##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended September 30, 2006
 OR
 o
    
    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.
  Delaware
(State or Other Jurisdiction of Incorporation or Organization)
    
    20-0153267
(I.R.S. Employer Identification No.)820 Gessner Road, Suite 1285, Houston, Texas
(Address of Principal Executive Offices)
    
    77024
(Zip Code)
 713) 467-8235
 þ o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer þ
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     1




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##### 



RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES
TABLE OF CONTENTS
 ITEM
    
    
    
    PAGE NO.Part I
    
    1.
    
    Financial StatementsReport of Independent Registered Public Accounting Firm
    
    
    3Consolidated Balance Sheets as of December 31, 2005 and September 30, 2006 (unaudited)
    
    
    4-5Unaudited Consolidated Statements of Operations for the three months and nine months ended September 30, 2005 and 2006
    
    
    6Unaudited Consolidated Statement of Partners Capital for the nine months ended September 30, 2006
    
    
    7Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 and 2006
    
    
    8Notes to Consolidated Financial Statements (unaudited)
    
    
    9-242.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25-373.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    384.
    
    Controls and Procedures
    
    
    38Part II
    
    1.
    
    Legal Proceedings
    
    
    391A.
    
    Risk Factors
    
    
    39-402.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    403.
    
    Defaults Upon Senior Securities
    
    
    404.
    
    Submission of Matters to a Vote of Security Holders
    
    
    405.
    
    Other Information
    
    
    406.
    
    Exhibits
    
    
    41-42Signatures
    
    
    43Exhibit Index
    
    
    44Exhibit 3.1Exhibit 31.1Exhibit 31.2Exhibit 32
   2




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##### Table of Contents



Part I
 
 Item 1.
 
 Report of Independent Registered Public Accounting Firm
 
       
  3




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##### Table of Contents



Rio Vista Energy Partners L.P. and Subsidiaries
 CONSOLIDATED BALANCE SHEETS
 ASSETS
 December 31,
    
    
    September 30,2005
    
    
    2006(Unaudited)Current AssetsCash
    
    $
    26,000
    
    
    $
    3,931,000Restricted cash
    
    
    1,907,000
    
    
    
    26,000Trade accounts receivable (less allowance for
doubtful accounts of $0)
    
    
    10,926,000
    
    
    
    286,000Due from Penn Octane Corporation, net
    
    
    
    
    
    
    3,288,000Prepaid expenses and other current assets
    
    
    5,000
    
    
    
    7,000Net current assets from discontinued operations
    
    
    2,244,000
    
    
    
    Total current assets
    
    
    15,108,000
    
    
    
    7,538,000Property, plant and equipment  net
    
    
    11,412,000
    
    
    
    10,815,000Other non-current assets
    
    
    15,000
    
    
    
    11,000Total assets
    
    $
    26,535,000
    
    
    $
    18,364,000
   4




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##### Table of Contents



Rio Vista Energy Partners L.P. and Subsidiaries
 CONSOLIDATED BALANCE SHEETS
 LIABILITIES AND PARTNERS CAPITAL
 December 31,
    
    
    September 30,2005
    
    
    2006(Unaudited)Current LiabilitiesNote payable
    
    $
    1,300,000
    
    
    $
    1,000,000Due to Penn Octane Corporation, net
    
    
    11,582,000
    
    
    
    Accounts payable
    
    
    670,000
    
    
    
    326,000Mexican taxes payable
    
    
    22,000
    
    
    
    73,000Accrued liabilities
    
    
    762,000
    
    
    
    724,000Total current liabilities
    
    
    14,336,000
    
    
    
    2,123,000Commitments and contingencies
    
    
    
    
    
    
    Partners CapitalCommon units
    
    
    11,955,000
    
    
    
    15,916,000General partners equity
    
    
    244,000
    
    
    
    325,000Total partners capital
    
    
    12,199,000
    
    
    
    16,241,000Total liabilities and partners capital
    
    $
    26,535,000
    
    
    $
    18,364,000
   5




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##### Table of Contents



Rio Vista Energy Partners L.P. and Subsidiaries
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2005
    
    
    2006
    
    
    2005
    
    
    2006Revenues
    
    $
    
    
    
    $
    191,000
    
    
    $
    
    
    
    $
    191,000Cost of goods sold
    
    
    774,000
    
    
    
    397,000
    
    
    
    1,651,000
    
    
    
    1,384,000Gross loss
    
    
    (774,000
    )
    
    
    (206,000
    )
    
    
    (1,651,000
    )
    
    
    (1,193,000
    )Selling, general and administrative expensesLegal and professional fees
    
    
    248,000
    
    
    
    88,000
    
    
    
    890,000
    
    
    
    490,000Salaries and payroll related expenses
    
    
    215,000
    
    
    
    151,000
    
    
    
    964,000
    
    
    
    492,000Other
    
    
    334,000
    
    
    
    298,000
    
    
    
    1,056,000
    
    
    
    935,000797,000
    
    
    
    537,000
    
    
    
    2,910,000
    
    
    
    1,917,000Operating loss from continuing operations
    
    
    (1,571,000
    )
    
    
    (743,000
    )
    
    
    (4,561,000
    )
    
    
    (3,110,000
    )Other expenseInterest expense
    
    
    (154,000
    )
    
    
    (31,000
    )
    
    
    (326,000
    )
    
    
    (105,000
    )Loss from continuing operations before
taxes
    
    
    (1,725,000
    )
    
    
    (774,000
    )
    
    
    (4,887,000
    )
    
    
    (3,215,000
    )Provision for Mexican income taxes
    
    
    (17,000
    )
    
    
    (23,000
    )
    
    
    (44,000
    )
    
    
    (52,000
    )Net loss from continuing operations
    
    $
    (1,742,000
    )
    
    $
    (797,000
    )
    
    $
    (4,931,000
    )
    
    $
    (3,267,000
    )Discontinued operations:Net income from operations of the LPG Assets
Sold
    
    
    668,000
    
    
    
    280,000
    
    
    
    3,301,000
    
    
    
    2,065,000Net gain on sale of LPG assets
    
    
    
    
    
    
    5,214,000
    
    
    
    
    
    
    
    5,214,000Net income from discontinued operations
    
    
    668,000
    
    
    
    5,494,000
    
    
    
    3,301,000
    
    
    
    7,279,000Net income (loss)
    
    $
    (1,074,000
    )
    
    $
    4,697,000
    
    
    $
    (1,630,000
    )
    
    $
    4,012,000Net income (loss) allocable to the partners
    
    $
    (1,074,000
    )
    
    $
    4,697,000
    
    
    $
    (1,630,000
    )
    
    $
    4,012,000Less general partners interest in net income
(loss)
    
    
    21,000
    
    
    
    (94,000
    )
    
    
    32,000
    
    
    
    (81,000
    )Net income (loss) allocable to the common units
    
    $
    (1,053,000
    )
    
    $
    4,603,000
    
    
    $
    (1,598,000
    )
    
    $
    3,931,000Net loss from continuing operations per common unit
    
    $
    (0.89
    )
    
    $
    (0.41
    )
    
    $
    (2.53
    )
    
    $
    (1.68
    )Net income from discontinued operations per common
unit
    
    
    0.34
    
    
    
    2.82
    
    
    
    1.69
    
    
    
    3.74Net income (loss) per common unit
    
    $
    (0.55
    )
    
    $
    2.41
    
    
    $
    (0.84
    )
    
    $
    2.06Weighted average common units outstanding
    
    
    1,910,656
    
    
    
    1,910,656
    
    
    
    1,910,656
    
    
    
    1,910,656
    6




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##### Table of Contents



Rio Vista Energy Partners L.P. and Subsidiaries
 CONSOLIDATED STATEMENT OF PARTNERS CAPITAL
 (Unaudited)
 Common UnitsTotalGeneral
    
    
    Partners'Units
    
    
    Amount
    
    
    Partner
    
    
    CapitalBalance as of December 31, 2005
    
    
    1,910,656
    
    
    $
    11,955,000
    
    
    $
    244,000
    
    
    $
    12,199,000Net income
    
    
    
    
    
    
    3,931,000
    
    
    
    81,000
    
    
    
    4,012,000Cash distribution to partners
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unit-based payment expense
    
    
    
    
    
    
    8,000
    
    
    
    
    
    
    
    8,000Loan discount on Penn Octane
Corporations debt related to
detachable warrants
    
    
    
    
    
    
    22,000
    
    
    
    
    
    
    
    22,000Balance as of September 30,
2006 (unaudited)
    
    
    1,910,656
    
    
    $
    15,916,000
    
    
    $
    325,000
    
    
    $
    16,241,000
   7




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##### Table of Contents



Rio Vista Energy Partners L.P. and Subsidiaries
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2006Cash flows from operating activities:Net loss from continuing operations
    
    $
    (4,931,000
    )
    
    $
    (3,267,000
    )Adjustments to reconcile net income from continuing operations
to net cash provided by (used in) operating activities:Depreciation
    
    
    454,000
    
    
    
    444,000Amortization of loan discount related to detachable warrants
    
    
    326,000
    
    
    
    22,000(Gain) loss on sale of assets
    
    
    (24,000
    )
    
    
    74,000Stock based compensation
    
    
    
    
    
    
    8,000Changes in current assets and liabilities:Trade accounts receivable
    
    
    (200,000
    )
    
    
    10,639,000Inventories
    
    
    92,000
    
    
    
    Prepaid expenses and other current assets
    
    
    (10,000
    )
    
    
    (2,000
    )Accounts payable
    
    
    379,000
    
    
    
    (344,000
    )Due to Penn Octane Corporation, net
    
    
    1,149,000
    
    
    
    (14,870,000
    )Accrued liabilities
    
    
    386,000
    
    
    
    (38,000
    )Mexican taxes payable
    
    
    (21,000
    )
    
    
    52,000Net cash used in continuing operating activities
    
    
    (2,400,000
    )
    
    
    (7,282,000
    )Net cash provided by discontinued operating activities
    
    
    3,301,000
    
    
    
    2,065,000Net cash provided by (used in) operating activities
    
    
    901,000
    
    
    
    (5,217,000
    )Cash flows from investing activities:Capital expenditures
    
    
    (181,000
    )
    
    
    (52,000
    )Proceeds from the sale of assets
    
    
    175,000
    
    
    
    131,000Proceeds from sale of discontinued operations
    
    
    
    
    
    
    7,458,000Net assets held for sale
    
    
    247,000
    
    
    
    Other non-current assets
    
    
    4,000
    
    
    
    4,000Net cash provided by investing activities
    
    
    245,000
    
    
    
    7,541,000Cash flows from financing activities:Decrease (increase) in restricted cash
    
    
    (1,447,000
    )
    
    
    1,881,000Cash distributions to partners
    
    
    (975,000
    )
    
    
    Issuance of debt
    
    
    1,300,000
    
    
    
    Reduction of debt
    
    
    
    
    
    
    (300,000
    )Net cash provided by (used in) financing activities
    
    
    (1,122,000
    )
    
    
    1,581,000Net change in cash
    
    
    24,000
    
    
    
    3,905,000Cash at beginning of period
    
    
    13,000
    
    
    
    26,000Cash at end of period
    
    $
    37,000
    
    
    $
    3,931,000Supplemental disclosures of cash flow information:Cash paid during the year for:Interest and LPG financing expense
    
    $
    
    
    
    $
    338,000Cash paid for Mexican taxes
    
    $
    181,000
    
    
    $
    Supplemental disclosures of noncash transactions:Units and warrants issued and other
    
    $
    422,000
    
    
    $
    22,000Transfer of line fill to inventory
    
    $
    92,000
    
    
    $
    
   8




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RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE A  ORGANIZATION
      9




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RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE A  ORGANIZATION  Continued
 Basis of Presentation
     NOTE B  UNIT-BASED PAYMENT
   10




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RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE B  UNIT-BASED PAYMENT  Continued
  Three Months Ended
    
    
    Nine Months EndedSeptember 30, 2005
    
    
    September 30, 2005Net income (loss) as reported
    
    $
    (1,074,000
    )
    
    $
    (1,630,000
    )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
    )
    
    
    (309,000
    )Net income (loss) pro forma
    
    
    (1,086,000
    )
    
    
    (1,939,000
    )Net income (loss) allocable to
the common units pro forma
    
    
    (1,064,000
    )
    
    
    (1,900,000
    )Net income (loss) per common
unit, as reported
    
    
    (0.55
    )
    
    
    (0.84
    )Net income (loss) per common
unit, pro forma
    
    
    (0.56
    )
    
    
    (0.99
    )
   11




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE C  INCOME LOSS) PER COMMON UNIT
   For the three months ended September 30, 2005Income (Loss)
    
    
    Shares
    
    
    Per-Unit(Numerator)
    
    
    (Denominator)
    
    
    AmountNet income (loss) from continuing operations
    
    $
    (1,742,000
    )Basic EPSIncome (loss) allocable to the common units
    
    
    (1,707,000
    )
    
    
    1,910,656
    
    
    $
    (0.89
    )Effect of Dilutive SecuritiesWarrants
    
    
    
    
    
    
    Diluted EPSIncome (loss) allocable to the common units
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
 For the three months ended September 30, 2006Income (Loss)
    
    
    Shares
    
    
    Per-Unit(Numerator)
    
    
    (Denominator)
    
    
    AmountNet income (loss) from continuing operations
    
    $
    (797,000
    )Basic EPSIncome (loss) allocable to the common units
    
    
    (781,000
    )
    
    
    1,910,656
    
    
    $
    (0.41
    )Effect of Dilutive SecuritiesWarrants
    
    
    
    
    
    
    Diluted EPSIncome (loss) allocable to the common units
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
  12




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE C  INCOME LOSS) PER COMMON UNIT  Continued
 For the nine months ended September 30, 2005Income (Loss)
    
    
    Shares
    
    
    Per-Unit(Numerator)
    
    
    (Denominator)
    
    
    AmountNet income (loss) from continuing operations
    
    $
    (4,931,000
    )Basic EPSIncome (loss) allocable to the common units
    
    
    (4,832,000
    )
    
    
    1,910,656
    
    
    $
    (2.53
    )Effect of Dilutive SecuritiesWarrants
    
    
    
    
    
    
    Diluted EPSIncome (loss) allocable to the common units
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
 For the nine months ended September 30, 2006Income (Loss)
    
    
    Shares
    
    
    Per-Unit(Numerator)
    
    
    (Denominator)
    
    
    AmountNet income (loss) from continuing operations
    
    $
    (3,267,000
    )Basic EPSIncome (loss) allocable to the common units
    
    
    (3,202,000
    )
    
    
    1,910,656
    
    
    $
    (1.68
    )Effect of Dilutive SecuritiesWarrants
    
    
    
    
    
    
    Diluted EPSIncome (loss) allocable to the common units
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
  13




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE D  SALE OF LPG ASSETS / DISCONTINUED OPERATIONS
       14




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE
D  SALE OF LPG ASSETS / DISCONTINUED OPERATIONS  Continued
   December 31,
    
    
    September 30,2005
    
    
    2006Brownsville Terminal Facility:Building
    
    $
    173,000
    
    
    $
    Terminal facilities
    
    
    3,631,000
    
    
    
    Tank Farm
    
    
    374,000
    
    
    
    Leasehold improvements
    
    
    319,000
    
    
    
    Equipment
    
    
    226,000
    
    
    
    Truck
    
    
    26,000
    
    
    
    Static inventory
    
    
    168,000
    
    
    
    4,917,000
    
    
    
    Less: Accumulated depreciation
    
    
    (2,935,000
    )
    
    
    1,982,000
    
    
    
    Inventories
    
    
    262,000
    
    
    
    Net current assets from discontinued operations
    
    $
    2,244,000
    
    
    $
    
 NOTE E  PROPERTY, PLANT AND EQUIPMENT
  December 31,
    
    
    September 30,2005
    
    
    2006US  Mexico Pipelines and Matamoros Terminal Facility: (a)U.S. Pipelines and Rights of Way
    
    $
    6,747,000
    
    
    $
    6,752,000Mexico Pipelines and Rights of Way
    
    
    993,000
    
    
    
    1,038,000Matamoros Terminal Facility
    
    
    5,875,000
    
    
    
    5,647,000Land
    
    
    705,000
    
    
    
    705,000Total
    
    
    14,320,000
    
    
    
    14,142,000Less: accumulated depreciation and amortization
    
    
    (2,908,000
    )
    
    
    (3,327,000
    )$
    11,412,000
    
    
    $
    10,815,000
 (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.
   15




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE F  DEBT OBLIGATIONS
 TransMontaigne Note
  NOTE G  INCOME TAXES
  NOTE H  PARTNERS CAPITAL
 Common Units
    16




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE H  PARTNERS CAPITAL  Continued
  General Partner Interest
   Options and Warrants
 Loan Discount on Penn Octane Corporations Debt Related to Detachable Warrants
    17




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE H  PARTNERS CAPITAL  Continued
 Equity Incentive Plan
   Distributions of Available Cash
      18




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE I  COMMITMENTS AND CONTINGENCIES
 Litigation
   Lesly Camacho by Her Mother Dora Adame as Next Friend, et al. vs. Penn
Octane International LLC th
  19




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE I  COMMITMENTS AND CONTINGENCIES  Continued
 Litigation  Continued
 Faustino Izaguirre Gonzalez, et al. vs. Penn Octane Corporation, et
al. th
  Rio Vista
Operating Partnership L.P. vs. Guajardo, Jr. Farms, Inc.
   20




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE I  COMMITMENTS AND CONTINGENCIES  Continued
 Credit Facility, Letters of Credit and Other
        21




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE I  COMMITMENTS AND CONTINGENCIES  Continued
 Consulting Agreement
    Concentrations of Credit Risk
  Tax obligations of Penn Octane resulting from the Spin-Off
   Partnership Tax Treatment
   22




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE I  COMMITMENTS AND CONTINGENCIES  Continued
 Partnership Tax Treatment  Continued
      Guarantees and Assets Pledged on Certain of Penn Octanes Obligations
  Fuel Products trade accounts payable
    
    $
    6,236,000Lines of credit
    
    $
    1,286,000Letters of credit in excess of Fuel Products
trade accounts payable
    
    $
    2,593,000
  23




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE I  COMMITMENTS AND CONTINGENCIES  Continued
  Accounts receivable
    
    $
    5,607,000Restricted cash
    
    $
    3,079,000Inventory
    
    $
    3,334,000Property, plant and equipment, net
    
    $
    10,905,000
  Accounts receivable
    
    $
    286,000Property, plant and equipment, net
    
    $
    10,815,000
 NOTE J  RELATED PARTY TRANSACTIONS
    Omnibus Agreement
     24




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##### Table of Contents



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 proceeded by fiscal (e.g.
fiscal 2006) 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, estimates, projects 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, LPG Asset Sale, LPG
Transportation Business, Retained Assets, TransMontaigne Note, guarantees, cash distributions,
Qualifying Income, Penn Octane, partnership tax treatment, risk factors 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 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, 2005, 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.
 Overview
    25




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##### Table of Contents



Liquidity and Capital Resources 
Distributions of Available Cash)
 LPG Transportation Agreement
   Month
    
    Minimum Volumes(gallons)October 2006
    
    
    8,100,000November 2006
    
    
    8,100,000December 2006
    
    
    9,000,000January 2007
    
    
    8,100,000February 2007
    
    
    8,100,000March 2007
    
    
    8,100,000
  26




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##### Table of Contents



Potential Factors Affecting Future Demand Of The Retained Assets:
 Recent Trends.
    Dependence on TransMontaigne.
  27




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##### Table of Contents



Results of Operations
 The following discussion of Rio Vistas results of operations from continuing operations for all
periods presented excludes the results of operations related to the Sold Assets, including
revenues, direct costs and associated interest expenses, which have been reclassified as
discontinued operations (see below). As a result, the results of operations from continuing
operations reflects only the results associated with the LPG Transportation Business, including all
costs associated with operation of the US-Mexico Pipelines and Matamoros Terminal Facility and all
indirect income and expenses of the Company.
 Continuing Operations:
 Three Months Ended September 30, 2006 Compared With Three Months Ended September 30, 2005
 Revenues.
 Cost of goods sold.
 Selling, general and administrative expenses.
 Other
income (expense).
 Nine Months Ended September 30, 2006 Compared With Nine Months Ended September 30, 2005
 Revenues.
 Cost of goods sold.
 Selling, general and administrative expenses.
  28




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##### Table of Contents



Other income (expense).
 Discontinued Operations:
 The following is a discussion of Rio Vistas results of operations from discontinued operations of
its LPG sales business for all periods presented through the date of its LPG Asset Sale and
includes all related revenues, direct costs and associated interest expenses.
  Three months ended
    
    
    Three months ended
    
    
    Nine months ended
    
    
    Nine months endedSeptember 30, 2005
    
    
    September 30, 2006 (a)
    
    
    September 30, 2005
    
    
    September 30, 2006 (a)Volume SoldLPG (millions of gallons)  PMI
    
    
    21.0
    
    
    
    9.0
    
    
    
    74.0
    
    
    
    66.2Average sales priceLPG (per gallon)  PMI
    
    $
    1.08
    
    
    $
    1.23
    
    
    $
    0.94
    
    
    $
    1.08
 (a)
    
    Sales of LPG ceased on August 21, 2006, immediately prior to the LPG Asset Sale
 Three Months Ended September 30, 2006 Compared With Three Months Ended September 30, 2005
 Revenues.
 Cost of goods sold.
 Nine Months Ended September 30, 2006 Compared With Nine Months Ended September 30, 2005
 Revenues.
 Cost of goods sold.
  29




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##### Table of Contents



Liquidity and Capital Resources
 General.
 As Reported
    
    
    
    
    
    
    Adjusted9/30/2006
    
    
    Pro Forma
    
    
    9/30/2006Current AssetsCash
    
    $
    3,931,000
    
    
    $
    (487,000
    )(a)
    
    $
    6,732,0003,288,000
    (b)Restricted Cash
    
    
    26,000
    
    
    
    
    
    
    
    26,000Trade Accounts Receivable
    
    
    286,000
    
    
    
    
    
    
    
    286,000Inventories
    
    
    
    
    
    
    
    
    
    
    Due From Affiliates
    
    
    3,288,000
    
    
    
    (3,288,000
    )(b)
    
    
    Prepaid Expenses
    
    
    7,000
    
    
    
    
    
    
    
    7,000Total Current Assets
    
    
    7,538,000
    
    
    
    (487,000
    )
    
    
    7,051,000Current LiabilitiesCurrent Maturities Of
Long-Term Debt
    
    $
    1,000,000
    
    
    
    
    
    
    $
    1,000,000US and Foreign Taxes Payable
    
    
    73,000
    
    
    
    
    
    
    
    73,000Accounts Payables
    
    
    326,000
    
    
    
    
    
    
    
    326,000Accrued Liabilities
    
    
    724,000
    
    
    
    
    
    
    
    724,000Total Current Liabilities
    
    
    2,123,000
    
    
    
    
    
    
    
    2,123,000Working Capital
    
    $
    5,415,000
    
    
    
    (487,000
    )
    
    $
    4,928,000
      30




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##### Table of Contents



TransMontaigne Note.
 Guarantees and Assets Pledged on Certain of Penn Octanes Obligations.
  RZB Obligation
  31
    Table of Contents  Guarantees and Assets Pledged on Certain of Penn Octanes Obligations
  Fuel Products trade payables
    
    $
    6.2Lines of credit
    
    $
    1.3Letters of credit in excess of Fuel Products
trade payables
    
    $
    2.6
  Accounts receivable
    
    $
    5.6Restricted cash
    
    $
    3.1Inventory
    
    $
    3.3Property, plant and equipment, net
    
    $
    10.9
  Accounts receivable
    
    $
    0.3Property, plant and equipment, net
    
    $
    10.8
  Payments due by Period(Amounts in Millions)Less than
    
    
    1  3
    
    
    4  5
    
    
    AfterContractual Obligations
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 YearsLong-Term Debt Obligations
    
    $
    1.0
    
    
    $
    1.0
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating Leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Long-Term Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Contractual Cash Obligations
    
    $
    1.0
    
    
    $
    1.0
    
    
    $
    
    
    
    $
    
    
    
    $
    
  32
    Table of Contents  Amount of Commitment ExpirationPer Period(Amounts in Millions)Total Amounts
    
    
    Less than
    
    
    1  3
    
    
    4  5
    
    
    OverCommercial Commitments
    
    Committed
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 YearsLines of Credit
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Standby Letters of Credit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Guarantees
    
    
    10.1
    
    
    
    10.1
    
    
    
    
    
    
    
    
    
    
    
    Standby Repurchase Obligations
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/AOther Commercial Commitments
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal Commercial Commitments
    
    $
    10.1
    
    
    $
    10.1
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Income Taxes.
  Partnership Tax Treatment.
 Litigation.
 Consulting Agreement
 Distributions of Available Cash.
    33
    Table of Contents   Mexican Operations.
  Deregulation of the LPG Industry in Mexico. Ley Reglarmentaria del Artículo 27 Constitutional en el Ramo del Petróleo Ley Orgánica del Petróleos Mexicanos
y Organismos Subsidiarios
  Partners Capital.
 Common Units
  34
    Table of Contents    General Partner Interest
   Options and Warrants
 Loan Discount on Penn Octane Corporations Debt Related to Detachable Warrants.
  Equity Incentive Plan.
  35




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##### Table of Contents



Intercompany Agreements
 Omnibus Agreement.
    36




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##### Table of Contents



Impact of Inflation
  Environmental Matters
  Recently Issued Financial Accounting Standards
   Statement by Management Concerning Review of Interim Information by An Independent Registered
Public Accounting Firm.
   37




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##### Table of Contents



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
   
 Item 4.
    
    Controls and Procedures.
    38




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##### Table of Contents



Part II
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
 Business Factors.
 Acquisition Factors.
 Competitive Factors.
 International Factors.
 Political Factors.
  39




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##### Table of Contents



Industry and Economic Factors.
 Market Risk Factors.
 Internal Control Factors.
 Projections.
 
 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.
  40




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##### Table of Contents



Item 6.
    
    Exhibits
 The following exhibits are incorporated by reference to previously filed reports, as
noted.
 Exhibit No.
 2.1
    
    
    Purchase and Sale Agreement dated August 15, 2006 as amended and restated on August 15, 2006
entered into by and between Rio Vista Operating Partnership L.P. and TransMontaigne Product
Services Inc. (Incorporated by reference to Rio Vistas Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006 filed on November 20, 2006, SEC File No. 000-50394).10.1
    
    
    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 (incorporated by
reference to Rio Vistas Quarterly Report on Form 10-Q for the quarter ended September 30,
2005 filed on August 19, 2005, SEC File No. 000-50394).10.2
    
    
    Purchase and Sale Agreement dated as of August 15, 2005 between Rio Vista Operating
Partnership L.P. and TransMontaigne Product Services Inc. (incorporated by reference to Rio
Vistas Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 filed on
August 19, 2005, SEC File No. 000-50394).10.3
    
    
    Amendment No. 1 to Purchase and Sale Agreement between Rio Vista Operating Partnership
L.P., Penn Octane International, LLC and TransMontaigne Product Services Inc., dated
January 26, 2006. (Incorporated by reference to Rio Vistas Annual Report on Form 10-K for
the year ended December 31, 2005 filed on April 6, 2006, SEC File No. 000-50394).10.4
    
    
    Promissory note dated August 15, 2005 between Rio Vista Operating Partnership L.P. and
TransMontaigne Product Services Inc. (incorporated by reference to Rio Vistas Quarterly
Report on Form 10-Q for the quarter ended September 30, 2005 filed on August 19, 2005, SEC
File No. 000-50394).10.5
    
    
    Security agreement dated August 15, 2005 between Rio Vista Operating Partnership L.P. and
TransMontaigne Product Services Inc. (incorporated by reference to Rio Vistas Quarterly
Report on Form 10-Q for the quarter ended September 30, 2005 filed on August 19, 2005, SEC
File No. 000-50394).10.6
    
    
    Amended and Restated Consulting Agreement dated November 15, 2005 between Penn Octane
Corporation, Rio Vista Energy Partners and Jerome B. Richter. (Incorporated by reference
to Rio Vistas Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 filed
on November 21, 2005, SEC File No. 000-50394).10.7
    
    
    First Amendment to the First Amended and Restated Agreement of Limited Partnership of Rio
Vista Energy Partners L.P. dated as of October 26, 2005. (Incorporated by reference to Rio
Vistas Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 filed on
November 21, 2005, SEC File No. 000-50394).10.8
    
    
    First Amendment to the First Amended and Restated Agreement of Limited Partnership of Rio
Vista Operating Partnership L.P. dated as of October 26, 2005. (Incorporated by reference
to Rio Vistas Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 filed
on November 21, 2005, SEC File No. 000-50394).10.9
    
    
    Matamoros LPG Mix Purchase and Sales Agreement made and entered into as of April 28, 2006, by
and between Rio Vista Operating Partnership L.P. and P.M.I. Trading Limited. (Incorporated by
reference to Rio Vistas Quarterly Report on Form 10-Q for the quarter ended June 30, 2006
filed on November 20, 2006, SEC File No. 000-50394).10.10
    
    
    Form of LPG Transportation Agreement by and between Rio Vista Operating Partnership L.P.,
Penn Octane International, LLC and TransMontaigne Product Services Inc. (Incorporated by
reference to Rio Vistas Quarterly Report on Form 10-Q for the quarter ended June 30, 2006
filed on November 20, 2006, SEC File No. 000-50394).
  41




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##### Table of Contents



10.11
    
    
    Form of US Pipeline Service & Operating Agreement by and between TransMontaigne Product
Services Inc. and Rio Vista Operating Partnership L.P. (Incorporated by reference to Rio
Vistas Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 filed on November
20, 2006, SEC File No. 000-50394).10.12
    
    
    Form of Amendment No. 1 to Promissory Note between Rio Vista Operating Partnership, L.P. and
TransMontaigne Product Services Inc. (Incorporated by reference to Rio Vistas Quarterly
Report on Form 10-Q for the quarter ended June 30, 2006 filed on November 20, 2006, SEC File
No. 000-50394).10.13
    
    
    Form of Amendment No. 1 to Security Agreement between Rio Vista Operating Partnership, L.P.
and TransMontaigne Product Services Inc. (Incorporated by reference to Rio Vistas Quarterly
Report on Form 10-Q for the quarter ended June 30, 2006 filed on November 20, 2006, SEC File
No. 000-50394).
 The following Exhibits are filed as part of this report:
 Exhibit No.
 3.1
    
    
    First Amendment to Amended and Restated Limited Liability Company Agreement of Rio Vista GP
LLC dated October 6, 2006.31.1
    
    
    Certification Pursuant to Rule 13a-14(a) / 15d  14(a) of the Exchange Act31.2
    
    
    Certification Pursuant to Rule 13a-14(a) / 15d  14(a) of the Exchange Act32
    
    
    Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 www.sec.gov
  42




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##### Table of Contents



SIGNATURES
  RIO VISTA ENERGY PARTNERS L.P.
BY: RIO VISTA GP LLC, General PartnerNovember 20, 2006
    
    By:
    
    /s/ Ian T. BothwellIan T. Bothwell
Acting Chief Executive Officer, Acting
President, Vice-President, Chief Financial
Officer, Treasurer and Assistant Secretary
(Principal Executive, Financial and
Accounting Officer)
  43




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description3.1
    
    
    First Amendment to Amended and Restated Limited Liability Company Agreement of Rio Vista GP
LLC dated October 6, 2006.31.1
    
    
    Certification Pursuant to Rule 13a-14(a) / 15d  14(a) of the Exchange Act31.2
    
    
    Certification Pursuant to Rule 13a-14(a) / 15d  14(a) of the Exchange Act32
    
    
    Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
  44