and assignments of rent.
     Under  the  RZB  Credit  Facility,  Rio  Vista  may not permit to exist any
     subsequent  lien,  security interest, mortgage, charge or other encumbrance
     of  any  nature on any of its properties or assets, except in favor of RZB,
     without  the  consent  of RZB. In connection with the LPG Supply Agreement,
     Penn  Octane and Rio Vista have agreed to share the financing costs related
     to  Penn  Octane's  purchase  of  LPG  under  the  RZB  Credit  Facility.

     Under  the  RZB  Credit Facility, Penn Octane is required to pay a fee with
     respect  to  each  letter  of  credit  thereunder in an amount equal to the
     greater of (i) $500, (ii) 2.5% of the maximum face amount of such letter of
     credit  for  LPG  and  Fuel  Products  (effective  July  21, 2005, the Fuel
     Products  rate  was  reduced  to 2%), or (iii) such higher amount as may be
     agreed  to  between Penn Octane and RZB. Any loan amounts outstanding under
     the  RZB  Credit  Facility  accrue  interest  at  a  rate equal to the rate
     announced  by  the JPMorgan Chase Bank as its prime rate (6.25% at June 30,
     2005)  plus  2.5%.  Pursuant  to  the RZB Credit Facility, RZB has sole and
     absolute  discretion  to  limit  or  terminate its participation in the RZB
     Credit  Facility  at  any  time,  and  to  refrain from making any loans or
     issuing  any letters of credit thereunder. RZB also has the right to demand
     payment of any and all amounts outstanding under the RZB Credit Facility at
     any  time.

     Mr.  Richter had personally guaranteed all of Penn Octane's and Rio Vista's
     payment  obligations  with  respect to the RZB Credit Facility. On July 21,
     2005 in connection with the annual March 31, 2005 renewal of the RZB Credit
     Facility,  RZB  no  longer  required  Mr.  Richter's  personal  guarantee.

     Under the terms of the RZB Credit Facility, either Penn Octane or Rio Vista
     is  required  to  maintain  net  worth  of  a  minimum  of  $10,000,000.

     Under  the  terms of the RZB Credit Facility, all cash from Rio Vista's LPG
     sales  is  deposited  directly  into  a  restricted  cash account under the
     direction  of  RZB to pay down all obligations of Penn Octane arising under
     the  RZB Credit Facility. Accordingly, Rio Vista only receives net proceeds
     from the restricted cash account when the amounts of collateral provided by
     Penn  Octane and Rio Vista exceed all liabilities under outstanding letters
     of  credit  issued on behalf of Penn Octane, at the sole discretion of RZB.
     Historically RZB has not unduly withheld net proceeds from Penn Octane, and
     Rio  Vista  does not expect that RZB will unduly withhold net proceeds from
     Rio  Vista.  Upon  the release of Rio Vista's net proceeds from Rio Vista's
     restricted  cash  account,  Rio Vista is then required to pay any remaining
     amounts  due Penn Octane, if any, for the supply of LPG and other allocated
     or  direct  expenses.


                                       17
<PAGE>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE H - COMMITMENTS AND CONTINGENCIES - CONTINUED

     CONCENTRATIONS  OF  CREDIT  RISK

     Financial  instruments  that  potentially  subject Rio Vista to credit risk
     include  cash  balances  at banks which at times exceed the federal deposit
     insurance.

     TAX OBLIGATIONS OF PENN OCTANE RESULTING FROM THE SPIN-OFF

     Rio  Vista  has agreed to indemnify Penn Octane for a period of three years
     from  December  31,  2004  for any federal income tax liabilities resulting
     from  the  Spin-Off  in  excess of $2,500,000. Penn Octane does not believe
     that  it has a federal income tax in connection with the Spin-Off in excess
     of  $2,500,000. However, the Internal Revenue Service (IRS) may review Penn
     Octane's  federal  income  tax  returns and challenge positions that it may
     take  with  respect  to  the  Spin-Off.

     PARTNERSHIP  TAX  TREATMENT

     Rio  Vista  is  not  a taxable entity for U.S. tax purposes (see below) and
     incurs  no  U.S.  federal  income  tax  liability.  Rio  Vista's  Mexican
     subsidiaries  are taxed on their income directly by the Mexican government.
     The  income/loss  of  Rio  Vista's Mexican subsidiaries are included in the
     U.S.  partnership income tax return of Rio Vista. The holders of the common
     units  and General Partner interest will be entitled to their proportionate
     share  of  any  tax  credits  resulting  from  any income taxes paid to the
     Mexican  government.  Each unitholder of Rio Vista is required to take into
     account  that  unitholder's  share  of  items  of  income,  gain,  loss and
     deduction  of  Rio  Vista in computing that unitholder's federal income tax
     liability,  even if no cash distributions are made to the unitholder by Rio
     Vista. Distributions by Rio Vista to a unitholder are generally not taxable
     unless  the  amount  of  cash  distributed is in excess of the unitholder's
     adjusted  tax  basis  in  Rio  Vista.

     Section  7704  of  the  Internal Revenue Code (Code) provides that publicly
     traded  partnerships,  as a general rule, are taxed as corporations despite
     the fact that they are not classified as corporations under Section 7701 of
     the  Code.  Section  7704 of the Code provides an exception to this general
     rule  for  a publicly traded partnership if 90% or more of its gross income
     for  every  taxable year consists of "qualifying income" (Qualifying Income
     Exception).  For  purposes  of this exception, "qualifying income" includes
     income  and  gains  derived  from  the  exploration, development, mining or
     production,  processing,  refining, transportation (including pipelines) or
     marketing  of  any  mineral or natural resource. Other types of "qualifying
     income"  include interest (other than from a financial business or interest
     based  on  profits  of the borrower), dividends, real property rents, gains
     from  the  sale  of  real  property,  including  real  property held by one
     considered  to  be  a "dealer" in such property, and gains from the sale or
     other  disposition of capital assets held for the production of income that
     otherwise  constitutes  "qualifying  income".

     No  ruling  has been or will be sought from the IRS and the IRS has made no
     determination as to Rio Vista's classification as a partnership for federal
     income tax purposes or whether Rio Vista's operations generate a minimum of
     90%  of  "qualifying  income"  under  Section  7704  of  the  Code.

     If Rio Vista was classified as a corporation in any taxable year, either as
     a result of a failure to meet the Qualifying Income Exception or otherwise,
     Rio  Vista's  items  of income, gain, loss and deduction would be reflected
     only  on  Rio  Vista's  tax  return rather than being passed through to Rio
     Vista's unitholders, and Rio Vista's net income would be taxed at corporate
     rates.


                                       18
<PAGE>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE H - COMMITMENTS AND CONTINGENCIES - CONTINUED

     PARTNERSHIP TAX TREATMENT - CONTINUED

     If  Rio Vista was treated as a corporation for federal income tax purposes,
     Rio  Vista would pay tax on income at corporate rates, which is currently a
     maximum of 35%. Distributions to unitholders would generally be taxed again
     as  corporate  distributions,  and  no income, gains, losses, or deductions
     would  flow through to the unitholders. Because a tax would be imposed upon
     Rio  Vista  as  a  corporation,  the  cash  available  for  distribution to
     unitholders  would be substantially reduced and Rio Vista's ability to make
     minimum  quarterly distributions would be impaired. Consequently, treatment
     of  Rio  Vista as a corporation would result in a material reduction in the
     anticipated  cash  flow  and  after-tax return to unitholders and therefore
     would  likely result in a substantial reduction in the value of Rio Vista's
     common  units.

     Current  law  may  change  so  as  to  cause  Rio  Vista to be taxable as a
     corporation  for federal income tax purposes or otherwise subject Rio Vista
     to  entity-level taxation. The Agreement provides that, if a law is enacted
     or  existing  law  is  modified or interpreted in a manner that subject Rio
     Vista  to  taxation  as  a  corporation  or otherwise subjects Rio Vista to
     entity-level taxation for federal, state or local income tax purposes, then
     the  minimum  quarterly  distribution  amount  and  the target distribution
     amount  will  be adjusted downward to reflect the impact of that law on Rio
     Vista.

     OTHER

     Rio  Vista  and  its  subsidiaries  are  involved  with  other proceedings,
     lawsuits  and  claims.  Rio  Vista  believes  that the liabilities, if any,
     ultimately  resulting from such proceedings, lawsuits and claims should not
     materially  affect  its  consolidated financial statements. Pursuant to the
     Omnibus Agreement, Penn Octane has agreed to indemnify Rio Vista for claims
     related  to  the  Assets  arising  from  events  or conditions occurring or
     existing  before  completion  of  the  Spin-Off.

     LONG-TERM  DEBT

     Long-term  debt of Penn Octane guaranteed by Rio Vista and on which certain
     of its assets are pledged totaled $1,805,000 at June 30, 2005. This debt is
     due  on December 15, 2005. Interest is payable quarterly at a rate of 16.5%
     per  annum.  The payments due June 15, 2005 in the amounts of approximately
     $103,000  have  not  been  made  on  these  notes.

     GUARANTEES  AND  ASSETS  PLEDGED  ON  CERTAIN  OF PENN OCTANE'S OBLIGATIONS

     The  dollar amounts of Penn Octane's obligations which Rio Vista guarantees
     and/or for which Rio Vista's assets are pledged total $10.9 million at June
     30,  2005  based  on  Penn Octane's most recently filed Quarterly Report on
     Form  10-Q  and  the  unaudited  amounts  were  as  follows:

     LPG and fuel products trade accounts payable          $4,200,000
     Total debt, net of discount                           $1,700,000
     Lines of credit                                       $3,900,000
     Letters of credit in excess of LPG and fuel products
       trade accounts payable                              $1,100,000

     Consolidated  current  assets  of Penn Octane, which includes assets of Rio
     Vista,  pledged in favor of Penn Octane's credit facility and certain other
     debt  total  $26,600,000 at June 30, 2005 and the unaudited amounts were as
     follows:

     Accounts receivable                                  $ 6,500,000
     Restricted cash                                      $ 2,700,000
     Inventory                                            $ 2,000,000
     Property, plant and equipment, net                   $15,400,000


                                       19
<PAGE>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  H  -  COMMITMENTS  AND  CONTINGENCIES  -  CONTINUED

     GUARANTEES  AND  ASSETS  PLEDGED  ON CERTAIN OF PENN OCTANE'S OBLIGATIONS -
     CONTINUED

     Rio  Vista's  assets that are included in the above amounts are as follows:

     Accounts  receivable                                 $ 1,700,000
     Restricted  cash                                     $   900,000
     Inventory                                            $   200,000
     Property, plant and equipment, net                   $13,700,000


NOTE  I  -  CONTRACTS

     LPG SALES TO PMI

     During  December  2004,  Rio  Vista  and  PMI  entered  into  a three month
     agreement  for the period January 1, 2005 to March 31, 2005 for the minimum
     sale  of  11,700,000  gallons of LPG for the months of January and February
     2005  and  11,050,000 gallons of LPG for the month of March 2005 (Quarterly
     Agreement)  at  reduced  margins compared with those in effect during 2004.
     Actual  volumes  sold  were  12,700,000  gallons,  9,900,000  gallons  and
     9,600,000  gallons  for  January, February and March 2005, respectively. In
     April  2005,  Rio  Vista entered into a one month contract with PMI for the
     sale  of  a minimum of 10,450,000 gallons at a further reduction in margin.
     One May 5, 2005, Rio Vista entered into a contract with PMI for the sale of
     a minimum of 6,000,000 gallons of LPG for the period May 5, 2005 to May 31,
     2005  at  the  reduced margin received in April 2005. For the period May 1,
     2005  to  May  4, 2005, PMI did not purchase any LPG from Rio Vista. Actual
     volumes  of  LPG sold to PMI for April and May 2005 were 10,800,000 gallons
     and  6,100,000  gallons,  respectively.

     The  shortfall  for  the  month  of  February 2005 was attributable to Penn
     Octane  not  having a sufficient supply of LPG to meet the minimum contract
     volume.  The  shortfall for the month of March 2005 was attributable to PMI
     not  purchasing  the  minimum  contract  volume.  In  accordance  with  the
     Quarterly Agreement, PMI paid approximately $104,000 representing the total
     amount  due  associated  with  the  shortfall  volumes  for  March  2005.


                                       20
<PAGE>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE I - CONTRACTS - CONTINUED

     LPG SALES TO PMI - CONTINUED

     Effective  June  4,  2005, Rio Vista entered into an agreement with PMI for
     the period June 4, 2005 through March 31, 2006 for the purchase of LPG (PMI
     Agreement).  PMI did not purchase LPG from Rio Vista during the period June
     1 - June 3, 2005. The following table sets forth the minimum monthly volume
     of  LPG  that  PMI has committed to purchase from Rio Vista pursuant to the
     PMI  Agreement.

<TABLE>
<CAPTION>
                   Month       Minimum Volumes
               --------------  ---------------
                                  (gallons)
<S>                            <C>

               June 2005             3,500,000

               July 2005             3,500,000

               August 2005           3,500,000

               September 2005        5,700,000

               October 2005          8,100,000

               November 2005        11,700,000

               December 2005        11,700,000

               January 2006         11,700,000

               February 2006        11,700,000

               March 2006            8,100,000
</TABLE>

     Actual  volumes  of  LPG  sold to PMI for June and July 2005 were 3,500,000
     gallons  and  3,500,000  gallons,  respectively.

     Under  the terms of the PMI Agreement, the sale price of LPG will be at the
     same  margins  in  effect  during  April  and  May  2005.

     PMI  has  primarily  used  the  Matamoros  Terminal  Facility  to  load LPG
     purchased  from  Penn  Octane  prior  to  the  Spin-Off and from Rio Vista,
     subsequent  thereto,  for  distribution  by truck in Mexico. Rio Vista will
     continue  to  use  the Brownsville Terminal Facility in connection with LPG
     delivered  by  railcar  to  other  customers, storage and as an alternative
     terminal  in  the  event  the  Matamoros  Terminal Facility cannot be used.


                                       21
<PAGE>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE J - RELATED PARTY TRANSACTIONS

     The  General  Partner  has  a  legal  duty  to manage Rio Vista in a manner
     beneficial  to  Rio  Vista's  unitholders.  This  legal  duty originates in
     statutes  and  judicial  decisions  and  is  commonly  referred  to  as  a
     "fiduciary"  duty.  Because  the General Partner is currently owned by Penn
     Octane,  Penn  Octane's  officers  and managers of the General Partner also
     have  fiduciary  duties  to manage the business of the General Partner in a
     manner  beneficial  to  Penn  Octane  and  its  stockholders.

     The  partnership  agreement  limits the liability and reduces the fiduciary
     duties of the General Partner to the unitholders. The partnership agreement
     also restricts the remedies available to unitholders for actions that might
     otherwise  constitute  breaches  of  the  General Partner's fiduciary duty.

     Under  the  terms  of  the LPG Supply Agreement and Omnibus Agreement, Penn
     Octane  charged  Rio Vista $17,761,000 and $45,041,000 for the three months
     and  six  months  ended  June  30,  2005.


     INTERCOMPANY  PURCHASE  AGREEMENT  FOR  LPG

     Penn  Octane  entered into the LPG Supply Agreement with Rio Vista pursuant
     to  which  Rio Vista has agreed to purchase all of its LPG requirements for
     sales  which  utilize the assets transferred to Rio Vista by Penn Octane to
     the  extent  Penn  Octane  is able to supply such LPG requirements. The LPG
     Supply  Agreement  further  provides  that  Rio  Vista has no obligation to
     purchase LPG from Penn Octane to the extent the distribution of such LPG to
     Rio  Vista's  customers would not require the use of any of the assets Penn
     Octane  contributed to Rio Vista or Penn Octane ceases to have the right to
     access  the  Leased  Pipeline.

     Under the LPG Supply Agreement, Penn Octane supplies all of Rio Vista's LPG
     requirements  in  connection  with  its  LPG  sales obligations to PMI. The
     purchases  of the LPG are at fluctuating prices and are determined based on
     the  cost  of LPG under Penn Octane's agreements with its LPG suppliers for
     volumes  sold to Rio Vista for sale to PMI or to other Rio Vista customers,
     other  direct  costs  related to PMI and other LPG sales of Rio Vista and a
     formula  that  takes  into consideration operating costs of Penn Octane and
     Rio Vista. Rio Vista expects the aggregate costs per gallon to purchase LPG
     (less  any  applicable  adjustments) to be below the aggregate sales prices
     per  gallon  of  LPG  sold  to  PMI.

     Under  the  terms  of Penn Octane's Exxon Supply Contract, Penn Octane must
     provide letters of credit in amounts equal to the cost of the product to be
     purchased.  In addition, the cost of the product purchased is tied directly
     to overall market conditions. As a result, Penn Octane's existing letter of
     credit  facility  may  not  be  adequate  to  meet  the  letter  of  credit
     requirements  under  the  Exxon Supply Contract or other suppliers if there
     are increases in quantities of LPG purchased and/or to finance future price
     increases  of  LPG.

     The LPG Supply Agreement terminates on the earlier to occur of:

          -    Penn  Octane  ceases  to  have  the  right  to  access the Leased
               Pipeline  that  connects  to  Rio  Vista's  Brownsville  Terminal
               Facility;  and

          -    Rio  Vista ceases to sell LPG using any of the assets contributed
               by  Penn  Octane  to  Rio  Vista  pursuant  to  the  Spin-Off.


                                       22
<PAGE>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE J - RELATED PARTY TRANSACTIONS - CONTINUED

     OMNIBUS  AGREEMENT

     In  connection  with  the  Spin-Off,  Penn  Octane  entered into an Omnibus
     Agreement  with Rio Vista that governs, among other things, indemnification
     obligations among the parties to the agreement, related party transactions,
     the  provision  of  general  administration  and  support  services by Penn
     Octane.

     The  Omnibus  Agreement prohibits Rio Vista from entering into any material
     agreement  with  Penn  Octane  without  the prior approval of the conflicts
     committee  of the board of managers of the General Partner. For purposes of
     the  Omnibus  Agreement,  the  term material agreements means any agreement
     between  Rio  Vista and Penn Octane that requires aggregate annual payments
     in  excess  of  $100,000.

     The  Omnibus  Agreement may be amended by written agreement of the parties;
     provided,  however  that  it may not be amended without the approval of the
     conflicts  committee  of  the  General  Partner  if  such  amendment  would
     adversely affect the unitholders of Rio Vista. The Omnibus Agreement has an
     initial  term  of  five  years  that  automatically  renews  for successive
     five-year  terms  and,  other  than  the  indemnification  provisions, will
     terminate  if  Rio  Vista  is  no  longer  an  affiliate  of  Penn  Octane.


NOTE K - REALIZATION OF ASSETS

     The accompanying consolidated balance sheet has been prepared in conformity
     with  accounting  principles  generally  accepted  in  the United States of
     America,  which  contemplate  continuation of Rio Vista as a going concern.
     Rio  Vista  is  dependent  on  Penn  Octane's  ability  to deliver adequate
     quantities  of  LPG  at  an  acceptable  price for ultimate sale to PMI, to
     provide credit to Rio Vista for such purchases and to provide management of
     its operations. Currently, Rio Vista's only source of revenue is from sales
     of  LPG  to  PMI and it operates under a short-term sale agreement with PMI
     which  provides  for  monthly  volumes  which are materially less than Penn
     Octane's historical monthly volumes and margins. As a result, Penn Octane's
     and  Rio Vista's gross profit have been materially reduced and may continue
     to  decline and their cash flow and available credit may be insufficient to
     absorb  such  additional  reductions  in  gross  profit.

     Rio  Vista  has  guaranteed  certain  of  Penn  Octane's  obligations.
     Substantially  all  of  Rio Vista's and Penn Octane's assets are pledged or
     committed  to  be  pledged  as  collateral  on  $1,805,000 of Penn Octane's
     existing  debt  and  the RZB Credit Facility, and therefore, both Rio Vista
     and Penn Octane may be unable to obtain additional financing collateralized
     by  those  assets.  Penn  Octane's  Report  of Independent Certified Public
     Accountants on the consolidated financial statements of Penn Octane at July
     31,  2004  contains an explanatory paragraph which describes an uncertainty
     about  Penn  Octane's  ability  to  continue  as  a  going concern. If Penn
     Octane's  and  Rio  Vista's  cash  flows  are  not  adequate  to  pay their
     obligations,  Penn  Octane  and/or  Rio  Vista  may  be  required  to raise
     additional funds to avoid foreclosure by Penn Octane's creditors. There can
     be  no  assurance  that  such additional funding will be available on terms
     attractive  to  either  Penn  Octane  or  Rio Vista or available at all. If
     additional  amounts  cannot  be  raised  and  cash flow is inadequate, Penn
     Octane and/or Rio Vista would likely be required to seek other alternatives
     which  could  include  the  sale  of  assets,  closure of operations and/or
     protection  under  the  U.S.  bankruptcy  laws.


                                       23
<PAGE>
                 RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE K - REALIZATION OF ASSETS - CONTINUED

     In  view  of  the  matters  described  in  the  preceding  paragraphs,
     recoverability  of  the  recorded  asset  amounts shown in the accompanying
     unaudited  consolidated balance sheet is dependent upon the ability of Penn
     Octane  to continue as a going concern and continued sales of LPG to PMI at
     acceptable  volumes  and margins to provide sufficient cash flow to pay Rio
     Vista's  expenses and guarantees of Penn Octane's obligations assuming Penn
     Octane's  inability  to  pay  such  obligations. The unaudited consolidated
     balance  sheet  does  not  include  any  adjustments  related  to  the
     recoverability  and classification of recorded asset amounts or amounts and
     classification  of  liabilities that might be necessary should Rio Vista be
     unable  to  continue  in  existence.

     To  provide Rio Vista with the ability it believes necessary to continue in
     existence,  management  is  taking  steps  to  (i)  diversify  Rio  Vista's
     operations  to  reduce  dependency  on  sales  of LPG and (ii) sell its LPG
     assets.

NOTE L - SUBSEQUENT EVENT

     PURCHASE AND SALE AGREEMENT

     On  August  15,  2005, Penn Octane and Rio Vista each entered into separate
     purchase  and  sale agreements (PSA's) with TransMontaigne Product Services
     Inc.  (TransMontaigne)  which provide for the sale and assignment of all of
     their  respective  LPG  assets  and  refined  products assets including the
     Brownsville  LPG  and  refined products terminal facility and tank farm and
     associated  leases, owned pipelines located in the United States, including
     land,  leases,  and  rights of ways, LPG inventory, 100% of the outstanding
     stock  of  Mexican  subsidiaries and affiliate, which in turn own pipelines
     and  the Matamoros Terminal Facility, including land and rights of way, and
     assignment  of  the  Pipeline  Lease,  PMI sales agreement and Exxon Supply
     Contract  (LPG Asset Sale). The purchase price is $10,100,000 for assets to
     be  sold by Penn Octane and $17,400,000 for assets to be sold by Rio Vista.
     The  purchase  price  may  be  reduced  as  provided  for  in the PSA's. In
     connection  with  the  PSA's,  TransMontaigne  agreed  to  loan  Rio  Vista
     $1,300,000 which is to be repaid, including interest, as a reduction of the
     total purchase price at the time of closing or 120 days following demand by
     TransMontaigne.  The loan is to be secured by the tank farm and certain LPG
     storage  tanks  located at the Brownsville Terminal Facility and is subject
     to  the  consent  from  RZB and the issuance of an estoppel letter from the
     Brownsville Navigation District. Rio Vista intends to use the proceeds from
     the loan to fund certain expenses associated with the PSA's and for working
     capital  purposes.

     The  closing  of  the  LPG  Asset  Sale  is  subject to several conditions,
     including  TransMontaigne's  satisfactory  completion  of its due diligence
     review,  including  financial  ,  business,  environmental  and  legal, the
     approval  of  Penn  Octane's  stockholders  and  Rio  Vista's unit holders,
     assignment  of  LPG  related contracts, and the modification of LPG related
     permits  and  the  related Mexican governmental approvals. The PSA's may be
     terminated  by any party if the closing does not occur by October 31, 2005.

     If the LPG Asset Sale is completed, Penn Octane intends to use a portion of
     its  proceeds  to  pay  off  the Restructured Notes and $280,000 Notes plus
     accrued  interest.  In  addition,  Penn Octane estimates that it may have a
     federal  tax  liability  in  connection  with  the  sale of its assets. The
     remaining proceeds will be available to Penn Octane to fund working capital
     requirements and to pursue activities which will enhance stockholder value.
     Penn Octane intends to continue to operate its Fuel Sales Business.

     Penn  Octane intends to file a proxy statement with the Securities Exchange
     Commission  (SEC) in connection with the requirement to obtain approval for
     the  LPG  Asset  Sale  from  Penn  Octane's  stockholders.

     If  the  LPG Asset Sale is completed, Rio Vista intends to use its proceeds
     to fund working capital requirements, pursue acquisitions and to resume the
     minimum  quarterly  distributions  to  its  unitholders  and  to  pay  all
     arrearages.  Rio  Vista  intends  to  pursue  acquisitions  which  produce
     "qualifying  income".

     Rio Vista intends to file a proxy statement with the SEC in connection with
     the  requirement to obtain approval for the LPG Asset Sale from Rio Vista's
     unitholders.  Rio  Vista's  proxy statement will also contain a proposal to
     amend the provision in its partnership agreement which requires dissolution
     upon  a  sale  of  all  or  substantially  all  of  its  assets.


                                       24
<PAGE>
ITEM  2.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL CONDITION AND
RESULTS  OF  OPERATIONS

     The  following  discussion  of  Rio Vista's liquidity and capital resources
should  be  read  in  conjunction  with  the  unaudited  consolidated  financial
statements  of  Rio  Vista and related notes thereto appearing elsewhere herein.
References  to  specific  years preceded by "fiscal" (e.g. fiscal 2005) refer to
Rio  Vista's  fiscal  year  ending  December  31.

FORWARD-LOOKING  STATEMENTS

     The  statements  contained in this Quarterly Report that are not historical
facts  are  forward-looking  statements within the meaning of Section 27A of the
Securities  Act  of 1933 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements may be identified by the use of forward-looking
terms such as "believes," "expects," "may," "will", "should" or "anticipates" or
by  discussions  of  strategy  that  inherently involve risks and uncertainties.
From  time  to  time, Rio Vista has made or may make forward-looking statements,
orally  or  in  writing.  These  forward-looking  statements  include statements
regarding  anticipated  future  revenues,  sales,  LPG  supply,  LPG  pricing,
operations,  demand,  potential acquisitions, competition, capital expenditures,
future acquisitions, additional financing, the deregulation of the LPG market in
Mexico,  the  operations  of  the  US  -  Mexico  Pipelines, the Brownsville and
Matamoros Terminal Facilities, other upgrades to Rio Vista's facilities, foreign
ownership  of  LPG  operations,  short-term obligations and credit arrangements,
guarantees, cash distributions, Qualifying Income, Penn Octane, the Spin-Off and
other  statements  regarding  matters that are not historical facts, and involve
predictions  which  are based upon a number of future conditions that ultimately
may  prove  to be inaccurate.  Actual results, performance or achievements could
differ  materially  from  the  results  expressed  in,  or  implied  by,  these
forward-looking  statements.  Factors  that  may  cause  or  contribute  to such
differences  include  those  discussed  in  Rio  Vista's  Form 10 filed with the
Securities  and  Exchange  Commission,  those discussed under "Risk Factors" and
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations,"  in  Rio  Vista's  Annual  Report  on  Form 10-K for the year ended
December  31,  2004,  Rio  Vista's  Registration Statement on Form 10 as well as
those  discussed  elsewhere  in  this  Quarterly  Report.  These factors may not
include  all  material  risks  facing  Rio  Vista.

RIO  VISTA  ENERGY  PARTNERS  L.P.  AND  ITS  CONSOLIDATED  SUBSIDIARIES  ARE
COLLECTIVELY  HEREINAFTER  REFERRED  TO  AS  "RIO  VISTA".

PURCHASE  AND  SALE  AGREEMENTS.

     On  August  15,  2005, Penn Octane and Rio Vista each entered into separate
purchase  and sale agreements (the "PSA's") with TransMontaigne Product Services
Inc.  ("TransMontaigne")  which  provide  for  the sale and assignment of all of
their  respective  LPG  assets  and  refined  products  assets  including  the
Brownsville  LPG  and  refined  products  terminal  facility  and  tank farm and
associated leases, owned pipelines located in the United States, including land,
leases,  and  rights  of  ways,  LPG inventory, 100% of the outstanding stock of
Mexican  subsidiaries  and  affiliate,  which  in  turn  own  pipelines  and the
Matamoros Terminal Facility, including land and rights of way, and assignment of
the  Pipeline  Lease,  PMI  sales  agreement and Exxon Supply Contract (the "LPG
Asset Sale").  The purchase price is $10.1 million for assets to be sold by Penn
Octane and $17.4 million for assets to be sold by Rio Vista.  The purchase price
may  be  reduced  as  provided  for in the PSA's.  In connection with the PSA's,
TransMontaigne  agreed  to  loan  Rio  Vista $1.3 million which is to be repaid,
including  interest,  as  a reduction of the total purchase price at the time of
closing  or  120  days  following  demand  by TransMontaigne.  The loan is to be
secured  by  the  tank  farm  and  certain  LPG  storage  tanks  located  at the
Brownsville  Terminal  Facility  and  is subject to the consent from RZB and the
issuance  of  an  estoppel letter from the Brownsville Navigation District.  Rio
Vista  intends  to  use  the  proceeds  from  the  loan to fund certain expenses
associated  with  the  PSA's  and  for  working  capital  purposes.

     The  closing  of  the  LPG  Asset  Sale  is  subject to several conditions,
including  TransMontaigne's satisfactory completion of its due diligence review,
including  financial  ,  business, environmental and legal, the approval of Penn
Octane's  stockholders  and  Rio Vista's unit holders, assignment of LPG related
contracts,  and  the modification of LPG related permits and the related Mexican
governmental approvals.  The PSA's may be terminated by any party if the closing
does  not  occur  by  October  31,  2005.


                                       25
<PAGE>
     If the LPG Asset Sale is completed, Penn Octane intends to use a portion of
its  proceeds  to pay off the Restructured Notes and $280,000 Notes plus accrued
interest.  In  addition,  Penn  Octane  estimates that it may have a federal tax
liability in connection with the sale of its assets. The remaining proceeds will
be  available  to Penn Octane to fund working capital requirements and to pursue
activities which will enhance stockholder value. Penn Octane intends to continue
to  operate  its  Fuel  Sales  Business.

     Penn  Octane intends to file a proxy statement with the Securities Exchange
Commission (the "SEC") in connection with the requirement to obtain approval for
the  LPG  Asset  Sale  from  Penn  Octane's  stockholders.

     If  the  LPG Asset Sale is completed, Rio Vista intends to use its proceeds
to  fund  working  capital  requirements,  pursue acquisitions and to resume the
minimum  quarterly  distributions  to its unitholders and to pay all arrearages.
Rio  Vista  intends  to  pursue  acquisitions which produce "qualifying income".

     Rio Vista intends to file a proxy statement with the SEC in connection with
the  requirement  to  obtain  approval  for  the LPG Asset Sale from Rio Vista's
unitholders.  Rio  Vista's proxy statement will also contain a proposal to amend
the  provision  in  its  partnership agreement which requires dissolution upon a
sale  of  all  or  substantially  all  of  its  assets.

     The  following  discusses  Rio Vista's existing risk factors, its business,
its  results of operations and its liquidity and capital resources assuming that
the  sale  of  the  assets  discussed  above is not consummated as contemplated.

RISK  FACTORS

     Business  Factors. Beginning with the expiration of the liquefied petroleum
gas  ("LPG")  sales contract between Penn Octane Corporation ("Penn Octane') and
P.M.I.  Trading  Limited ("PMI") effective March 31, 2004 and continuing through
the  contract  recently entered into between Rio Vista and PMI effective June 4,
2005 (the "PMI Agreement"), Penn Octane and Rio Vista have experienced lower LPG
sales  volumes  and  margins  since  April  1,  2004 between Penn Octane and PMI
through  the date of the Spin-Off and Rio Vista and PMI after the Spin-off which
have  adversely  affected  Rio Vista's results of operations. Rio Vista has only
one  customer for LPG in Mexico, PMI. There is no assurance that upon expiration
of the PMI Agreement that PMI will continue to purchase LPG from Rio Vista or in
quantities  or  at  prices  that  are  profitable. There are a limited number of
suppliers  of  LPG that connect to Rio Vista's pipelines and a limited supply of
LPG.  Rio  Vista  may lose its competitive advantage when Penn Octane's Seadrift
pipeline  lease expires in 2013. Rio Vista may be unable to successfully develop
additional  sources  of  revenue  in  order to reduce its dependence on PMI. Rio
Vista  may  not have sufficient cash to meet its obligations. All of Rio Vista's
assets are pledged as collateral for existing debt of Penn Octane, and Rio Vista
therefore  may  be  unable to obtain additional financing collateralized by such
assets.  Rio Vista is at risk of economic loss due to fixed margin contracts. If
Rio  Vista  cannot  develop  sufficient  capital  resources  for acquisitions or
opportunities  for  expansion,  Rio  Vista's  growth  will  be  limited.  Future
acquisitions  and  expansions  may not be successful, may substantially increase
Rio  Vista's indebtedness and contingent liabilities, and may create integration
difficulties.  Rio Vista's business would be adversely affected if operations at
its  transportation,  terminal and distribution facilities were interrupted. Rio
Vista's  business  would  also  be  adversely  affected if the operations of Rio
Vista's  customers  and  suppliers  (including  Penn  Octane)  were interrupted.

     Competitive  Factors.  The energy industry is highly competitive.  There is
competition  within  the  industries and also with other industries in supplying
the  energy  and fuel needs of the industry and individual consumers.  Rio Vista
competes  with  other companies including Valero, L.P. ("Valero") in the sale or
purchase  of LPG as well as the transportation of these products in the U.S. and
Mexican  markets  and  employs  all  methods of competition which are lawful and
appropriate  for  such  purposes.  A  key  component  of Rio Vista's competitive
position, particularly given the commodity-based nature of many of its products,
is  its  ability  to manage its expenses successfully, which requires continuous
management focus on reducing unit costs and improving efficiency and its ability
to secure unique opportunities for the purchase, sale and/or delivery methods of
its  products.

     International  Factors.  Mexican  economic, political and social conditions
may  change  and  adversely affect Rio Vista's operations.  Rio Vista may not be
able to continue operations in Mexico if Mexico restricts the existing ownership
structure  of  its  Mexican  operations,  requiring  Rio  Vista  to increase its
reliance on Mexican nationals to conduct its business.  The LPG market in Mexico
has  yet  to be deregulated.  If deregulation ocurrs, the results may hinder Rio
Vista's ability to negotiate acceptable contracts with distributors.


                                       26
<PAGE>
     Political  Factors.  The  operations and earnings of Rio Vista  in the U.S.
and  Mexico  have  been, and may in the future be, affected from time to time in
varying  degree by political instability and by other political developments and
laws  and  regulations,  such  as  forced divestiture of assets; restrictions on
production,  imports  and  exports;  war or other international conflicts; civil
unrest  and  local  security  concerns  that  threaten the safe operation of Rio
Vista's  facilities;  price  controls; tax increases and retroactive tax claims;
expropriation  of  property;  cancellation of contract rights; and environmental
regulations.  Both  the  likelihood of such occurrences and their overall effect
upon  Rio  Vista  vary  greatly  and  are  not  predictable.

     Industry  and  Economic  Factors.  The operations and earnings of Rio Vista
throughout the U.S. and Mexico are affected by local, regional and global events
or  conditions  that  affect  supply  and demand for Rio Vista's products. These
events  or  conditions  are  generally  not predictable and include, among other
things, general economic growth rates and the occurrence of economic recessions;
the  development  of  new  supply  sources for its products; supply disruptions;
weather,  including  seasonal  patterns  that  affect  energy  demand and severe
weather  events  that  can disrupt operations; technological advances, including
advances  in  exploration,  production,  refining  and  advances  in  technology
relating  to  energy usage; changes in demographics, including population growth
rates  and  consumer  preferences;  and  the  competitiveness  of  alternative
hydrocarbon  or  other  energy  sources  or  product  substitutes.

     Acquisition  Factors.  In  additional  to  the  factors  cited  above,  the
advancement,  cost  and  results of particular acquisitions sought by Rio Vista,
including  acquisitions  which  do not specifically fall within the areas of Rio
Vista's  current lines of businesses will depend on: the outcome of negotiations
for  such acquisitions; the ability of the Rio Vista's management to manage such
acquisitions;  the  ability  of  Rio  Vista  to  obtain  financing  for  such
acquisitions;  business  integration  issues; changes in operating conditions or
costs;  and  the  occurrence  of  unforeseen  technical  difficulties.

     Market  Risk  Factors.  See  "Notes  to Consolidated Financial Statements,"
"Management's  Discussion  and  Analysis  of  Financial Condition and Results of
Operations"  and "Quantitative and Qualitative Disclosures About Market Risk" in
this  report  for  discussion of the impact of market risks, inflation and other
uncertainties.

     Internal  Control  Factors.   Pursuant to Section 404 of the Sarbanes Oxley
Act  of  2002,  beginning  with  the  year  ended December 31, 2006, Rio Vista's
management  will  be  required  to complete an annual evaluation of its internal
control  systems.  In addition, Rio Vista's independent auditors are required to
provide  an  opinion  regarding  such evaluation and the adequacy of Rio Vista's
internal  accounting controls.  Rio Vista's internal controls may be found to be
inadequate,  deficiencies  or  weaknesses may be discovered, and remediation may
not  be  successful.  As  Rio Vista grows, Rio Vista will need to strengthen its
internal  control  systems.  If  Rio  Vista  acquires  an existing business, the
internal  control  systems  of  the  acquired business may be inadequate and may
require  additional  strengthening.

     Projections.  Projections,  estimates and descriptions of Rio Vista's plans
and  objectives  included  herein are forward-looking statements.  Actual future
results  could  differ  materially  due  to,  among  other  things,  the factors
discussed  above  and  elsewhere  in  this  report.

OVERVIEW

     Rio  Vista  Energy  Partners  L.P.  ("Rio  Vista"),  a  Delaware  limited
partnership,  was  formed by Penn Octane Corporation ("Penn Octane") on July 10,
2003  and was a wholly owned subsidiary of Penn Octane until September 30, 2004,
the  date  that Penn Octane completed a series of transactions involving (i) the
transfer  of  substantially  all  of  its  owned pipeline and terminal assets in
Brownsville, Texas and Matamoros, Mexico and certain immaterial liabilities (the
"Assets")  to Rio Vista Operating Partnership L.P. ("RVOP") (ii) the transfer of
its 99.9% interest in RVOP to Rio Vista and (iii) the distribution of all of its
limited  partnership  interests  (the "Common Units") in Rio Vista to its common
stockholders (the "Spin-Off"), resulting in Rio Vista becoming a separate public
company.  The  Common  Units  represented 98% of Rio Vista's outstanding capital
and  100% of Rio Vista's limited partnership interests.  The remaining 2%, which
is  the  general  partner  interest, is owned and controlled by Rio Vista GP LLC
(the  "General Partner"), a wholly owned subsidiary of Penn Octane.  The General
Partner  is  responsible  for  the  management  of  Rio Vista.  Rio Vista Energy
Partners  L.P.  and  its  consolidated subsidiaries are collectively hereinafter
referred  to  as  "Rio  Vista".


                                       27
<PAGE>
     As  a  result  of  the  Spin-Off,  Rio  Vista  is  engaged in the purchase,
transportation  and  sale  of liquefied petroleum gas ("LPG").    Rio Vista owns
and  operates  terminal  facilities  in  Brownsville,  Texas  (the  "Brownsville
Terminal  Facility")  and  in  Matamoros,  Tamaulipas,  Mexico  (the  "Matamoros
Terminal  Facility")  and  approximately 23 miles of pipelines (the "US - Mexico
Pipelines")  which  connect  the  Brownsville Terminal Facility to the Matamoros
Terminal  Facility.  The  primary market for Rio Vista's LPG is the northeastern
region  of  Mexico,  which  includes  the  states  of  Coahuila,  Nuevo Leon and
Tamaulipas.

     Rio  Vista believes it has a competitive advantage in the supply of LPG for
the  northeastern  region of Mexico because of Rio Vista's pipeline and terminal
facilities  and  its long term LPG supply agreement with Penn Octane which allow
Rio  Vista to bring supplies of LPG close to consumers of LPG in major cities in
that  region  at  competitive  prices.  Rio  Vista's primary customer for LPG is
P.M.I. Trading Limited ("PMI").  PMI is a subsidiary of Petroleos Mexicanos, the
state-owned  Mexican  oil  company,  which  is  commonly known by its trade name
"PEMEX."  PMI  is  the exclusive importer of LPG into Mexico.  PMI sells the LPG
purchased  from  Rio  Vista  to  PEMEX  which  distributes  the  LPG  into  the
northeastern  region  of  Mexico.

     All  of  Rio  Vista's LPG operations are conducted through, and Rio Vista's
LPG  operating  assets  are  owned  by, RVOP. The General Partner is entitled to
receive  distributions  on  its  general partner interest as provided for in Rio
Vista's  partnership  agreement. The General Partner has sole responsibility for
conducting  Rio  Vista's  business  and  for  managing Rio Vista's operations in
accordance  with  the  partnership  agreement.  Other  than  the  foregoing
distributions,  the  General  Partner does not receive a management fee or other
compensation  in  connection with its management of Rio Vista's business, but is
entitled  to  be reimbursed for all direct and indirect expenses incurred on Rio
Vista's  behalf.

     Rio Vista purchases LPG from Penn Octane under a long-term supply agreement
(the "LPG Supply Agreement").  The purchase price of the LPG from Penn Octane is
determined  based on the cost of LPG under Penn Octane's agreements with its LPG
suppliers  for  volumes  sold to Rio Vista for sale to PMI or to other Rio Vista
customers,  other  direct  costs related to PMI and other LPG sales of Rio Vista
and  a  formula that takes into consideration operating costs of Penn Octane and
Rio  Vista.

     Rio  Vista  provides  products  and  services  through  a  combination  of
fixed-margin  and  fixed-price  contracts. Costs included in cost of goods sold,
other  than  the  purchase  price  of LPG, may affect actual profits from sales,
including  costs  relating  to  transportation, storage, leases and maintenance.

     Historically,  up  until the date of the Spin-Off, Penn Octane has sold LPG
primarily  to  PMI.  Penn  Octane  has  a long-term lease agreement, expiring in
December 2013, for approximately 132 miles of pipeline which connects ExxonMobil
Corporation's  ("Exxon")  King Ranch Gas Plant in Kleberg County, Texas and Duke
Energy's  La  Gloria  Gas  Plant  in  Jim  Wells  County,  Texas, to Rio Vista's
Brownsville  Terminal  Facility  (the  "Leased  Pipeline").  In  addition at the
discretion  of  Exxon,  Penn  Octane  has access to a twelve-inch pipeline which
connects Exxon's Viola valve station in Nueces County, Texas to the inlet of the
King  Ranch  Gas  Plant  (the  "ECCPL"), as well as existing and other potential
propane  pipeline  suppliers  which  have  the  ability to access the ECCPL.  In
connection  with  Penn  Octane's  lease  agreement for the Leased Pipeline, Penn
Octane has access to storage in Markham, Texas (the "Markham Storage") which has
a  capacity  of  up to approximately 21.0 million gallons of storage, as well as
other  potential  propane  pipeline  suppliers,  via  approximately 155 miles of
pipeline  located  between  Markham,  Texas  and the Exxon King Ranch Gas Plant.
Penn  Octane's  long  term  supply  agreement in effect as of June 30, 2005 with
Exxon  requires Penn Octane to purchase minimum quantities of LPG totaling up to
13.9  million gallons of LPG per month although actual quantities supplied under
such agreements during the six months ended June 30, 2005 were approximately 9.1
million  gallons  per  month.


                                       28
<PAGE>
LPG  SALES

     The following table shows Rio Vista's actual volumes sold to PMI in gallons
and  average sales price for the six months ended June 30, 2005 and actual sales
to  PMI  by  Penn  Octane  in gallons and average sales price for the six months
ended  June  30,  2004.

                                                                  2004    2005
                                                                -------  -------
Volume  Sold

     LPG (millions of gallons) - PMI                              97.7      52.7

Average sales price

     LPG (per gallon) - PMI                                    $  0.75   $  0.89


     RECENT  TRENDS.  Since  April 2004, PMI had contracted with Penn Octane and
Rio  Vista  (subsequent  to  the  Spin-Off) for volumes which were significantly
lower  than  amounts purchased by PMI from Penn Octane in similar periods during
previous  years  and  beginning April 2005 margins have been significantly lower
than  historical  levels.  See  Liquidity  and  Capital Resources - Sales to PMI
below.  Rio  Vista  believes that the reduction of volume commitments or margins
for April 2004 through March 2006 is based on additional LPG production by PEMEX
being  generated  from the Burgos Basin field in Reynosa, Mexico, an area within
the  proximity  of  Rio  Vista's  Matamoros  Terminal  Facility  and  increased
competition from U.S. suppliers (see below).  Although Rio Vista is not aware of
the  total amount of LPG actually being produced by PEMEX from the Burgos Basin,
it  is  aware  that  PEMEX  has  constructed  and is operating two new cryogenic
facilities  at  the  Burgos  Basin  which  it  believes  may  have a capacity of
producing  up  to  12 million gallons of LPG per month.  Rio Vista also believes
that  PEMEX intends to install two additional cryogenic facilities, with similar
capacity,  to be operational in 2006.  Rio Vista is not aware of the capacity at
which  the  current  cryogenic  facilities are being operated.  Furthermore, Rio
Vista  is  not  aware  of the actual gas reserves of the Burgos Basin or the gas
quality,  each  of  which  could  significantly  impact  LPG production amounts.

     During  June  2004,  Valero  began  operation  of  a  newly constructed LPG
terminal  facility  in  Nuevo  Laredo,  Mexico  and a newly constructed pipeline
connecting  the  terminal facility in Nuevo Laredo, Mexico to existing pipelines
in  Juarez,  Texas  which connect directly to Valero Energy Corporation's Corpus
Christi, Texas and Three Rivers, Texas refineries.  Valero originally contracted
with  PMI  under  a  five  year  agreement  to deliver approximately 6.3 million
gallons  (of  which  3.2 million gallons were previously delivered by truck from
Three  Rivers, Texas) of LPG per month.  During July 2005, Valero announced that
it  had  entered  into  a  new  agreement with PMI which provides for double the
amount  of  LPG  previously  contracted  for  with  PMI.

     During  2004, a pipeline operated by El Paso Energy between Corpus Christi,
Texas  and  Hidalgo County, Texas was closed.  Historically these facilities had
supplied  approximately  5.0  million  gallons  of  LPG per month to Rio Vista's
strategic  zone.  Rio  Vista  is  not  aware  of  any  future  plans  for  these
facilities.

     During  2003,  PMI  constructed  and began operations of a refined products
cross  border  pipeline  connecting  a  pipeline  running from PEMEX's Cadereyta
Refinery  in  Monterey, Mexico to terminal facilities operated by TransMontaigne
in  Brownsville,  Texas.  The  pipeline  crosses the U.S.-Mexico border near the
proximity  of  Rio  Vista's  U.S.  -  Mexico  Pipelines.  In connection with the
construction  of  the  pipeline,  PMI utilizes an easement from Rio Vista for an
approximate  21.67  acre  portion  of  the  pipeline.  Under  the  terms  of the
easement,  PMI  has warranted that it will not transport LPG through October 15,
2017.


                                       29
<PAGE>
RESULTS  OF  OPERATIONS

     THREE  MONTHS  ENDED JUNE 30, 2005 COMPARED WITH PENN OCTANE'S SALES TO PMI
FOR  THE  THREE  MONTHS  ENDED  JUNE  30,  2004.

     Revenues.  Revenues  for  the  three months ended June 30, 2005, were $18.3
million compared with $30.2 million for the comparative period one year earlier,
a  decrease  of  $11.9  million  or  39.3%.  Of this decrease, $17.9 million was
attributable  to  decreased  volumes  of LPG sold to PMI during the three months
ended  June 30, 2005, partially offset by $6.0 million attributable to increases
in  average  sales  prices of LPG sold to PMI during the three months ended June
30,  2005.

     Cost of goods sold.  Cost of goods sold for the three months ended June 30,
2005  was  $17.8  million.  The  cost  of goods sold for LPG purchased from Penn
Octane  was  determined  in  accordance with the LPG Supply Agreement.  Costs of
goods  sold  also  included  other  direct  costs  related  to  Rio  Vista's LPG
operations,  including  costs  associated  with  operating  the  Brownsville and
Matamoros  terminal  facilities.

     Selling,  general  and  administrative  expenses.  Selling,  general  and
administrative  expenses  were  $1.1 million for the three months ended June 30,
2005.  These  costs were comprised of indirect selling general expenses directly
incurred  by  Rio  Vista  or allocated by Penn Octane to Rio Vista in accordance
with  the Omnibus Agreement.  Salary related costs allocated by Penn Octane were
based  on  the  percentage of time spent by those employees (including executive
officers) in performing Rio Vista related matters compared with the overall time
spent  working  by  those  employees.

     Other  income  (expense).  Other  income  (expense)  was $(155,000) for the
three  months ended June 30, 2005 and is comprised of interest expense allocated
to  Rio  Vista  by  Penn  Octane  in connection with the RZB Credit Facility and
amortization  of  loan  discount  related  to  detachable  warrants.

     Mexican  Income  tax.   Rio  Vista  incurred  $25,000 of Mexican income tax
expense  related  to  its  Mexican  subsidiaries.

     SIX MONTHS ENDED JUNE 30, 2005 COMPARED WITH PENN OCTANE'S SALES TO PMI FOR
THE  SIX  MONTHS  ENDED  JUNE  30,  2004.

     Revenues.  Revenues  for  the  six  months  ended June 30, 2005, were $46.9
million compared with $73.6 million for the comparative period one year earlier,
a  decrease  of  $26.9  million  or  36.5%.  Of this decrease, $39.9 million was
attributable to decreased volumes of LPG sold to PMI during the six months ended
June  30,  2005,  partially offset by $13.0 million attributable to increases in
average  sales  prices  of  LPG sold to PMI during the six months ended June 30,
2005.

     Cost  of  goods sold.  Cost of goods sold for the six months ended June 30,
2005  was  $45.0  million.  The  cost  of goods sold for LPG purchased from Penn
Octane  was  determined  in  accordance with the LPG Supply Agreement.  Costs of
goods  sold  also  included  other  direct  costs  related  to  Rio  Vista's LPG
operations,  including  costs  associated  with  operating  the  Brownsville and
Matamoros  terminal  facilities.

     Selling,  general  and  administrative  expenses.  Selling,  general  and
administrative  expenses  were  $2.1  million  for the six months ended June 30,
2005.  These  costs were comprised of indirect selling general expenses directly
incurred  by  Rio  Vista  or allocated by Penn Octane to Rio Vista in accordance
with  the Omnibus Agreement.  Salary related costs allocated by Penn Octane were
based  on  the  percentage of time spent by those employees (including executive
officers) in performing Rio Vista related matters compared with the overall time
spent  working  by  those  employees.

     Other  income (expense).  Other income (expense) was $(273,000) for the six
months ended June 30, 2005 and is comprised of interest expense allocated to Rio
Vista by Penn Octane in connection with the RZB Credit Facility and amortization
of  loan  discount  related  to  detachable  warrants.

     Mexican  Income  tax.   Rio  Vista  incurred  $26,000 of Mexican income tax
expense  related  to  its  Mexican  subsidiaries.


                                       30
<PAGE>
LIQUIDITY  AND  CAPITAL  RESOURCES

   General.  Rio  Vista  commenced  operations  on  October 1, 2004 and only had
nominal  cash  at  the  time  of the Spin-Off.  Rio Vista pays all of its direct
costs  and  expenses, and Rio Vista reimburses Penn Octane for cost and expenses
paid by Penn Octane on behalf of Rio Vista.  As discussed below, Rio Vista sells
LPG  to  PMI  and  purchases  the  LPG from Penn Octane.  Rio Vista's LPG Supply
Agreement  with  Penn Octane provides that it pays Penn Octane for LPG purchased
upon  receipt  of  the  proceeds  from  sales  to  PMI.

     Under  the  terms of the PMI Agreement referred to below, the sale price of
LPG will be at the same margins in effect during April and May 2005. Because the
volume  commitments  and price margins under the PMI Agreement are significantly
lower  than  PMI's historical volume commitments and margins, Rio Vista's income
will  be  less  than  its  expected cash operating and other expenses during the
period  from  at  least June through September 2005. Rio Vista estimates monthly
cash  flow  shortfalls,  assuming  current  expense  levels  excluding scheduled
obligations,  during  these  months  on  a  consolidated  basis  ranging  from
approximately  $175,000  per  month  at  a  volume  of  3.5  million  gallons to
approximately $75,000 per month at a volume of 5.7 million gallons.

     The  cash  flow  operating  shortfalls  projected  above do not reflect the
further cash requirements associated with existing debt and other obligations of
Rio  Vista.  Actual  shortfalls  could  be  significantly  higher than estimated
above.

     Rio  Vista  is taking certain measures to further reduce cash operating and
other expenses.  There can be no assurance, however, that costs and expenses can
be  reduced  sufficiently to mitigate negative cash flows at the reduced volumes
and  margins  contained  in  the  PMI  Agreement.

     Rio  Vista's  cash  flow  has  been reduced as a result of materially lower
volumes of sales to PMI and materially reduced margins.  Additionally, Rio Vista
has  begun  to  incur  the  additional  public company compliance and income tax
preparation  costs.  As  a  result  of  these  factors,  Rio  Vista may not have
sufficient  cash  flow  to  pay  its  obligations  when  due  and/or make future
distributions  to  its  unitholders.  In  the event Penn Octane does not pay its
obligations  when  due,  Rio Vista's guarantees to Penn Octane and Penn Octane's
creditors  may be triggered.  Accordingly, Rio Vista may be required to pay such
obligations  of  Penn  Octane  to  avoid  foreclosure against its assets by Penn
Octane's  creditors.  If Rio Vista's revenues and other sources of liquidity are
not  adequate  to  pay  its  obligations, Rio Vista may be required to reduce or
eliminate  the  quarterly  distributions  to  unitholders and Penn Octane or Rio
Vista  may  be  required  to  raise  additional funds to avoid such foreclosure.
There  can  be  no  assurance  that such additional funding will be available on
terms attractive to either Penn Octane or Rio Vista or available at all.

     Although  Rio  Vista  is not required to do so, if Penn Octane is unable to
pay its obligations when they become due, Rio Vista may lend the necessary funds
to  Penn  Octane.  Conversely, if Rio Vista does not have the funds necessary to
pay  its  obligations  and  to  make  its distributions, to the extent that Penn
Octane has sufficient cash to do so, it may lend such amounts to Rio Vista.

     If  Penn Octane's cash flow from operations is not adequate to satisfy such
payment  of  liabilities and obligations and/or tax liabilities when due and Rio
Vista  is unable to satisfy its guarantees and/or tax indemnification agreement,
Penn  Octane  and/or  Rio Vista may be required to pursue additional debt and/or
equity  financing.  In  such  event,  Penn  Octane's  management and the General
Partner do not believe that Penn Octane and/or Rio Vista would be able to obtain
such  financing  from traditional commercial lenders.  In addition, there can be
no  assurance  that  such  additional  financing  will  be  available  on  terms
attractive  to  Penn Octane and/or Rio Vista or at all.  If additional financing
is  available through the sale of Penn Octane's and/or Rio Vista's equity and/or
other  securities  convertible  into equity securities through public or private
financings, substantial and immediate dilution may occur.  There is no assurance
that  Rio  Vista  would  be  able to raise any additional capital if needed.  If
additional  financing  cannot be accomplished and Rio Vista is unable to pay its
liabilities  and obligations when due or to restructure certain of Penn Octane's
liabilities  and obligations, Rio Vista may suffer material adverse consequences
to  its  business, financial condition and results of operations and Penn Octane
and/or  Rio  Vista  would  likely  be  required to seek other alternatives which
include  the  sale  of assets, closure of operations and/or protection under the
U.S.  bankruptcy  laws.


                                       31
<PAGE>
     Dependency  on Penn Octane. Rio Vista is dependent on Penn Octane's ability
to  deliver  adequate quantities of LPG at an acceptable price for ultimate sale
to  PMI,  to  provide  credit  to  Rio  Vista  for such purchases and to provide
management  of its operations. In addition, substantially all of Rio Vista's and
Penn  Octane's  assets  are  pledged or committed to be pledged as collateral on
$1.8  million  of  Penn  Octane's  existing debt and the RZB Credit Facility and
therefore,  both  Rio  Vista  and  Penn Octane maybe unable to obtain additional
financing  collateralized  by  those  assets.

     Guarantees and Assets Pledged on Certain of Penn Octane's Obligations.  Rio
Vista  has agreed to guarantee certain of Penn Octane's obligations to creditors
and all of Rio Vista's assets are pledged as collateral for those obligations of
Penn  Octane  to such creditors.  In addition, Rio Vista has agreed to indemnify
Penn  Octane  for a period of three years from December 31, 2004 for any federal
income  tax  liabilities  resulting from the Spin-Off in excess of $2.5 million.
Consequently,  Rio  Vista  may be unable to obtain financing using these pledged
assets  as  collateral  and  Rio Vista's inability to borrow on these assets may
adversely  affect  Rio  Vista's  results  of  operations  and  ability  to  make
distributions  to its unitholders.  Rio Vista may also be prohibited from making
any distributions to unitholders if it would cause an event of default, or if an
event  of  default is existing, under Penn Octane's revolving credit facilities,
or  any  other  covenant  which  may exist under any other credit arrangement or
other  regulatory  requirement  at  the  time.

     The  following  table reflects cash flows for the six months ended June 30,
2004  and  2005.  All  information  is  in  thousands.

<TABLE>
<CAPTION>
                                                 2004        2005
                                             -----------  -----------
<S>                                          <C>          <C>
Net cash provided by (used in) operating
activities                                   $         -  $(   2,177)

Net cash used in investing activities                  -         119

Net cash provided by (used in) in financing
activities                                             -       2,062
                                             -----------  -----------

Net increase in cash                         $         -  $        4
                                             ===========  ===========
</TABLE>


     The following is a discussion of the guaranteed obligations:


                                       32
<PAGE>
   RZB  OBLIGATION

     Rio  Vista's LPG purchases are financed entirely by Penn Octane through its
credit  facility  with  RZB  Finance,  LLC  ("RZB").

     As  of  June 30, 2005, Penn Octane had a $20.0 million credit facility with
RZB  for  demand loans and standby letters of credit (the "RZB Credit Facility")
to  finance  Penn  Octane's purchases of LPG and gasoline and diesel fuel ("Fuel
Products") in connection with Penn Octane's fuel sales business.  The RZB Credit
facility  is  an  uncommitted facility under which the letters of credit have an
expiration date of no more than 90 days and the facility is reviewed annually at
March  31.   As  a result of the financing provided to Rio Vista by Penn Octane,
Rio  Vista has agreed to guarantee Penn Octane's obligations with respect to the
RZB Credit Facility.  In connection with Rio Vista's guaranty, Rio Vista granted
RZB  a  security interest and assignment in any and all of Rio Vista's accounts,
inventory,  real  property, buildings, pipelines, fixtures and interests therein
or  relating  thereto,  including,  without  limitation,  the  lease  with  the
Brownsville  Navigation  District  of  Cameron  County for the land on which Rio
Vista's Brownsville Terminal Facility is located, and has entered into leasehold
deeds  of  trust,  security  agreements, financing statements and assignments of
rent.  Under  the  RZB  Credit  Facility,  Rio Vista may not permit to exist any
subsequent lien, security interest, mortgage, charge or other encumbrance of any
nature  on  any of its properties or assets, except in favor of RZB, without the
consent  of  RZB.  In  connection with the LPG Supply Agreement, Penn Octane and
Rio  Vista  have  agreed  to  share the financing costs related to Penn Octane's
purchase  of  LPG  under  the  RZB  Credit  Facility.

     Under  the  RZB  Credit Facility, Penn Octane is required to pay a fee with
respect to each letter of credit thereunder in an amount equal to the greater of
(i)  $500, (ii) 2.5% of the maximum face amount of such letter of credit for LPG
and  Fuel  Products (effective July 21, 2005, the Fuel Products rate was reduced
to  2%), or (iii) such higher amount as may be agreed to between Penn Octane and
RZB.  Any loan amounts outstanding under the RZB Credit Facility accrue interest
at  a  rate  equal to the rate announced by the JPMorgan Chase Bank as its prime
rate  (6.25%  at June 30, 2005) plus 2.5%.  Pursuant to the RZB Credit Facility,
RZB  has sole and absolute discretion to limit or terminate its participation in
the  RZB  Credit  Facility  at any time, and to refrain from making any loans or
issuing  any  letters  of  credit  thereunder.  RZB also has the right to demand
payment  of any and all amounts outstanding under the RZB Credit Facility at any
time.

     Jerome  B.  Richter,  former  Chief  Executive Officer of Penn Octane,  had
personally  guaranteed  all of Penn Octane's and Rio Vista's payment obligations
with  respect  to  the RZB Credit Facility.  On July 21, 2005 in connection with
the  annual  March  31,  2005  renewal of the RZB Credit Facility, RZB no longer
required  Mr.  Richter's  personal  guarantee.

     Under the terms of the RZB Credit Facility, either Penn Octane or Rio Vista
is  required  to  maintain  net  worth  of  a  minimum  of  $10.0  million.

     Under  the  terms of the RZB Credit Facility, all cash from Rio Vista's LPG
sales  is  deposited directly into a restricted cash account under the direction
of  RZB  to pay down all obligations of Penn Octane arising under the RZB Credit
Facility.  Accordingly, Rio Vista only receives net proceeds from the restricted
cash  account  when  the  amounts  of collateral provided by Penn Octane and Rio
Vista  exceed  all  liabilities  under  outstanding  letters of credit issued on
behalf  of Penn Octane, at the sole discretion of RZB.  Historically RZB has not
unduly  withheld  net  proceeds  from Penn Octane, and Rio Vista does not expect
that  RZB will unduly withhold net proceeds from Rio Vista.  Upon the release of
Rio  Vista's net proceeds from Rio Vista's restricted cash account, Rio Vista is
then  required  to  pay  any  remaining amounts due Penn Octane, if any, for the
supply  of  LPG  and  other  allocated  or  direct  expenses.

     LPG  financing  expense  allocated to Rio Vista from Penn Octane associated
with  the RZB Credit Facility totaled $101,000 for the six months ended June 30,
2005.

     Penn  Octane  may  need  to  increase  its credit facility for increases in
quantities  of  LPG  and  Fuel Products purchased and/or to finance future price
increases  of  LPG and Fuel Products.  Rio Vista relies on Penn Octane's ability
to  allocate  credit limits under the RZB Credit Facility to purchase quantities
of  LPG.  However there can be no assurance that Penn Octane will have available
and/or  continue  to  provide  sufficient credit limits for Rio Vista's required
purchases  of  LPG.


                                       33
<PAGE>
   LONG-TERM  DEBT

     Long-term  debt of Penn Octane guaranteed by Rio Vista and on which certain
of  its  assets are pledged totaled $1.8 million at June 30, 2005.  This debt is
due  on December 15, 2005.  Interest is payable quarterly at a rate of 16.5% per
annum.  The  payments due June 15, 2005 in the amounts of approximately $103,000
have  not  been  made  on  these  notes.

   OBLIGATIONS  AND  ASSETS  PLEDGED

     The  dollar  amounts  of Penn Octane obligations which Rio Vista guarantees
and/or  for which Rio Vista's assets are pledged total $10.9 million at June 30,
2005, based on Penn Octane's most recently filed Quarterly Report on  Form 10-Q,
and the unaudited amounts were as follows (in millions):
          LPG and fuel products trade payables                    $  4.2
          Total debt, net of discount                             $  1.7
          Lines of  credit                                        $  3.9
          Letters of credit in excess of LPG and fuel products
            trade payables                                        $  1.1

     Consolidated  current  assets  of Penn Octane, which includes assets of Rio
Vista,  pledged in favor of Penn Octane's credit facility and certain other debt
total  $26.6  million at June 30, 2005 and the unaudited amounts were as follows
(in millions):
          Accounts  receivable                                    $  6.5
          Restricted  cash                                        $  2.7
          Inventory                                               $  2.0
          Property, plant and equipment, net                      $ 15.4

     Rio  Vista's  assets  that are included in the above amounts are as follows
(in millions):
          Accounts receivable                                     $  1.7
          Restricted cash                                         $   .9
          Inventory                                               $   .2
          Property, plant and equipment, net                      $ 13.7

     The  following  is  a  summary of Rio Vista's estimated minimum contractual
obligations  as  of  June  30,  2005.

<TABLE>
<CAPTION>
                                                          PAYMENTS DUE BY PERIOD
                                                           (AMOUNTS IN MILLIONS)
                                        ------------------------------------------------
                                                 Less than    1 - 3     4 - 5    After
    Contractual Obligations              Total     1 Year     Years     Years   5 Years
--------------------------------------  -------  ----------  --------  -------  --------
<S>                                     <C>      <C>         <C>       <C>      <C>

Long-Term Debt Obligations              $     -  $        -  $      -  $     -  $      -
Operating Leases                             .2          .1        .1        -         -
LPG Purchase Obligations                      -           -         -        -         -
Other Long-Term Obligations                   -           -         -        -         -
                                        -------  ----------  --------  -------  --------
    Total Contractual Cash Obligations  $    .2  $       .1  $     .1  $     -  $      -
                                        =======  ==========  ========  =======  ========
</TABLE>


                                       34
<PAGE>
The  following  is  a  summary  of  Rio  Vista's  estimated  minimum  commercial
obligations  as  of  June  30,  2005, based on Penn Octane's most recently filed
Quarterly  Report  on  Form  10-Q  as  of  June  30,  2005.

<TABLE>
<CAPTION>
                                                       AMOUNT OF COMMITMENT EXPIRATION
                                                                  PER PERIOD
                                                             (AMOUNTS IN MILLIONS)
                                  ----------------------------------------------------
    Commercial                    Total Amounts   Less than   1 - 3   4 - 5     Over
     Commitments                    Committed       1 Year    Years   Years   5 Years
--------------------------------  --------------  ----------  ------  ------  --------
<S>                               <C>             <C>         <C>     <C>     <C>

Lines of Credit                   $            -  $        -  $    -  $    -  $      -
Standby Letters of Credit                      -           -       -       -         -
Guarantees                                  10.9        10.9       -       -         -
Standby Repurchase Obligations               N/A         N/A     N/A     N/A       N/A
Other Commercial Commitments                 N/A         N/A     N/A     N/A       N/A
                                  --------------  ----------  ------  ------  --------
    Total Commercial Commitments  $         10.9  $     10.9  $    -  $    -  $      -
                                  ==============  ==========  ======  ======  ========
</TABLE>


     Income  Taxes.   Rio Vista has agreed to indemnify Penn Octane for a period
of  three  years  from  December 31, 2004 for any federal income tax liabilities
resulting  from  the  Spin-Off in excess of $2.5 million.   Penn Octane does not
believe  that  it  has  a  federal income tax in connection with the Spin-Off in
excess  of  $2.5 million.  However, the Internal Revenue Service (the "IRS") may
review  Penn Octane's federal income tax returns and challenge positions that it
may  take  with  respect  to  the  Spin-Off.

     Partnership  Tax Treatment.  Rio Vista is not a taxable entity for U.S. tax
purposes  (see  below)  and  incurs  no  U.S. federal income tax liability.  Rio
Vista's  Mexican  subsidiaries are taxed on their income directly by the Mexican
government.   The  income/loss  of Rio Vista's Mexican subsidiaries are included
in  the  U.S.  partnership  income  tax return of Rio Vista.  The holders of the
common  units  and  General  Partner  interest  will  be  entitled  to  their
proportionate  share  of any tax credits resulting from any income taxes paid to
the  Mexican government.   Each unitholder of Rio Vista is required to take into
account  that unitholder's share of items of income, gain, loss and deduction of
Rio  Vista  in computing that unitholder's federal income tax liability, even if
no  cash  distributions are made to the unitholder by Rio Vista.   Distributions
by Rio Vista to a unitholder are generally not taxable unless the amount of cash
distributed  is  in  excess of the unitholder's adjusted tax basis in Rio Vista.

     Section  7704  of  the  Internal Revenue Code (Code) provides that publicly
traded  partnerships,  as  a general rule, are taxed as corporations despite the
fact  that  they  are  not  classified as corporations under Section 7701 of the
Code.  Section 7704 of the Code provides an exception to this general rule for a
publicly traded partnership if 90% or more of its gross income for every taxable
year  consists  of "qualifying income" (the "Qualifying Income Exception").  For
purposes  of  this  exception,  "qualifying  income"  includes  income and gains
derived  from  the  exploration,  development, mining or production, processing,
refining,  transportation  (including  pipelines) or marketing of any mineral or
natural  resource.  Other  types  of "qualifying income" include interest (other
than  from  a  financial business or interest based on profits of the borrower),
dividends,  real property rents, gains from the sale of real property, including
real  property  held  by  one  considered to be a "dealer" in such property, and
gains  from  the  sale  or  other  disposition  of  capital  assets held for the
production  of  income  that  otherwise  constitutes  "qualifying  income".

     No  ruling  has been or will be sought from the IRS and the IRS has made no
determination  as  to  Rio  Vista's  classification as a partnership for federal
income  tax purposes or whether Rio Vista's operations generate a minimum of 90%
of  "qualifying  income"  under  Section  7704  of  the  Code.

     If Rio Vista was classified as a corporation in any taxable year, either as
a  result of a failure to meet the Qualifying Income Exception or otherwise, Rio
Vista's items of income, gain, loss and deduction would be reflected only on Rio
Vista's  tax return rather than being passed through to Rio Vista's unitholders,
and  Rio  Vista's  net  income  would  be  taxed  at  corporate  rates.


                                       35
<PAGE>
     If  Rio Vista was treated as a corporation for federal income tax purposes,
Rio  Vista  would  pay  tax  on  income at corporate rates, which is currently a
maximum  of 35%.  Distributions to unitholders would generally be taxed again as
corporate  distributions, and no income, gains, losses, or deductions would flow
through  to the unitholders.  Because a tax would be imposed upon Rio Vista as a
corporation,  the  cash  available  for  distribution  to  unitholders  would be
substantially  reduced  and  Rio  Vista's  ability  to  make  minimum  quarterly
distributions  would  be  impaired.  Consequently,  treatment  of Rio Vista as a
corporation  would  result  in a material reduction in the anticipated cash flow
and  after-tax  return  to  unitholders  and  therefore would likely result in a
substantial reduction in the value of Rio Vista's common units.

     Current  law  may  change  so  as  to  cause  Rio  Vista to be taxable as a
corporation  for  federal  income tax purposes or otherwise subject Rio Vista to
entity-level  taxation.  The  Agreement  provides  that,  if a law is enacted or
existing  law  is modified or interpreted in a manner that subjects Rio Vista to
taxation  as  a  corporation  or  otherwise  subjects  Rio Vista to entity-level
taxation  for  federal,  state  or  local  income tax purposes, then the minimum
quarterly  distribution  amount  and  the  target  distribution  amount  will be
adjusted downward to reflect the impact of that law on Rio Vista.

     Other.  Rio Vista and its subsidiaries are involved with other proceedings,
lawsuits  and  claims.  Rio  Vista  believes  that  the  liabilities,  if  any,
ultimately  resulting  from  such  proceedings,  lawsuits  and claims should not
materially  affect  its  consolidated  financial  statements.   Pursuant  to the
Omnibus  Agreement,  Penn  Octane  has  agreed to indemnify Rio Vista for claims
related  to  the  Assets arising from events or conditions occurring or existing
before  completion  of  the  Spin-Off.

     Distributions  of Available Cash. All unitholders have the right to receive
distributions  from  Rio Vista of "available cash" as defined in the partnership
agreement  in  an  amount equal to the minimum distribution of $0.25 per quarter
per  unit,  plus  any  arrearages  in  the  payment  of  the  minimum  quarterly
distribution  on  the  units from prior quarters. The General Partner receives a
distribution  corresponding  to  its  2%  General  Partnership  Interest.  The
distributions  are  to  be  paid 45 days after the end of each calendar quarter.
However, Rio Vista is prohibited from making any distributions to unitholders if
it  would  cause  an event of default, or an event of default is existing, under
any  obligation of Penn Octane which Rio Vista has guaranteed (see note H to the
unaudited  consolidated  financial  statements).

     Cash  distributions  from Rio Vista are shared by the holders of the common
units and the General Partner interest as described in the partnership agreement
based  on a formula whereby the General Partner receives disproportionately more
distributions  per  percentage  interest than the holders of the common units as
annual  cash  distributions  exceed  certain  milestones.

     On  both  February  14,  2005  and  May  13,  2005,  Rio  Vista  made  cash
distributions  of  $487,000.   Rio Vista has not declared a distribution for the
quarter  ended  June  30,  2005.

     Rio  Vista's  ability to make distributions may be impacted by sales to PMI
at  acceptable  volumes  and  margins,  payments  on  its  guarantees, costs and
expenses and the inability to obtain additional financing on its pledged assets.
Although  Penn  Octane  is not required to do so, to the extent that Penn Octane
has  sufficient  cash  to  do  so,  it may lend amounts to Rio Vista to meet the
minimum  distributions.  If  Rio Vista's revenues and other sources of liquidity
after  its  quarterly  distributions  are  not  adequate to satisfy such payment
obligations  of  Penn Octane and/or Penn Octane does not have the necessary cash
to  loan  to  Rio  Vista,  Rio  Vista may be required to reduce or eliminate the
quarterly  distributions  to unitholders and/or Penn Octane and/or Rio Vista may
be  required  to raise additional funds to avoid foreclosure against its assets.
However,  there  can  be  no  assurance  that  such  additional  funding will be
available on terms attractive to either Penn Octane or Rio Vista or available at
all.


                                       36
<PAGE>
     The  following is a reconciliation of net income to distributable cash flow
for the three months ended  December 31, 2004, March 31, 2005 and June 30, 2005.

<TABLE>
<CAPTION>
                                                           Three Months Ended
                                               --------------------------------------------
                                                December 31,    March 31,
                                                    2004          2005       June 30, 2005
                                               --------------  -----------  ---------------
<S>                                            <C>             <C>          <C>
Net income (loss)                              $     (63,000)  $  173,000   $     (728,000)
    Plus interest and other expense, net             101,000      119,000          179,000
    Plus depreciation and amortization               178,000      205,000          205,000
    Plus other non-cash expenses                     344,000            -           17,000
                                               --------------  -----------  ---------------
EBITDA                                               560,000      497,000         (327,000)
Less cash interest and other cash expense,
net                                                 (101,000)     (61,000)         (64,000)
                                               --------------  -----------  ---------------
Distributable cash flow (deficit)                    459,000      436,000         (391,000)
Distributable cash flow (deficit) applicable
to general partner                                    (9,000)      (9,000)           8,000
                                               --------------  -----------  ---------------
Distributable cash flow (deficit) applicable
to limited partners                            $     450,000   $  427,000   $     (383,000)
                                               ==============  ===========  ===============
</TABLE>


     Rio  Vista  utilizes  two financial measures, EBITDA and distributable cash
flow,  which  are not defined in GAAP.  Management uses these financial measures
because  they  are  widely  accepted  financial  indicators used by investors to
compare  partnership  performance.  In  addition, management believes that these
measures  provide investors an enhanced perspective of the operating performance
of  Rio  Vista's  assets  and the cash flow the business is generating.  Neither
EBITDA  nor distributable cash flow are intended to represent cash flows for the
period, nor are they presented as an alternative to net income.  They should not
be  considered  in  isolation  or  as  substitutes  for a measure of performance
prepared  in  accordance  with  GAAP.

     Increased  expenses.  As a result of the Spin-Off, Rio Vista estimates that
operating expenses will increase by approximately $450,000 on an annual basis as
a  result  of additional public company and income tax preparation costs related
to  Rio  Vista.

     Sales  to  PMI.  On March  31, 2004, Penn Octane's sales agreement with PMI
(the  "Contract")  expired.  Prior  to  the Spin-Off, during the period April 1,
2004  through  September  30,  2004,  Penn  Octane  and PMI entered into monthly
agreements  for  the  sale  of  LPG.  During  the months of October 2004 through
December 2004, Rio Vista and PMI entered into monthly agreements for the sale of
LPG ("Monthly 2004 Contracts").  During December 2004, Rio Vista and PMI entered
into  a  three  month agreement for the period January 1, 2005 to March 31, 2005
for  the  minimum  sale of 11.7 million gallons of LPG for the months of January
and  February  2005  and 11.1 million gallons of LPG for the month of March 2005
(the  "Quarterly  Agreement")  at  reduced margins compared with those in effect
during  2004.   Actual  volumes  sold  were  12.7  million  gallons, 9.9 million
gallons  and  9.6  million  gallons  for  January,  February  and  March  2005,
respectively.   In  April 2005, Rio Vista entered into a one month contract with
PMI  for  the  sale  of  a  minimum of 10.5 million gallons at a further reduced
margin.  On May 5, 2005, Rio Vista entered into a contract with PMI for the sale
of  a  minimum  of 6.0 million gallons of LPG  for the period May 5, 2005 to May
31,  2005  at  the reduced margin received in April 2005.  For the period May 1,
2005  to  May  4,  2005,  PMI  did  not purchase any LPG from Rio Vista.  Actual
volumes  of LPG sold to PMI for April and May 2005 were 10.8 million gallons and
6.1  million  gallons,  respectively.

     The  shortfall  for  the  month  of  February 2005 was attributable to Penn
Octane,  not  having a sufficient supply of LPG to meet minimum contract volume.
The shortfall for the month of March 2005 was attributable to PMI not purchasing
the minimum contract volume.   In accordance with  the Quarterly Agreement,  PMI
paid  approximately  $104,000  representing the total amount due associated with
the  shortfall  volumes  for  March  2005.


                                       37
<PAGE>
     Effective  June  4,  2005, Rio Vista entered into an agreement with PMI for
the period June 4, 2005 through March 31, 2006 for the purchase of LPG (the "PMI
Agreement").  PMI did not purchase LPG from Rio Vista during the period June 1 -
June  3, 2005.  The following table sets forth the minimum monthly volume of LPG
that PMI has committed to purchase from Rio Vista pursuant to the PMI Agreement.

<TABLE>
<CAPTION>
                   Month           Minimum Volumes
               --------------  ------------------------
                               (in millions of gallons)
<S>                            <C>

               June 2005                            3.5

               July 2005                            3.5

               August 2005                          3.5

               September 2005                       5.7

               October 2005                         8.1

               November 2005                       11.7

               December 2005                       11.7

               January 2006                        11.7

               February 2006                       11.7

               March 2006                           8.1
</TABLE>

     Actual  volumes  of LPG sold to PMI for June and July 2005 were 3.5 million
gallons  and  3.5  million  gallons,  respectively.

     Under  the terms of the PMI Agreement, the sale price of LPG will be at the
same  margins  in  effect  during  April  and  May  2005.

     Rio  Vista's management believes that PMI's reduction of volume commitments
for April 2004 through March 2006 is based on additional LPG production by PEMEX
being  generated  from the Burgos Basin field in Reynosa, Mexico, an area within
the  proximity  of  Rio  Vista's  Matamoros  Terminal  Facility  and  increased
competition  from  U.S.  suppliers  including  Valero (see Recent Trends above).

     PMI  has  primarily  used  the  Matamoros  Terminal  Facility  to  load LPG
purchased  from Penn Octane prior to the Spin-Off and from Rio Vista, subsequent
thereto,  for  distribution  by truck in Mexico.  Rio Vista will continue to use
the Brownsville Terminal Facility in connection with LPG delivered by railcar to
other  customers,  storage  and  as  an  alternative  terminal  in the event the
Matamoros  Terminal  Facility  cannot  be  used.

     Seasonality.  Rio  Vista's gross profit is dependent on sales volume of LPG
to  PMI,  which  fluctuates in part based on the seasons.  The demand for LPG is
strongest  during  the  winter  season.

     LPG  Supply Agreement.    Penn Octane entered into the LPG Supply Agreement
with Rio Vista pursuant to which Rio Vista has agreed to purchase all of its LPG
requirements for sales which utilize the assets transferred to Rio Vista by Penn
Octane  to  the extent Penn Octane is able to supply such LPG requirements.  The
LPG  Supply  Agreement  further  provides  that  Rio  Vista has no obligation to
purchase  LPG from Penn Octane to the extent the distribution of such LPG to Rio
Vista's  customers  would  not  require the use of any of the assets Penn Octane
contributed  to  Rio Vista or Penn Octane ceases to have the right to access the
Leased  Pipeline.


                                       38
<PAGE>
     Under the LPG Supply Agreement, Penn Octane supplies all of Rio Vista's LPG
requirements  in connection with its LPG sales obligations to PMI. The purchases
of the LPG are at fluctuating prices and are determined based on the cost of LPG
under  Penn  Octane's  agreements with its LPG suppliers for volumes sold to Rio
Vista  for  sale  to  PMI  or  to  other Rio Vista customers, other direct costs
related  to  PMI  and other LPG sales of Rio Vista and a formula that takes into
consideration  operating  costs  of Penn Octane and Rio Vista. Rio Vista expects
the aggregate costs per gallon to purchase LPG (less any applicable adjustments)
to  be below the aggregate sales prices per gallon of LPG sold to PMI. Rio Vista
believes  that  its  LPG  Supply  Agreement with Penn Octane provides it with an
advantage  over  competitors  in the supply of LPG to PMI based on Penn Octane's
adequate  volumes  and  price  provided  for  in  its  agreements  with  its LPG
suppliers, and Penn Octane's Leased Pipeline which takes the LPG directly to Rio
Vista's  Brownsville  Terminal  Facility  from  those  suppliers.  The  Leased
Pipeline's  capacity  is  estimated  to be between 25.0 million and 30.0 million
gallons  per  month.

     Under  the  terms  of  the  Exxon Supply Contract, Penn Octane must provide
letters  of  credit in amounts equal to the cost of the product to be purchased.
In  addition,  the  cost  of  the  product purchased is tied directly to overall
market  conditions.  As  a  result,  Penn  Octane's  existing  letter  of credit
facility may not be adequate to meet the letter of credit requirements under the
Exxon Supply Contract or other suppliers if there are increases in quantities of
LPG  purchased  and/or  to  finance  future  price  increases  of  LPG.

     The LPG Supply Agreement terminates on the earlier to occur of:

          -    Penn  Octane  ceases  to  have  the  right  to  access the Leased
               Pipeline  that  connects  to  Rio  Vista's  Brownsville  Terminal
               Facility;  and

          -    Rio  Vista ceases to sell LPG using any of the assets contributed
               by  Penn  Octane  to  Rio  Vista  pursuant  to  the  Spin-Off.

     Mexican Operations. Under current Mexican law, foreign ownership of Mexican
entities  involved  in  the  distribution  of LPG or the operation of receiving,
conveying,  storing  and  delivering  LPG  to final users is prohibited. Foreign
ownership  is  permitted  in  the transportation and storage of LPG. Mexican law
also  provides that an entity with a permit to transport LPG is not permitted to
obtain  permits  for the other defined LPG activities (storage or distribution).
PennMex  has  a  transportation  permit and Termatsal owns, leases, or is in the
process  of  obtaining the land or rights of way used in the construction of the
Mexican  portion of the US-Mexico Pipelines, and owns the Mexican portion of the
assets  comprising  the US-Mexico Pipelines and the Matamoros Terminal Facility.
Rio  Vista's  consolidated  Mexican  affiliate,  Tergas,  S.  de  R.L.  de  C.V.
("Tergas"),  has  been  granted  the  permit  to  operate the Matamoros Terminal
Facility  and Rio Vista relies on Tergas' permit to continue its delivery of LPG
at  the  Matamoros  Terminal Facility. Rio Vista pays Tergas its actual cost for
distribution  services  at  the Matamoros Terminal Facility plus a small profit.

     Through  Rio Vista's operations in Mexico and the operations of the Mexican
subsidiaries  and  Tergas, Rio Vista is subject to the tax laws of Mexico which,
among  other  things, require that Rio Vista comply with transfer pricing rules,
the  payment  of  income,  asset  and  ad  valorem  taxes, and possibly taxes on
distributions  in  excess  of  earnings.  In  addition, distributions to foreign
entities,  including  dividends  and interest payments may be subject to Mexican
withholding  taxes.

     During  July 2003, Penn Octane acquired an option to purchase Tergas, which
is  95%  owned by Vicente Soriano, an employee of Penn Octane, and the remaining
balance  owned  by  Abelardo  Mier,  a consultant of  Penn Octane, for a nominal
price  of  approximately  $5,000.   The  option  was transferred to Rio Vista on
September  30,  2004.

     Deregulation of the LPG Industry in Mexico.  The Mexican petroleum industry
is  governed by the Ley Reglarmentaria del Art culo 27 Constitutional en el Ramo
del  Petr  leo  (the  Regulatory Law to Article 27 of the Constitution of Mexico
concerning  Petroleum Affairs (the "Regulatory Law")), Reglamento de Gas Licuado
de  Petroleo  (Regulation  of  LPG)  and  Ley Org nica del Petr leos Mexicanos y
Organismos  Subsidiarios  (the Organic Law of Petr leos Mexicanos and Subsidiary
Entities (the "Organic Law")).  Under Mexican law and related regulations, PEMEX
is  entrusted with the central planning and the strategic management of Mexico's
petroleum  industry, including importation, sales and transportation of LPG.  In
carrying  out  this  role,  PEMEX  controls  pricing and distribution of various
petrochemical  products,  including  LPG.


                                       39
<PAGE>
     Beginning  in  1995,  as  part  of  a  national  privatization program, the
Regulatory  Law  was  amended to permit private entities to transport, store and
distribute  natural  gas with the approval of the Ministry of Energy. As part of
this  national  privatization  program,  the  Mexican  Government is expected to
deregulate  the LPG market ("Deregulation"). In June 1999, the Regulation of LPG
was  enacted to permit foreign entities to participate without limitation in the
defined  LPG  activities related to transportation and storage. However, foreign
entities are prohibited from participating in the distribution of LPG in Mexico.
Upon  Deregulation,  Mexican  entities  will  be able to import LPG into Mexico.
Under  Mexican law, an entity with a permit to transport LPG is not permitted to
obtain  permits for the other defined LPG activities (storage and distribution).
Rio  Vista  expects  to sell LPG directly to independent Mexican distributors as
well  as  PMI  upon  Deregulation.  Rio  Vista  anticipates that the independent
Mexican  distributors  will be required to obtain authorization from the Mexican
government  for  the importation of LPG upon Deregulation prior to entering into
contracts  with  Rio  Vista.

     During  July  2001, the Mexican government announced that it would begin to
accept  applications  from  Mexican  companies  for  permits  to  allow  for the
importation  of  LPG  pursuant to provisions already provided for under existing
Mexican  law.

     In  connection  with  the above, in August 2001, Tergas received a one year
permit  from  the  Mexican government to import LPG.  During September 2001, the
Mexican government decided to delay the implementation of Deregulation and asked
Tergas  to defer use of the permit and as a result, Penn Octane did not sell LPG
to  distributors  other  than  PMI.  In March 2002, the Mexican government again
announced its intention to issue permits for free importation of LPG into Mexico
by  distributors  and others beginning August 2002, which was again delayed.  To
date  the  Mexican  government  has  continued  to  delay  implementation  of
Deregulation.  Tergas'  permit to import LPG expired during August 2002.  Tergas
intends  to  obtain  a  new  permit  when the Mexican government again begins to
accept  applications.  As a result of the foregoing, it is uncertain as to when,
if  ever,  Deregulation will actually occur and the effect, if any, it will have
on  Rio  Vista.  However, should Deregulation occur, it is Rio Vista's intention
to  sell  LPG  directly  to  distributors  in  Mexico  as  well  as  to  PMI.

     The  point  of sale for LPG which flows through the US-Mexico Pipelines for
delivery  to the Matamoros Terminal Facility is the United States-Mexico border.
For  LPG  delivered  into  Mexico,  PMI  is  the  importer  of  record.

     Partners'  Capital.  Rio  Vista's beginning capital was contributed by Penn
Octane  to  Rio  Vista's  operating partnership in the form of assets consisting
primarily  of  terminal  assets  located  in  Brownsville, Texas, and Matamoros,
Mexico,  as  well  as  the  pipelines connecting these terminal facilities.  The
contribution  to Rio Vista was recorded at Penn Octane's historical cost of such
assets  on  the  date  of  the  Spin-Off  ($14.6  million).

     COMMON UNITS

     In  connection  with  the  Spin-Off on September 30, 2004, Rio Vista issued
1,910,656  common  units  to  the  holders  of  Penn  Octane  common  stock.

     The  common  units  represent  limited partner interests in Rio Vista.  The
holders of common units are entitled to participate in Rio Vista's distributions
and  exercise  the  rights or privileges available to limited partners under the
Agreement.  The  holders  of  common  units  have  only limited voting rights on
matters affecting Rio Vista.  Holders of common units have no right to elect the
General  Partner  or  its managers on an annual or other continuing basis.  Penn
Octane elects the managers of the General Partner.  Although the General Partner
has a fiduciary duty to manage Rio Vista in a manner beneficial to Rio Vista and
its  unitholders, the managers of the General Partner also have a fiduciary duty
to  manage  the  General  Partner  in a manner beneficial to Penn Octane and its
stockholders.  The  General Partner generally may not be removed except upon the
vote  of  the holders of at least 80% of the outstanding common units; provided,
however,  if at any time any person or group, other than the General Partner and
its  affiliates,  or a direct or subsequently approved transferee of the General
Partner  or  its affiliates, acquires, in the aggregate, beneficial ownership of
20%  or  more  of any class of units then outstanding, that person or group will
lose  voting  rights  on  all of its units and the units may not be voted on any
matter  and  will  not be considered to be outstanding when sending notices of a
meeting  of unitholders, calculating required votes, determining the presence of
a  quorum  or  for  other  similar  purposes.

     In  addition,  the  partnership  agreement contains provisions limiting the
ability  of  holders  of common units to call meetings or to acquire information
about  Rio  Vista's operations, as well as other provisions limiting the holders
of  common  units  ability  to  influence the manner or direction of management.


                                       40
<PAGE>
     GENERAL PARTNER INTEREST

     The  General Partner of Rio Vista owns a 2% general partner interest in Rio
Vista.  The General Partner is currently 100% owned by Penn Octane.  Penn Octane
has  granted options to Mr.  Richter and to Shore Capital LLC ("Shore Capital"),
an  affiliate  of  Richard Shore, Jr., former President of Penn Octane and Chief
Executive Officer of the General Partner, to purchase 50% of its general partner
interest.  The  options  expire on July 10, 2006.  Following the exercise of any
of  these options, Penn Octane will retain voting control of the General Partner
pursuant  to  a  voting  agreement.

     The  General  Partner generally has unlimited liability for the obligations
of  Rio Vista, such as its debts and environmental liabilities, except for those
contractual obligations of Rio Vista that are expressly made without recourse to
the  General  Partner.

     OPTIONS AND WARRANTS

     Rio Vista has no U.S. employees and is managed by its General Partner.  Rio
Vista  applies  APB  25  for  warrants  granted to employees and managers of the
General  Partner  and SFAS 123 for warrants issued to acquire goods and services
from  non-employees.

     COMMON  UNIT WARRANTS.  In connection with an employment agreement with Mr.
Shore,  Shore  Capital,  received warrants to acquire 97,415 common units of Rio
Vista  with  an  exercise  price  of  $8.47  per  common unit.  The warrants are
exercisable  beginning  on  October  1,  2004  and  expire  on  July  10,  2006.

     On March 9, 2005, the board of managers of the General Partner approved the
Rio  Vista  2005 Equity Incentive Plan (the "2005 Plan").  The 2005 Plan permits
the  grant  of  common unit options, common unit appreciation rights, restricted
common unit and phantom common units to any person who is an employee (including
to  any  executive officer) or consultant of Rio Vista or the General Partner or
any  affiliate  of Rio Vista or the General Partner. The 2005 Plan provides that
each  outside  manager  of  the  General  Partner shall be granted a common unit
option  once  each fiscal year for not more than 5,000 common units, in an equal
amount  as  determined by the board of managers.  The aggregate number of common
units authorized for issuance as awards under the 2005 Plan is 750,000. The 2005
Plan shall remain available for the grant of awards until March 9, 2015, or such
earlier  date  as  the  board  of  managers  may  determine.  The  2005  Plan is
administered  by the compensation committee of the board of managers.  Under the
terms  of  the  Agreement  and  applicable  rules of the Nasdaq Stock Market, no
approval  by  the  common  unitholders  of  Rio  Vista  was  required.


                                       41
<PAGE>
     On March 9, 2005, the board of managers of the General Partner approved the
grant  of  options  to  purchase  a total of 108,750 common units under the 2005
Plan.  Of  the total number of options granted, 93,750 were granted to executive
officers  of  the  General  Partner  and  Mr.  Richter and 15,000 were issued to
outside  managers of the General Partner.  The exercise price for the options is
$12.51  per  common  unit, which is the average of the high and low sales prices
for  Rio  Vista  common units as reported by the Nasdaq Stock Market on March 9,
2005.  The  options  granted  to executive officers (including Mr. Richter) were
fully vested on the date of grant.  The options granted to outside managers vest
in equal monthly installments over a period of 12 months from the date of grant.
All  options  become fully exercisable upon a change in control event and expire
three  years  from  the  date  of  grant.

     LOAN DISCOUNT ON PENN OCTANE'S DEBT RELATED TO DETACHABLE WARRANTS.  During
January  2004,  in  connection  with  $1.8  million  of debt obligations of Penn
Octane,  Penn  Octane  agreed  to  issue, in the future, an aggregate of 110,250
warrants  to  purchase  Rio  Vista  common  units ("Rio Vista Warrants").    The
exercise  price  of the warrants was to be determined based on the amount of the
first  quarterly distribution paid by Rio Vista.  As a result of the approval of
the  payment  of  Rio  Vista's  first cash distribution on January 14, 2005 (see
below),  Rio  Vista  granted  the  immediately  exercisable  warrants  having an
exercise  price of $5.00 and recorded a discount of approximately $422,000 which
is  reflected  as  interest  expense  ratably  amortized  from the grant date of
January  14,  2005  to  December  15,  2005,  the  maturity  date  of  the  debt
obligations.  For  the  three  months  and  six  months  ended  June  30,  2005
amortization  expense  was  $115,000 and $173,000, respectively.   The Rio Vista
Warrants  will  expire  on  December  15,  2006.

     The  Spin-Off.  During September 2003, Penn Octane's board of directors and
the  independent committee of its board of directors formally approved the terms
of  the  Spin-Off  and Rio Vista filed a Form 10 registration statement with the
Securities and Exchange Commission.  On September 30, 2004, all of Penn Octane's
limited  partnership  interest  in  Rio  Vista  was distributed to Penn Octane's
stockholders.  Each  stockholder  of Penn Octane on September 30, 2004, received
one common unit of the limited partnership interest of Rio Vista for every eight
shares  of  Penn  Octane's  common  stock  owned.

     As  a  result  of  the  Spin-Off,  Rio  Vista  owns  and  operates the LPG,
distribution, transportation and marketing business previously conducted by Penn
Octane.  All  of  the  assets  transferred  to  Rio Vista in connection with the
Spin-Off  have  been  transferred  at  historical  costs and related accumulated
depreciation  of  Penn  Octane  at  the  date  of the Spin-Off.  Rio Vista began
selling  LPG  to  PMI  upon the completion of the Spin-Off and at that time also
began  purchasing  LPG  from  Penn  Octane  under  the  LPG  Supply  Agreement.

     The  General  Partner  is  responsible  for  managing  the  operations  and
activities  of  Rio  Vista.  Common  unitholders  do  not  participate  in  the
management  of  Rio  Vista.  Penn  Octane  controls  Rio  Vista by virtue of its
current  ownership,  management  and  voting  control  of  the  General Partner.
Therefore,  Rio  Vista  is  accounted  for  as a consolidated subsidiary of Penn
Octane  for  financial  accounting  purposes.

     INTERCOMPANY  PURCHASE  AGREEMENT  FOR  LPG

     Penn  Octane  entered into the LPG Supply Agreement with Rio Vista pursuant
to  which Rio Vista has agreed to purchase all of its LPG requirements for sales
which  utilize  the assets transferred to Rio Vista by Penn Octane to the extent
Penn  Octane  is  able to supply such LPG requirements (see LPG Supply Agreement
above).

     OMNIBUS  AGREEMENT

     In  connection  with  the  Spin-Off,  Penn  Octane  entered into an Omnibus
Agreement  with  Rio  Vista  that  governs,  among other things, indemnification
obligations  among the parties to the agreement, related party transactions, the
provision  of  general  administration  and  support  services  by  Penn Octane.

     The  Omnibus  Agreement prohibits Rio Vista from entering into any material
agreement with Penn Octane without the prior approval of the conflicts committee
of  the  board  of managers of the General Partner.  For purposes of the Omnibus
Agreement,  the  term  material agreements means any agreement between Rio Vista
and  Penn  Octane that requires aggregate annual payments in excess of $100,000.


                                       42
<PAGE>
     The  Omnibus  Agreement may be amended by written agreement of the parties;
provided,  however  that  it  may  not  be  amended  without the approval of the
conflicts  committee  of  the  General Partner if such amendment would adversely
affect  the unitholders of Rio Vista.  The Omnibus Agreement has an initial term
of  five  years  that  automatically  renews for successive five-year terms and,
other  than  the  indemnification  provisions, will terminate if Rio Vista is no
longer  an  affiliate  of  Penn  Octane.

     Realization  of  Assets.   Rio Vista's unaudited consolidated balance sheet
included  elsewhere  herein  has  been  prepared  in  conformity with accounting
principles generally accepted in the United States of America, which contemplate
continuation  of  Rio  Vista as a going concern.  Rio Vista is dependent on Penn
Octane's  ability  to  deliver adequate quantities of LPG at an acceptable price
for  ultimate sale to PMI, to provide credit to Rio Vista for such purchases and
to  provide management of its operations.  Currently, Rio Vista's only source of
revenue  is  from  sales  of  LPG to PMI and it operates under a short-term sale
agreement  with PMI which provides for monthly volumes which are materially less
than  Penn Octane's historical monthly volumes and margins.    As a result, Penn
Octane's  and  Rio  Vista's  gross  profit  have been materially reduced and may
continue to decline and their cash flow and available credit may be insufficient
to  absorb  such  additional  reductions  in  gross  profit.

     Rio  Vista  has  guaranteed  certain  of  Penn  Octane's  obligations.
Substantially  all  of  Rio  Vista's  and  Penn  Octane's  assets are pledged or
committed  to be pledged as collateral on $1.8 million of Penn Octane's existing
debt  and the RZB Credit Facility, and therefore, both Rio Vista and Penn Octane
may  be  unable  to  obtain additional financing collateralized by those assets.
Penn  Octane's  Report  of  Independent  Certified  Public  Accountants  on  the
consolidated  financial  statements  of Penn Octane at July 31, 2004 contains an
explanatory paragraph which describes an uncertainty about Penn Octane's ability
to continue as a going concern.  If Penn Octane's and Rio Vista's cash flows are
not  adequate  to  pay  their  obligations,  Penn Octane and/or Rio Vista may be
required  to  raise  additional  funds  to  avoid  foreclosure  by Penn Octane's
creditors.   There  can  be  no  assurance  that such additional funding will be
available on terms attractive to either Penn Octane or Rio Vista or available at
all.  If  additional  amounts cannot be raised and cash flow is inadequate, Penn
Octane  and/or  Rio  Vista  would  likely be required to seek other alternatives
which  include the sale of assets, closure of operations and/or protection under
the  U.S.  bankruptcy  laws.

     In  view  of  the  matters  described  in  the  preceding  paragraphs,
recoverability  of  the  recorded  asset  amounts shown in Rio Vista's unaudited
consolidated  balance  sheet  including  elsewhere herein, is dependent upon the
ability of Penn Octane to continue as a going concern and continued sales of LPG
to  PMI at acceptable volumes and margins to provide sufficient cash flow to pay
Rio  Vista's  expenses and guarantees of Penn Octane's obligations assuming Penn
Octane's  inability to pay such obligations.  The unaudited consolidated balance
sheet included elsewhere herein, does not include any adjustments related to the
recoverability  and  classification  of  recorded  asset  amounts or amounts and
classification of liabilities that might be necessary should Rio Vista be unable
to  continue  in  existence.

     To  provide Rio Vista with the ability it believes necessary to continue in
existence, management is taking steps to (i) diversify Rio Vista's operations to
reduce  dependency  on  sales  of  LPG  and  (ii)  sell  its  LPG  assets.


                                       43
<PAGE>
IMPACT  OF  INFLATION

     Inflation in the United States and Mexico has been relatively low in recent
years  and  did  not  have  a  material  impact  on  the  consolidated financial
statements  of  Rio  Vista.  However,  inflation  remains a factor in the United
States  and  Mexico  economies and could increase Rio Vista's cost to acquire or
replace  property,  plant  and  equipment as well as our labor and supply costs.

     Rio Vista may be adversely impacted as a result of increases in LPG prices,
which  are  related  to  oil  and  natural gas prices, because of limits on Penn
Octane's  credit  facility.

ENVIRONMENTAL  MATTERS

     Rio  Vista's  operations  are subject to environmental laws and regulations
adopted  by various governmental authorities in the jurisdictions in which these
operations  are  conducted.  Under  the  Omnibus  Agreement,  Penn  Octane  will
indemnify  Rio Vista for five years after the completion of the Spin-Off against
certain  potential  environmental  liabilities  associated  with  the  assets it
contributed  to  Rio  Vista relating to events or conditions that existed before
the  completion  of  the  Spin-Off.

RECENTLY  ISSUED  FINANCIAL  ACCOUNTING  STANDARDS

     During  2004,  Rio  Vista  adopted  Financial  Accounting  Standards  Board
Interpretation  No.  46,  "Consolidation of Variable Entities" ("FIN 46"), which
was amended by FIN 46R.  This interpretation of Accounting Research Bulletin No.
51,  "Consolidated  Financial  Statements",  addresses consolidation by business
enterprises  of  variable  interest entities ("VIE") that do not have sufficient
equity investment at risk to permit the entity to finance its activities without
additional  subordinated financial support.  FIN 46R requires the beneficiary of
a  VIE  to  consolidate  in its financial statements the assets, liabilities and
results  of  operations of the VIE.  Tergas, an affiliate of Rio Vista, is a VIE
and  therefore,  its  assets,  liabilities  and  results of operations have been
included  in  the  accompanying  consolidated financial statements of Rio Vista.

     In  November  2004,  the  FASB  issued  Statement  of  Financial Accounting
Standard  No.  151,  "Inventory  Costs  -  An Amendment of ARB No. 43 Chapter 4"
("SFAS  151")  which  clarifies  that abnormal amounts of idle facility expense,
freight,  handling  costs  and  spoilage  should be expensed as incurred and not
included  in  overhead.  Further,  SFAS  151  requires  that allocation of fixed
production  overheads  to conversion costs should be based on normal capacity of
the  production  facilities.  The  provisions  in  SFAS  151  are  effective for
inventory costs incurred during fiscal years beginning after June 15, 2005.  Rio
Vista  has  determined  that  SFAS  151 will not have a material impact on their
consolidated  results  of  operations,  financial  position  or  cash  flows.

     During  December  2004,  the  Financial Accounting Standards Board ("FASB")
issued  Statement  of  Financial  Accounting  Standard  No.  123  (revised 2004)
"Share-Based  Payment"  ("SFAS 123R").  SFAS 123R replaces SFAS 123, "Accounting
for  Stock-Based  Compensation",  and supercedes APB Opinion 25, "Accounting for
Stock  Issued  to  Employees"  ("APB  25").  SFAS 123R requires that the cost of
share-based  payment  transactions  (including  those  with  employees  and
non-employees)  be  recognized in the financial statements as compensation cost.
That  cost  will  be  measured  based  on  the fair value of equity or liability
instrument  issued.    SFAS 123R is effective for Rio Vista beginning January 1,
2006.  Rio  Vista  will apply the modified prospective method as provided for in
SFAS  123R,  and therefore the financial statements of Rio Vista for interim and
annual  periods  prior  to  the  adoption  of  SFAS  123R  will  not reflect any
restatements.

     In  December  2004,  the  FASB  issued  Statement  of  Financial Accounting
Standard  No.  153, "Exchanges of Nonmonetary Assets-An Amendment of APB Opinion
No.  29"  ("SFAS  153").  The  amendments  made  by  SFAS  153  are based on the
principle  that  exchanges on nonmonetary assets should be measured based on the
fair  value  of  the assets exchanged.  The provisions in SFAS 153 are effective
for nonmonetary asset exchanges occurring in fiscal periods beginning after June
15,  2005.  Early application is permitted and companies must apply the standard
prospectively.  Rio  Vista has determined that SFAS 153 will not have a material
impact  on  their consolidated results of operations, financial position or cash
flows.


                                       44
<PAGE>
     In May 2005, the FASB issued Statement of Financial Accounting Standard No.
154,  "Accounting  Changes  and Error Corrections" (SFAS154).  This new standard
replaces  APB  Opinion  No.  20,  "Accounting Changes" and FASB Statement No. 3,
"Reporting  Accounting  Changes  in  Interim Financial Statements".  Among other
changes,  SFAS  154  requires that a voluntary change in accounting principle be
applied  retrospectively with all prior period financial statements presented on
the  new  accounting  principle,  unless it is impracticable to do so.  SFAS 154
also  provides  that  (1)  a  change  in  method of depreciating or amortizing a
long-lived  nonfinancial  asset  be  accounted  for  as  a  change  in  estimate
(prospectively)  that  was effected by a change in accounting principle, and (2)
correction  of errors in previously issued financial statements should be termed
a  "restatement."  The  new  standard  is  effective  for accounting changes and
correction  of  errors  made  in fiscal years beginning after December 15, 2005.
Early  adoption  of  this  standard  is  permitted  for  accounting  changes and
correction  of  errors  made  in fiscal years beginning after June 1, 2005.  Rio
Vista  has  determined  that  SFAS  154 will not have a material impact on their
consolidated results of operations, financial position or cash flows.


CRITICAL  ACCOUNTING  POLICIES

     The  consolidated  financial  statements of Rio Vista reflect the selection
and  application  of  accounting  policies  which  require  management  to  make
significant  estimates  and  judgments.  See note B to Rio Vista's  consolidated
financial  statements  included in its Annual Report on Form 10-K for the fiscal
year ended December 31, 2004, "Summary of Significant Accounting Policies".  Rio
Vista  believes that the following reflect the more critical accounting policies
that  affect  the  financial  position  and  results  of  operations.

     Revenue  recognition  - Rio Vista expects in the future to enter into sales
     agreements to sell LPG for future delivery. Rio Vista will not record sales
     until  the  LPG  is  delivered  to  the  customer.

     Impairment  of  long-lived assets - The determination of whether impairment
     has  occurred  is  based  on  an  estimate  of  undiscounted  cash  flows
     attributable  to  assets in future periods. If impairment has occurred, the
     amount  of  the impairment loss recognized will be determined by estimating
     the fair value of the assets and recording a loss if the fair value is less
     than  the  carrying  value.  Assessments  of  impairment  are  subject  to
     management's  judgments  and based on estimates that management is required
     to  make.

     Depreciation  and amortization expenses - Property, plant and equipment are
     carried  at  cost  less  accumulated  depreciation  and  amortization.
     Depreciation  and  amortization rates are based on management's estimate of
     the  future  utilization  and  useful  lives  of  the  assets.

     Unit-based  compensation  -  Rio Vista accounts for unit-based compensation
     using the provisions of APB 25 (intrinsic value method), which is permitted
     by  SFAS  123.  The difference in net income, if any, between the intrinsic
     value method and the method provided for by SFAS 123 (fair value method) is
     required  to  be  disclosed  in  the  financial statements on an annual and
     interim  basis  as  a  result  of  the  issuance  of  SFAS  148.

     Allowance  for  doubtful  accounts  -  The carrying value of trade accounts
     receivable  is  based  on  estimated  fair value. The determination of fair
     value  is  subject to management's judgments and is based on estimates that
     management  is  required  to  make.


STATEMENT  BY MANAGEMENT CONCERNING REVIEW OF INTERIM INFORMATION BY INDEPENDENT
CERTIFIED  PUBLIC  ACCOUNTANTS.

     The  unaudited consolidated financial statements included in this filing on
Form  10-Q  have  been reviewed by Burton McCumber & Cortez, L.L.P., independent
certified  public  accountants,  in  accordance  with  established  professional
standards  and  procedures  for  such  review.  The  report of Burton McCumber &
Cortez,  L.L.P.  commenting  on  their  review,  accompanies  the  unaudited
consolidated  financial  statements  included  in  Item  1  of  Part  I.


                                       45
<PAGE>
ITEM 3.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK.

     To  the  extent  that  Rio  Vista  maintains quantities of LPG inventory in
excess  of  commitments for quantities of undelivered LPG and/or has commitments
for  undelivered  LPG  in  excess of inventory balances, Rio Vista is exposed to
market risk related to the volatility of LPG prices. In the event that inventory
balances  exceed  commitments for undelivered LPG, during periods of falling LPG
prices,  Rio  Vista may sell excess inventory to customers to reduce the risk of
these  price  fluctuations.  In  the  event that commitments for undelivered LPG
exceed  inventory  balances,  Rio  Vista may purchase contracts which protect it
against  future  price  increases  of  LPG.

     Rio  Vista  does  not  maintain  quantities  of  LPG inventory in excess of
quantities  actually  ordered  by  PMI.  Therefore,  Rio Vista has not currently
entered into and does not currently expect to enter into any arrangements in the
future  to  mitigate  the  impact  of  commodity  price  risk.

     Rio  Vista  does not have any debt.  Trade accounts receivable from PMI and
Rio  Vista's  trade  and  other accounts payable generally do not bear interest.
Penn  Octane's  credit  facility with RZB for which Rio Vista is responsible for
some  of  the  costs  provides  for cash advances at a current variable interest
rate.   Fees  paid to RZB for letters of credit are based on a fixed schedule as
provided  in  Penn  Octane's agreement with RZB.  Therefore, Rio Vista currently
has  limited,  if  any,  interest  rate  risk.

     Rio  Vista  routinely  converts  U.S.  dollars  into  Mexican  pesos to pay
terminal  operating  costs and income taxes.  Such costs are expected to be less
than  $1  million  per year and Rio Vista expects such costs will remain at less
than  $1  million  in  any  year.  Rio Vista does not maintain Mexican peso bank
accounts with other than nominal balances.  Therefore, Rio Vista has limited, if
any,  risk  related  to  foreign  currency  exchange  rates.


ITEM 4.  CONTROLS  AND  PROCEDURES.

     The General Partner's management, including the principal executive officer
and  principal  financial  officer,  conducted  an  evaluation  of  Rio  Vista's
disclosure controls and procedures, as such term is defined under Rule 13a-14(c)
promulgated under the Securities Exchange Act of 1934, as amended, as of the end
of  the  period.  Based  on  their  evaluation,  the General Partner's principal
executive  officer  and  principal accounting officer concluded that Rio Vista's
disclosure  controls  and  procedures  are  effective.

     There  have  been no significant changes (including corrective actions with
regard  to  significant  deficiencies  or  material  weaknesses)  in Rio Vista's
internal  controls  or  in  other  factors that could significantly affect these
controls subsequent to the date of the evaluation referenced in paragraph above.


                                       46
<PAGE>
Part II

ITEM 1.   LEGAL  PROCEEDINGS

          See  note H to Rio Vista's unaudited consolidated financial statements
          included in its Quarterly Report on Form 10-Q for the six months ended
          June  30,  2005.

ITEM 2.   UNREGISTERED  SALES  OF  EQUITY  SECURITIES  AND  USE  OF  PROCEEDS

          None.

ITEM 3.   DEFAULTS  UPON  SENIOR  SECURITIES

          None.

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

          None.

ITEM 5.   OTHER  INFORMATION

          None.

ITEM 6.   EXHIBITS

     THE  FOLLOWING  EXHIBITS  ARE INCORPORATED BY REFERENCE TO PREVIOUSLY FILED
     REPORTS,  AS  NOTED.

          Exhibit  No.
          ------------

          10.1*     Rio  Vista  Energy  Partners L.P. 2005 Equity Incentive Plan
                    (incorporated  by  reference to Rio Vista's Annual Report on
                    Form  10-K  for  the  year  ended December 31, 2004 filed on
                    April  12,  2005,  SEC  File  No.  000-50394)

          *  indicates  management contract or compensatory plan or arrangement.


                                       47
<PAGE>
     THE FOLLOWING EXHIBITS ARE FILED AS PART OF THIS REPORT:

          Exhibit  No.
          ------------

          10.2      Matamoros  LPG  Mix  Purchase  and  Sales Agreement made and
                    entered  into  as  of June 4, 2005, by and between Rio Vista
                    Energy  Partners  L.P.  and  P.M.I.  Trading  Limited.

          10.3      Purchase  and  Sale  Agreement  dated  as of August 15, 2005
                    between  Rio  Vista  Operating  Partnership  L.P.  and
                    TransMontaigne  Product  Services Inc.

          10.4      Promissory  Note  dated  August  15,  2005 between Rio Vista
                    Operating  Partnership  L.P.  and  TransMontaigne  Product
                    Services  Inc.

          10.5      Security  Agreement  dated August 15, 2005 between Rio Vista
                    Operating  Partnership  L.P.  and  TransMontaigne  Product
                    Services Inc.

          31.1      Certification  Pursuant  to  Rule 13a-14(a) / 15d - 14(a) of
                    the  Exchange  Act

          31.2      Certification  Pursuant  to  Rule 13a-14(a) / 15d - 14(a) of
                    the  Exchange  Act

          32        Certification  Pursuant to 18 U.S.C. Section 1350 as Adopted
                    Pursuant  to Section 906 of the Sarbanes - Oxley Act of 2002


                                       48
<PAGE>
                                   SIGNATURES

     Pursuant  to  the requirements of the Securities Exchange Act of 1934, this
report  has been signed by the following persons on behalf of the registrant and
in  the  capacities  and  on  the  dates  indicated.


                          RIO VISTA ENERGY PARTNERS L.P.



August 19, 2005           By:  /s/ Ian T. Bothwell
                               -------------------------------------------------
                               Ian T. Bothwell
                               Chief Financial Officer (principal accounting and
                               Financial  officer)  of Rio Vista GP LLC, general
                               partner of Rio Vista Energy Partners L.P.


                                       49