##### 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, 2008
 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
    
    20-0153267(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)1313 E. Alton Gloor Blvd., Suite J, Brownsville, Texas
    
    78526(Address of Principal Executive Offices)
    
    (Zip Code)
 (956) 831-0886
 þ o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
    
    Smaller Reporting Company þ
 Yes o No þ




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##### 



RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

TABLE OF CONTENTS
 PAGE NO.PART I FINANCIAL INFORMATIONITEM1. Financial StatementsReport of Independent Registered Public Accounting Firm
    
    
    3Consolidated Balance Sheets as of December 31, 2007 and
September 30, 2008 (unaudited)
    
    
    4-5Unaudited Consolidated Statements of Operations for the three months and
nine months ended September 30, 2007 and 2008
    
    
    6Unaudited Consolidated Statement of Partners Capital for the nine months
ended September 30, 2008
    
    
    7Unaudited Consolidated Statements of Cash Flows for the nine months
ended September 30, 2007 and 2008
    
    
    8Notes to Consolidated Financial Statements (unaudited)
    
    
    9-312. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    32-443. Quantitative and Qualitative Disclosures About Market Risk
    
    
    444T. Controls and Procedures
    
    
    44-45PART II OTHER INFORMATION1. Legal Proceedings
    
    
    461A. Risk Factors
    
    
    462. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    463. Defaults Upon Senior Securities
    
    
    464. Submission of Matters to a Vote of Security Holders
    
    
    465. Other Information
    
    
    466. Exhibits
    
    
    47Signatures
    
    
    48Exhibit 10.1Exhibit 10.2Exhibit 10.3Exhibit 15Exhibit 31.1Exhibit 31.2Exhibit 32
   2




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##### Table of Contents



Part I  FINANCIAL INFORMATION
 
 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 30,2007
    
    
    2008(Unaudited)Current AssetsCash
    
    $
    3,450,000
    
    
    $
    963,000Restricted cash
    
    
    26,000
    
    
    
    27,000Trade accounts receivable (less allowance
for doubtful accounts of $0 at December
31, 2007 and September 30, 2008)
    
    
    1,446,000
    
    
    
    2,136,000Prepaid expenses and other current assets
    
    
    453,000
    
    
    
    408,000Total current assets
    
    
    5,375,000
    
    
    
    3,534,000Oil and gas properties and related
equipment (successful efforts method) 
net
    
    
    26,197,000
    
    
    
    28,256,000Property, plant and equipment  net
    
    
    12,762,000
    
    
    
    12,566,000Other non-current assets
    
    
    
    
    
    
    15,000Goodwill
    
    
    5,121,000
    
    
    
    5,121,000Total assets
    
    $
    49,455,000
    
    
    $
    49,492,000
   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 30,2007
    
    
    2008(Unaudited)Current LiabilitiesCurrent maturities of long-term debt
    
    $
    3,361,000
    
    
    $
    5,738,000Short-term debt
    
    
    5,493,000
    
    
    
    5,875,000Due to Penn Octane Corporation, net
    
    
    347,000
    
    
    
    852,000Accounts payable
    
    
    2,101,000
    
    
    
    2,637,000Taxes payable
    
    
    618,000
    
    
    
    811,000Accrued liabilities
    
    
    1,476,000
    
    
    
    2,584,000Total current liabilities
    
    
    13,396,000
    
    
    
    18,497,000Commitments and contingencies
    
    
    
    
    
    
    Long-term debt, less current maturities
    
    
    21,250,000
    
    
    
    19,688,000Deferred income taxes
    
    
    3,238,000
    
    
    
    2,924,000Partners CapitalCommon units
    
    
    11,340,000
    
    
    
    8,215,000General Partners equity
    
    
    231,000
    
    
    
    168,000Total partners capital
    
    
    11,571,000
    
    
    
    8,383,000Total liabilities and partners capital
    
    $
    49,455,000
    
    
    $
    49,492,000
   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 30,2007
    
    
    2008
    
    
    2007
    
    
    2008Revenues
    
    $
    1,650,000
    
    
    $
    4,698,000
    
    
    $
    2,765,000
    
    
    $
    11,803,000Cost of goods sold
    
    
    1,271,000
    
    
    
    3,702,000
    
    
    
    2,067,000
    
    
    
    9,387,000Gross profit
    
    
    379,000
    
    
    
    996,000
    
    
    
    698,000
    
    
    
    2,416,000Selling, general and administrative expenses and otherLegal and professional fees
    
    
    467,000
    
    
    
    225,000
    
    
    
    989,000
    
    
    
    1,396,000Salaries and payroll related expenses
    
    
    414,000
    
    
    
    365,000
    
    
    
    706,000
    
    
    
    1,229,000Other
    
    
    413,000
    
    
    
    461,000
    
    
    
    1,010,000
    
    
    
    1,503,0001,294,000
    
    
    
    1,051,000
    
    
    
    2,705,000
    
    
    
    4,128,000Operating loss from operations
    
    
    (915,000
    )
    
    
    (55,000
    )
    
    
    (2,007,000
    )
    
    
    (1,712,000
    )Other income (expense)Interest expense
    
    
    (205,000
    )
    
    
    (978,000
    )
    
    
    (256,000
    )
    
    
    (2,694,000
    )Interest income
    
    
    5,000
    
    
    
    2,000
    
    
    
    6,000
    
    
    
    8,000Loss from operations before taxes
    
    
    (1,115,000
    )
    
    
    (1,031,000
    )
    
    
    (2,257,000
    )
    
    
    (4,398,000
    )Provision (benefit) for income taxes
    
    
    44,000
    
    
    
    7,000
    
    
    
    69,000
    
    
    
    (91,000
    )Net loss from continuing operations
    
    $
    (1,159,000
    )
    
    $
    (1,038,000
    )
    
    $
    (2,326,000
    )
    
    $
    (4,307,000
    )Loss on sale of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (343,000
    )Net loss
    
    $
    (1,159,000
    )
    
    $
    (1,038,000
    )
    
    $
    (2,326,000
    )
    
    $
    (4,650,000
    )Net loss allocable to the partners
    
    $
    (1,159,000
    )
    
    $
    (1,038,000
    )
    
    $
    (2,326,000
    )
    
    $
    (4,650,000
    )Less General Partners interest in net loss
    
    
    23,000
    
    
    
    21,000
    
    
    
    46,000
    
    
    
    93,000Net loss allocable to the common units
    
    $
    (1,136,000
    )
    
    $
    (1,017,000
    )
    
    $
    (2,280,000
    )
    
    $
    (4,557,000
    )Net loss from continuing operations per common unit
    
    $
    (0.59
    )
    
    $
    (0.38
    )
    
    $
    (1,19
    )
    
    $
    (1.66
    )Net loss from discontinued operations per common unit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.13
    )Net loss per common unit
    
    $
    (0.59
    )
    
    $
    (0.38
    )
    
    $
    (1,19
    )
    
    $
    (1.79
    )Weighted average common units outstanding
    
    
    1,935,656
    
    
    
    2,670,740
    
    
    
    1,919,264
    
    
    
    2,546,846
   6




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF PARTNERS CAPITAL
 (UNAUDITED)
 TotalCommon Units
    
    
    General
    
    
    PartnersUnits
    
    
    Amount
    
    
    Partner
    
    
    CapitalBalance as of December 31, 2007
    
    
    2,429,206
    
    
    $
    11,340,000
    
    
    $
    231,000
    
    
    $
    11,571,000Net loss
    
    
    
    
    
    
    (4,557,000
    )
    
    
    (93,000
    )
    
    
    (4,650,000
    )Exercise of options for cash
    
    
    61,875
    
    
    
    759,000
    
    
    
    15,000
    
    
    
    774,000Exercise of options in exchange for
severance package
    
    
    15,625
    
    
    
    217,000
    
    
    
    5,000
    
    
    
    222,000Units issued as bonus compensation
    
    
    8,812
    
    
    
    120,000
    
    
    
    3,000
    
    
    
    123,000Registration costs
    
    
    
    
    
    
    (308,000
    )
    
    
    (6,000
    )
    
    
    (314,000
    )Cash distribution to partners
    
    
    
    
    
    
    (1,916,000
    )
    
    
    (39,000
    )
    
    
    (1,955,000
    )Contribution from the General Partner
    
    
    
    
    
    
    116,000
    
    
    
    2,000
    
    
    
    118,000Issuance of common units
    
    
    197,628
    
    
    
    1,960,000
    
    
    
    40,000
    
    
    
    2,000,000Unit-based compensation
    
    
    
    
    
    
    406,000
    
    
    
    8,000
    
    
    
    414,000Units issued to consultant
    
    
    6,378
    
    
    
    78,000
    
    
    
    2,000
    
    
    
    80,000Balance as of September 30, 2008
    
    
    2,719,524
    
    
    $
    8,215,000
    
    
    $
    168,000
    
    
    $
    8,383,000
   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 30,2007
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (2,326,000
    )
    
    $
    (4,650,000
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation, depletion and amortization
    
    
    581,000
    
    
    
    1,533,000Unit-based compensation
    
    
    259,000
    
    
    
    414,000Amortization of loan discount
    
    
    10,000
    
    
    
    54,000Beneficial conversion amortization
    
    
    
    
    
    
    18,000Loss on sale of discontinued operations
    
    
    
    
    
    
    343,000Gain on sale of assets
    
    
    
    
    
    
    (20,000
    )Changes in current assets and liabilities:Trade accounts receivable
    
    
    (278,000
    )
    
    
    (690,000
    )Prepaid and other current assets
    
    
    (248,000
    )
    
    
    45,000Trade accounts payable
    
    
    941,000
    
    
    
    Due to Penn Octane Corporation, net
    
    
    2,485,000
    
    
    
    505,000Accrued liabilities and other accounts payable
    
    
    206,000
    
    
    
    1,412,000U.S. and foreign taxes payable
    
    
    166,000
    
    
    
    192,000Net cash provided by operating activities
    
    
    1,796,000
    
    
    
    (844,000
    )Cash flows from investing activities:Capital expenditures
    
    
    (6,000
    )
    
    
    (3,559,000
    )Other non-current assets
    
    
    (5,000
    )
    
    
    (15,000
    )Costs to acquire Regional Enterprizes, Inc.
    
    
    (7,982,000
    )
    
    
    Purchase price adjustments  Oklahoma assets
    
    
    
    
    
    
    83,000Net cash used in investing activities
    
    
    (7,993,000
    )
    
    
    (3,491,000
    )Cash flows from financing activities:Proceeds from exercise of options
    
    
    
    
    
    
    774,000Registration costs
    
    
    
    
    
    
    (314,000
    )Cash distributions to partners
    
    
    (1,469,000
    )
    
    
    (1,955,000
    )Reduction of debt
    
    
    
    
    
    
    (350,000
    )Issuance of debt
    
    
    5,000,000
    
    
    
    1,575,000Refundable deposit
    
    
    6,500,000
    
    
    
    Capital contribution and issuance of common units
    
    
    
    
    
    
    2,118,000Net cash used in financing activities
    
    
    10,031,000
    
    
    
    1,848,000Net change in cash
    
    
    3,834,000
    
    
    
    (2,487,000
    )Cash at beginning of period
    
    
    3,896,000
    
    
    
    3,450,000Cash at end of period
    
    $
    7,730,000
    
    
    $
    963,000Supplemental disclosures of cash flow information:Cash paid during the year for:Interest
    
    $
    124,000
    
    
    $
    3,138,000Supplemental disclosures of noncash transactions:Units and warrants issued and other
    
    $
    
    
    
    $
    424,000Unit-based compensation
    
    $
    259,000
    
    
    $
    414,000Exchange of assets for note reduction
    
    $
    
    
    
    $
    100,000Sellers note, net of discount
    
    $
    884,000
    
    
    $
    
   8




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##### Table of Contents



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




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##### Table of Contents



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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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE B  UNIT-BASED PAYMENT  Continued
  NOTE C   LOSS PER COMMON UNIT
  For the three months ended September 30, 2007Loss
    
    
    Units
    
    
    Per-Unit(Numerator)
    
    
    (Denominator)
    
    
    AmountNet loss from continuing operations
available to the common units
    
    $
    (1,136,000
    )Basic EPSNet loss available to the common units
    
    
    (1,136,000
    )
    
    
    1,935,656
    
    
    $
    (0.59
    )Effect of Dilutive SecuritiesWarrants
    
    
    
    
    
    
    Diluted EPSNet loss available to the common units
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
  11




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE C   LOSS PER COMMON UNIT  Continued
 For the three months ended September 30, 2008Loss
    
    
    Units
    
    
    Per-Unit(Numerator)
    
    
    (Denominator)
    
    
    AmountNet loss from continuing operations
available to the common units
    
    $
    (1,017,000
    )Basic EPSNet loss available to the common units
    
    
    (1,017,000
    )
    
    
    2,670,740
    
    
    $
    (0.38
    )Effect of Dilutive SecuritiesWarrants
    
    
    
    
    
    
    Diluted EPSNet loss available to the common units
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
 For the nine months ended September 30, 2007Loss
    
    
    Units
    
    
    Per-Unit(Numerator)
    
    
    (Denominator)
    
    
    AmountNet loss from continuing operations
available to the common units
    
    $
    (2,280,000
    )Basic EPSNet loss available to the common units
    
    
    ( 2,280,000
    )
    
    
    1,919,264
    
    
    $
    (1.19
    )Effect of Dilutive SecuritiesWarrants
    
    
    
    
    
    
    Diluted EPSNet loss available to the common units
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
 For the nine months ended September 30, 2008Loss
    
    
    Units
    
    
    Per-Unit(Numerator)
    
    
    (Denominator)
    
    
    AmountNet loss from continuing operations
available to the common units
    
    $
    (4,221,000
    )Basic EPSNet loss available to the common units
    
    
    (4,221,000
    )
    
    
    2,546,846
    
    
    $
    (1.66
    )Effect of Dilutive SecuritiesWarrants
    
    
    
    
    
    
    Diluted EPSNet loss available to the common units
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
  12




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RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE D  A FORMER OFFICER OF PENN OCTANE NOTE
  NOTE E  PROPERTY, PLANT AND EQUIPMENT
  December 31,
    
    
    September 30,2007
    
    
    2008Oklahoma:Pipelines and equipment
    
    $
    6,756,000
    
    
    $
    7,507,000Regional:Land
    
    
    237,000
    
    
    
    237,000Terminal and improvements
    
    
    3,825,000
    
    
    
    4,041,000Automotive equipment
    
    
    2,438,000
    
    
    
    2,438,0006,500,000
    
    
    
    6,716,00013,256,000
    
    
    
    14,223,000Less: accumulated depreciation and amortization
    
    
    (494,000
    )
    
    
    (1,657,000
    )$
    12,762,000
    
    
    $
    12,566,000
    13




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE F  OIL AND GAS PROPERTIES AND RELATED EQUIPMENT, NET
 Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities
  Development costs of leased properties:
    
    $
    2,265,000Capitalized pipeline infrastructure costs:
    
    $
    700,000
   NOTE G  DEBT OBLIGATIONS
  December 31,
    
    
    September 30,2007
    
    
    2008RZB Note
    
    $
    5,000,000
    
    
    $
    5,000,000Moores Note
    
    
    493,000
    
    
    
    300,000Richter Note Payable (see note D)
    
    
    
    
    
    
    575,000$
    5,493,000
    
    
    $
    5,875,000
  TCW Credit Facility
    
    $
    23,689,000
    
    
    $
    24,700,000Sellers Note  Regional
    
    
    922,000
    
    
    
    726,00024,611,000
    
    
    
    25,426,000Less current portion
    
    
    3,361,000
    
    
    
    5,738,000$
    21,250,000
    
    
    $
    19,688,000
 RZB Amendment
   14




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE G  DEBT OBLIGATIONS  Continued
 RZB Amendment  Continued
  Moores Note
  Sellers Note  Regional
   15




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RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE G  DEBT OBLIGATIONS  Continued
 TCW Credit Facility
 wholly-owned
    16




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE G  DEBT OBLIGATIONS  Continued
 TCW Credit Facility  Continued
   Beneficial Conversion Features
  NOTE H  PARTNERS CAPITAL
 Common Units
   17




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RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE H  PARTNERS CAPITAL  Continued
 Common Units  Continued
  Private Placement of Common Units
    18




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RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE H  PARTNERS CAPITAL  Continued
 Private Placement of Common Units  Continued
      Distributions of Available Cash
   19




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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
 Distributions of Available Cash  Continued
   Amounts PaidQuarter
    
    Payment
    
    
    Distribution
    
    
    Common
    
    
    GeneralEnded
    
    Date
    
    
    Per Unit
    
    
    Units
    
    
    PartnerDecember 2007
    
    
    02/14/08
    
    
    $
    0.25
    
    
    $
    607,000
    
    
    $
    12,000March 2008
    
    
    05/16/08
    
    
    $
    0.25
    
    
    $
    629,000
    
    
    $
    13,000June 2008
    
    
    08/14/08
    
    
    $
    0.25
    
    
    $
    679,000
    
    
    $
    14,000
  NOTE I  UNIT WARRANTS
 Options and Warrants
 non-employees.
 Equity Incentive Plan
    20




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE I  UNIT WARRANTS  Continued
 Equity Incentive Plan  Continued
  NOTE J  COMMITMENTS AND CONTINGENCIES
 Legal Proceedings
   Lesly Camacho by Her Mother Dora Adame as Next Friend, et al. vs. Penn
Octane International LLC, et al th
  21




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RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE J  COMMITMENTS AND CONTINGENCIES   Continued
 Legal Proceedings   Continued
 Faustino Izaguirre Gonzalez, et al. vs. Penn Octane Corporation,
et al. th
   Nolte v. Regional
Enterprizes, Inc. CV-0478-PJM).
   22




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE J  COMMITMENTS AND CONTINGENCIES   Continued
 Legal Proceedings   Continued
   Credit Facility, Letters of Credit and Other
     23




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE J  COMMITMENTS AND CONTINGENCIES   Continued
 Credit Facility, Letters of Credit and Other  continued
  Leases
 Norfolk Southern Leases
    Consulting Agreement
   24




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE J  COMMITMENTS AND CONTINGENCIES   Continued
 CEOcast
  Strategic Growth International
  Concentrations of Credit Risk
  Tax obligations of Penn Octane resulting from the Spin-Off
    25




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE J  COMMITMENTS AND CONTINGENCIES   Continued
 Partnership Tax Treatment and Regional and MV Income Taxes
        26




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE K  OIL AND GAS SALES CONTRACT
   Date
    
    Terms April 2008  October 2008:
    
    1.0 MMcf/d @ $6.35/Mcf (MV Pipeline production) April 2008  October 2008:
    
    0.5 MMcf/d @ $7.97/Mcf (Brooken Pipeline production) November 2008  March 2009:
    
    1.0 MMcf/d @ $8.61/Mcf (MV Pipeline production) November 2008  March 2009:
    
    0.5 MMcf/d @ $8.61/Mcf (Brooken Pipeline production)
  NOTE L  RELATED PARTY TRANSACTIONS
   Sale  Purchase of Rio Vista Common Units
   27




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE L  RELATED PARTY TRANSACTIONS  Continued
 Loans To Rio Vista
  Omnibus Agreement
     NOTE M  401K
   28




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE N  REALIZATION OF ASSETS
       29




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##### Table of Contents



RIO VISTA ENERGY PARTNERS L.P.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE O    SEGMENT INFORMATION
    Transportation andTerminalling
    
    
    Oil and Gas
    
    
    TotalsRevenues from external customers
    
    
    2,279,000
    
    
    
    2,419,000
    
    
    
    4,698,000Interest expense
    
    
    143,000
    
    
    
    766,000
    
    
    
    909,000Interest income
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    278,000
    
    
    
    287,000
    
    
    
    565,000Segment gross profit
    
    
    559,000
    
    
    
    448,000
    
    
    
    1,007,000Segment assets
    
    
    12,179,000
    
    
    
    37,109,000
    
    
    
    49,288,000Segment liabilities
    
    
    4,384,000
    
    
    
    28,465,000
    
    
    
    32,849,000Expenditure for segment assets
    
    
    26,000
    
    
    
    540,000
    
    
    
    566,000Reconciliation to Consolidated Amounts:RevenuesTotal revenues for reportable segments
    
    
    
    
    
    
    
    
    
    $
    5,269,000Elimination of intersegment revenues
    
    
    
    
    
    
    
    
    
    
    (571,000
    )Total consolidated revenues
    
    
    
    
    
    
    
    
    
    $
    4,698,000Profit (loss)Total gross profit for reportable segments
    
    
    
    
    
    
    
    
    
    
    1,007,000Other gross profit
    
    
    
    
    
    
    
    
    
    
    (11,000
    )Selling, general and administrative expense
    
    
    
    
    
    
    
    
    
    
    (1,051,000
    )Interest and Fuel Products financing expense
    
    
    
    
    
    
    
    
    
    
    (978,000
    )Interest income
    
    
    
    
    
    
    
    
    
    
    2,000Elimination of intersegment profits
    
    
    
    
    
    
    
    
    
    
    Unallocated amountsCorporate headquarters expense
    
    
    
    
    
    
    
    
    
    
    Other expenses
    
    
    
    
    
    
    
    
    
    
    Consolidated income from continuing
operations before income tax
    
    
    
    
    
    
    
    
    
    $
    (1,031,000
    )AssetsTotal assets for reportable segments
    
    
    
    
    
    
    
    
    
    
    49,288,000Other assets
    
    
    
    
    
    
    
    
    
    
    204,000Corporate headquarters
    
    
    
    
    
    
    
    
    
    
    Other unallocated amounts
    
    
    
    
    
    
    
    
    
    
    Total consolidated assets
    
    
    
    
    
    
    
    
    
    $
    49,492,000
  30




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RIO VISTA ENERGY PARTNERS L.P. AND SUBIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 NOTE O    SEGMENT INFORMATION  Continued
  Transportation andTerminalling
    
    
    Oil and Gas
    
    
    TotalsRevenues from external customers
    
    
    6,539,000
    
    
    
    5,264,000
    
    
    
    11,803,000Interest expense
    
    
    531,000
    
    
    
    2,063,000
    
    
    
    2,594,000Interest income
    
    
    
    
    
    
    7,000
    
    
    
    7,000Depreciation and amortization
    
    
    818,000
    
    
    
    712,000
    
    
    
    1,530,000Segment gross profit
    
    
    1,448,000
    
    
    
    968,000
    
    
    
    2,416,000Segment assets
    
    
    12,179,000
    
    
    
    37,109,000
    
    
    
    49,288,000Segment liabilities
    
    
    4,384,000
    
    
    
    28,465,000
    
    
    
    32,849,000Expenditure for segment assets
    
    
    226,000
    
    
    
    3,333,000
    
    
    
    3,559,000Reconciliation to Consolidated Amounts:RevenuesTotal revenues for reportable segments
    
    
    
    
    
    
    
    
    
    $
    13,930,000Elimination of intersegment revenues
    
    
    
    
    
    
    
    
    
    
    (2,127,000
    )Total consolidated revenues
    
    
    
    
    
    
    
    
    
    $
    11,803,000Profit (loss)Total gross profit for reportable segments
    
    
    
    
    
    
    
    
    
    
    2,416,000Other gross profit
    
    
    
    
    
    
    
    
    
    
    Selling, general and administrative expense
    
    
    
    
    
    
    
    
    
    
    (4,128,000
    )Interest and Fuel Products financing expense
    
    
    
    
    
    
    
    
    
    
    (2,694,000
    )Interest income
    
    
    
    
    
    
    
    
    
    
    8,000Elimination of intersegment profits
    
    
    
    
    
    
    
    
    
    
    Unallocated amountsCorporate headquarters expense
    
    
    
    
    
    
    
    
    
    
    Other expenses
    
    
    
    
    
    
    
    
    
    
    Consolidated income from continuing
operations before income tax
    
    
    
    
    
    
    
    
    
    $
    (4,398,000
    )AssetsTotal assets for reportable segments
    
    
    
    
    
    
    
    
    
    
    49,288,000Other assets
    
    
    
    
    
    
    
    
    
    
    204,000Corporate headquarters
    
    
    
    
    
    
    
    
    
    
    Other unallocated amounts
    
    
    
    
    
    
    
    
    
    
    Total consolidated assets
    
    
    
    
    
    
    
    
    
    $
    49,492,000
  31




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##### Table of Contents



Item 2 Managements Discussion and Analysis of Financial Condition and
Results of Operations
 Rio Vista Energy Partners L.P. and its consolidated subsidiaries are collectively hereinafter
referred to as Rio Vista.
 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 preceeded by fiscal (e.g.
fiscal 2008) refer to Rio Vistas fiscal year ending December 31.
   
    
    the volatility of realized natural gas prices;
    
    the discovery, estimation, development and replacement of oil and natural gas reserves;
    
    our business and financial strategy;
    
    our drilling locations;
    
    technology;
    
    our cash flow, liquidity and financial position;
    
    our production volumes;
    
    our lease operating expenses, general and administrative costs and finding and
development costs;
    
    the availability of drilling and production equipment, labor and other services;
    
    our future operating results;
    
    our prospect development and property acquisitions;
    
    the marketing of oil and natural gas;
    
    competition in the oil and natural gas industry and the transportation and terminalling
business;
    
    the impact of weather and the occurrence of natural disasters such as fires, floods,
hurricanes, earthquakes and other catastrophic events and natural disasters;
    
    governmental regulation of the oil and natural gas industry and the transportation and
terminalling business;
    
    required capital expenditures;
    
    cash distributions and qualified income;
    
    developments in oil producing and natural gas producing countries; and
    
    our strategic plans, objectives, expectations and intentions for future operations.
  forward-looking
  32




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##### Table of Contents



Overview
 Historical Assets and Operations
   Current Assets and Operations
   Liquidity and Capital Resources
 General
   33




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##### Table of Contents



Distributions of Available Cash
    34




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##### Table of Contents



Amounts PaidQuarter
    
    Payment
    
    
    Distribution
    
    
    Common
    
    
    GeneralEnded
    
    Date
    
    
    Per Unit
    
    
    Units
    
    
    PartnerDecember 2007
    
    
    02/14/08
    
    
    $
    0.25
    
    
    $
    607,000
    
    
    $
    12,000March 2008
    
    
    05/16/08
    
    
    $
    0.25
    
    
    $
    629,000
    
    
    $
    13,000June 2008
    
    
    08/14/08
    
    
    $
    0.25
    
    
    $
    679,000
    
    
    $
    14,000
  Debt Obligations
 RZB Loan Agreement
    TCW Credit Facility
   35




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##### Table of Contents



RZB Credit Facility Guarantee
    36




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##### Table of Contents



Moores Note
  Sellers Note  Regional
  A Former Officer of Penn Octane Note
  Leases
 Norfolk Southern Leases
     37




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##### Table of Contents



CEOcast Agreement
  Strategic Growth International
  Related Party Transactions
    38




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##### Table of Contents



Nasdaq Market
  Realization of Assets
       39




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##### Table of Contents



Results of Operations
  Three months ended September 30, 2008 Compared With Three months ended September 30, 2007
 THREE MONTHS ENDED SEPTEMBER 30, 2008
 Oklahoma
    
    
    Regional
    
    
    LPG
    
    
    Corporate/Assets (a)
    
    
    Enterprises (b)
    
    
    Transportation (c)
    
    
    Other
    
    
    TotalRevenues
    
    
    2,419,000
    
    
    
    2,279,000
    
    
    
    
    
    
    
    
    
    
    
    4,698,000Cost Of Goods Sold
    
    
    1,971,000
    
    
    
    1,720,000
    
    
    
    
    
    
    
    11,000
    
    
    
    3,702,000Gross Profit
    
    
    448,000
    
    
    
    559,000
    
    
    
    
    
    
    
    (11,000
    )
    
    
    996,000Selling, General And
Administrative
Expenses
    
    
    (9,000
    )
    
    
    (246,000
    )
    
    
    
    
    
    
    (796,000
    )
    
    
    (1,051,000
    )Operating Income (loss)
    
    
    439,000
    
    
    
    313,000
    
    
    
    
    
    
    
    (807,000
    )
    
    
    (55,000
    )Other Income (Expense)Interest Expense
    
    
    (766,000
    )
    
    
    (143,000
    )
    
    
    
    
    
    
    (69,000
    )
    
    
    (978,000
    )Interest Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    2,000Income (Loss) From
Operations Before
Taxes
    
    
    (327,000
    )
    
    
    170,000
    
    
    
    
    
    
    
    (874,000
    )
    
    
    (1,031,000
    )Provision (Benefit)
for Income Taxes
    
    
    (32,000
    )
    
    
    39,000
    
    
    
    
    
    
    
    
    
    
    
    7,000Net Income (Loss)
    
    
    (295,000
    )
    
    
    131,000
    
    
    
    
    
    
    
    (874,000
    )
    
    
    (1,038,000
    )
 (a)
    
    Acquired during November 2007(b)
    
    Acquired during July 2007(c)
    
    Business commenced in August 2006 and sold December 31, 2007  40




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##### Table of Contents



THREE MONTHS ENDED SEPTEMBER 30, 2007
 Oklahoma
    
    
    Regional
    
    
    LPG
    
    
    Corporate/Assets (a)
    
    
    Enterprises (b)
    
    
    Transportation (c)
    
    
    Other
    
    
    TotalRevenues
    
    
    
    
    
    
    1,211,000
    
    
    
    439,000
    
    
    
    
    
    
    
    1,650,000Cost Of Goods Sold
    
    
    
    
    
    
    827,000
    
    
    
    444,000
    
    
    
    
    
    
    
    1,271,000Gross Profit
    
    
    
    
    
    
    384,000
    
    
    
    (5,000
    )
    
    
    
    
    
    
    379,000Selling, General And
Administrative Expenses
    
    
    
    
    
    
    (123,000
    )
    
    
    (42,000
    )
    
    
    (1,129,000
    )
    
    
    (1,294,000
    )Operating Income (loss)
    
    
    
    
    
    
    261,000
    
    
    
    (47,000
    )
    
    
    (1,129,000
    )
    
    
    (915,000
    )Interest (Expense) Income
    
    
    
    
    
    
    (174,000
    )
    
    
    (31,000
    )
    
    
    5,000
    
    
    
    (200,000
    )Income (Loss) From
Operations Before Taxes
    
    
    
    
    
    
    87,000
    
    
    
    (78,000
    )
    
    
    (1,124,000
    )
    
    
    (1,115,000
    )Provision For Income Taxes
    
    
    
    
    
    
    35,000
    
    
    
    
    
    
    
    9,000
    
    
    
    44,000Net Income (loss)
    
    
    
    
    
    
    52,000
    
    
    
    (78,000
    )
    
    
    (1,133,000
    )
    
    
    (1,159,000
    )
 (a)
    
    Acquired during November 2007(b)
    
    Acquired during July 2007(c)
    
    Business commenced in August 2006 and sold December 31, 2007  41




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##### Table of Contents



Nine months ended September 30, 2008 Compared With Nine months ended September 30, 2007
 NINE MONTHS ENDED SEPTEMBER 30, 2008
 Oklahoma
    
    
    Regional
    
    
    LPG
    
    
    Corporate/Assets (a)
    
    
    Enterprises (b)
    
    
    Transportation (c)
    
    
    Other
    
    
    TotalRevenues
    
    
    5,264,000
    
    
    
    6,539,000
    
    
    
    
    
    
    
    
    
    
    
    11,803,000Cost Of Goods Sold
    
    
    4,296,000
    
    
    
    5,091,000
    
    
    
    
    
    
    
    
    
    
    
    9,387,000Gross Profit
    
    
    968,000
    
    
    
    1,448,000
    
    
    
    
    
    
    
    
    
    
    
    2,416,000Selling, General And
Administrative
Expenses
    
    
    (90,000
    )
    
    
    (688,000
    )
    
    
    
    
    
    
    (3,350,000
    )
    
    
    (4,128,000
    )Operating Income (loss)
    
    
    878,000
    
    
    
    760,000
    
    
    
    
    
    
    
    (3,350,000
    )
    
    
    (1,712,000
    )Interest Expense
    
    
    (2,063,000
    )
    
    
    (531,000
    )
    
    
    
    
    
    
    (100,000
    )
    
    
    (2,694,000
    )Interest income
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    
    1,000
    
    
    
    8,000Income (Loss) From
Operations Before
Taxes
    
    
    (1,178,000
    )
    
    
    229,000
    
    
    
    
    
    
    
    (3,449,000
    )
    
    
    (4,398,000
    )Provision (Benefit)
For Income Taxes
    
    
    (98,000
    )
    
    
    7,000
    
    
    
    
    
    
    
    
    
    
    
    (91,000
    )Income (loss) from
continuing operations
    
    
    (1,080,000
    )
    
    
    222,000
    
    
    
    
    
    
    
    (3,449,000
    )
    
    
    (4,307,000
    )Loss on sale of
discontinued
operations
    
    
    
    
    
    
    
    
    
    
    (343,000
    )
    
    
    
    
    
    
    (343,000
    )Net Income (loss)
    
    
    (1,080,000
    )
    
    
    222,000
    
    
    
    (343,000
    )
    
    
    (3,449,000
    )
    
    
    (4,650,000
    )
 (a)
    
    Acquired during November 2007(b)
    
    Acquired during July 2007(c)
    
    Business commenced in August 2006 and sold December 31, 2007  42




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##### Table of Contents



NINE MONTHS ENDED SEPTEMBER 30, 2007
 Oklahoma
    
    
    Regional
    
    
    LPG
    
    
    Corporate/Assets (a)
    
    
    Enterprises (b)
    
    
    Transportation (c)
    
    
    Other
    
    
    TotalRevenues
    
    
    
    
    
    
    1,211,000
    
    
    
    1,554,000
    
    
    
    
    
    
    
    2,765,000Cost Of Goods Sold
    
    
    
    
    
    
    827,000
    
    
    
    1,240,000
    
    
    
    
    
    
    
    2,067,000Gross Profit
    
    
    
    
    
    
    384,000
    
    
    
    314,000
    
    
    
    
    
    
    
    698,000Selling, General And
Administrative Expenses
    
    
    
    
    
    
    (123,000
    )
    
    
    (156,000
    )
    
    
    (2,426,000
    )
    
    
    (2,705,000
    )Operating Income (loss)
    
    
    
    
    
    
    261,000
    
    
    
    158,000
    
    
    
    (2,426,000
    )
    
    
    (2,007,000
    )Other ExpenseInterest (Expense) Income
    
    
    
    
    
    
    (174,000
    )
    
    
    (83,000
    )
    
    
    7,000
    
    
    
    (250,000
    )Income (Loss) From
Operations Before Taxes
    
    
    
    
    
    
    87,000
    
    
    
    75,000
    
    
    
    (2,419,000
    )
    
    
    (2,257,000
    )Provision For Income Taxes
    
    
    
    
    
    
    35,000
    
    
    
    
    
    
    
    34,000
    
    
    
    69,000Net Income (loss)
    
    
    
    
    
    
    52,000
    
    
    
    75,000
    
    
    
    (2,453,000
    )
    
    
    (2,326,000
    )
 (a)
    
    Acquired during November 2007(b)
    
    Acquired during July 2007(c)
    
    Business commenced in August 2006 and sold December 31, 2007 Off-Balance Sheet Arrangements
   43




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##### Table of Contents



Statement by Management Concerning Review of Interim Information by An Independent Registered
Public Accounting Firm.
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4T. Controls and Procedures.
     
    
    In May 2008, our General Partner hired an assistant controller to provide additional
assistance with internal accounting responsibilities and financial reporting. The newly
hired assistant controller has previous oil and gas experience.
    
    In June 2008, our General Partner hired a vice president, who is primarily responsible
for overseeing the operations of our oil and gas properties.
    
    Our General Partner is continuing to have ongoing discussions with a potential Chief
Executive Officer candidate. This candidate has extensive oil and gas expertise. We are
currently negotiating with this candidate in an effort to have him accept the role as Chief
Executive Officer.
  44




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##### Table of Contents




    
    In March 2008 and in connection with the acquisition of the Oklahoma operations, our
General Partner hired two employees who were previously engaged in accounting functions of
those businesses. We are currently training those employees.
    
    In May 2008, our General Partner engaged the services of a software consulting firm to
implement an Oracle ERP accounting software system. This system is intended to enhance
internal controls over the ability to enter transactions into the financial system and
financial reporting. This system will also provide for multiple user access, timely access
to accounting information and additional data security.
    
    Management is currently reviewing employee compensation and incentives to ensure that
it continues to attract and retain qualified employees.
     45




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##### Table of Contents



Part II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
 .
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
   
 Item 3. Defaults upon Senior Securities.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 5. Other Information.
   46




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##### Table of Contents



Item 6 Exhibits.
 The following Exhibits are filed as part of this report:
 Exhibit No.10.1
    
    
    First Amendment to Note Purchase Agreement dated as of September 29, 2008
by and among Rio Vista Penny LLC, TCW Asset Management Company, and the
Holders party to the Original Note Purchase Agreement.10.2
    
    
    Amended and Restated Management Services Agreement, dated and effective
as of September 29, 2008, is made by and among Rio Vista Operating LLC,
Rio Vista Energy Partners L.P., and Rio Vista Penny LLC.10.3
    
    
    Promissory Note dated April 15, 2008 between Rio Vista Energy Partners
L.P. and Jerome B. Richter.15
    
    
    Accountants Acknowledgment.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
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##### Table of Contents



SIGNATURES
  RIO VISTA ENERGY PARTNERS L.P.By:
    
    Rio Vista GP LLC, its General PartnerNovember 17, 2008
    
    By:
    
    /s/ Ian T. Bothwell

Ian T. BothwellActing Chief Executive Officer, Acting President, 
Vice-President, Chief Financial Officer, 
Treasurer and Assistant Secretary
(Principal Executive, Financial and Accounting Officer)
of Rio Vista GP LLC, general partner of 
Rio Vista Energy Partners L.P.
 
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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description10.1
    
    
    First Amendment to Note Purchase Agreement dated as of September 29, 2008
by and among Rio Vista Penny LLC, TCW Asset Management Company, and the
Holders party to the Original Note Purchase Agreement.10.2
    
    
    Amended and Restated Management Services Agreement, dated and effective
as of September 29, 2008, is made by and among Rio Vista Operating LLC,
Rio Vista Energy Partners L.P., and Rio Vista Penny LLC.10.3
    
    
    Promissory Note dated April 15, 2008 between Rio Vista Energy Partners
L.P. and Jerome B. Richter.15
    
    
    Accountants Acknowledgment.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
  49