<PAGE>

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

                                   (Mark One)

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

                 For the quarterly period ended March 31, 2001
                                                --------------

                                       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:  33-98490
                                                --------


                            STAR GAS PARTNERS, L.P.
                            -----------------------
             (Exact name of registrant as specified in its charter)


Delaware                                06-1437793
--------                                -------------------------------------
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
incorporation or organization)


2187 Atlantic Street, Stamford, Connecticut             06902
--------------------------------------------------------------------------------
(Address of principal executive office)

(203) 328-7300
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)


--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)

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 the number of shares outstanding of each issuer's classes of common
stock, as of May 3, 2001:


19,724,967   Common Units
 2,696,946   Senior Subordinated Units
   345,364   Junior Subordinated Units
   325,729   General Partner Units
<PAGE>

                                     STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
                                                INDEX TO FORM 10-Q

<TABLE>
<CAPTION>
Part I         Financial Information                                                                             Page
                                                                                                                 ----
               Item 1 - Condensed Consolidated Financial Statements
<S>                                                                                                             <C>
                      Condensed Consolidated Balance Sheets as of
                           September 30, 2000 and March 31, 2001                                                   3

                      Condensed Consolidated Statements of Operations for the
                           Three months ended March 31, 2000 and March 31, 2001
                           and for the Six months ended March 31, 2000 and
                           March 31, 2001                                                                         4

                      Condensed Consolidated Statements of Comprehensive Income
                           for the Three months ended March 31, 2000 and March
                           31, 2001 and for the Six months ended March 31, 2000
                           and March 31, 2001                                                                     5

                      Condensed Consolidated Statement of Partners' Capital for the six months ended
                           March 31, 2001                                                                         6

                      Condensed Consolidated Statements of Cash Flows for the six months ended
                           March 31, 2000 and March 31, 2001                                                      7

                      Notes to Condensed Consolidated Financial Statements                                     8-15

               Item 2 - Management's Discussion and Analysis of Financial Condition and
                           Results of Operations                                                              16-22

               Item 3 - Quantitative and Qualitative Disclosures About Market Risk                               23

Part II        Other Information:

               Item 6 - Exhibits and Reports on Form 8-K                                                         23

               Signature                                                                                         24
</TABLE>

                                       2
<PAGE>

                    STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                                                          March 31,
                                                                                         September 30,      2001
                                                                                              2000       (unaudited)
                                                                                          --------   --------------------
Assets
Current assets:
<S>                                                                                       <C>                    <C>
   Cash and cash equivalents                                                              $ 10,910               $ 16,908
   Receivables, net of allowance of $1,956 and $5,648 respectively                          66,858                199,842
   Inventories                                                                              34,407                 26,001
   Prepaid expenses and other current assets                                                14,815                 18,337
                                                                                          --------               --------
       Total current assets                                                                126,990                261,088
                                                                                          --------               --------


Property and equipment, net                                                                171,300                202,162
Long-term portion of accounts receivable                                                     7,282                  7,266
Intangibles and other assets, net                                                          313,404                333,923
                                                                                          --------               --------
       Total assets                                                                       $618,976               $804,439
                                                                                          ========               ========

Liabilities and Partners' Capital
Current liabilities:
   Accounts payable                                                                       $ 27,874               $ 37,070
   Working capital facility borrowings                                                      24,400                 58,953
   Current maturities of long-term debt                                                     16,515                 34,644
   Accrued expenses                                                                         42,410                 50,920
   Unearned service contract revenue                                                        15,654                 16,254
   Customer credit balances                                                                 37,943                  9,189
                                                                                          --------               --------
       Total current liabilities                                                           164,796                207,030
                                                                                          --------               --------

Long-term debt                                                                             310,414                335,198
Other long-term liabilities                                                                  4,588                  4,416

Partners' Capital:
   Common unitholders                                                                      134,672                241,606
   Subordinated unitholders                                                                  6,090                 16,554
   General partner                                                                          (1,584)                  (524)
   Accumulated other comprehensive income                                                        -                    159
                                                                                          --------               --------
       Total Partners' Capital                                                             139,178                257,795
                                                                                          --------               --------

       Total Liabilities and Partners' Capital                                            $618,976               $804,439
                                                                                          ========               ========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

                    STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (unaudited)


<TABLE>
<CAPTION>
                                                         Three Months Ended March 31,  Six Months Ended March 31,
                                                         ----------------------------  --------------------------

(in thousands, except per unit data)                              2000           2001          2000          2001
                                                              --------       --------      --------      --------
Sales:
<S>                                                      <C>            <C>            <C>           <C>
   Product                                                    $298,012       $439,723      $458,552      $730,314
   Installation, service and appliances                         23,683         30,724        50,029        63,637
                                                              --------       --------      --------      --------
       Total sales                                             321,695        470,447       508,581       793,951

Costs and expenses:
   Cost of product                                             175,288        281,529       261,834       475,915
   Cost of installation, service and appliances                 29,449         36,441        60,334        73,357
   Delivery and branch                                          45,275         57,839        85,577       107,173
   Depreciation and amortization                                 8,196         10,372        16,600        20,019
   General and administrative                                    4,595          8,669         9,276        15,562
   TG&E customer acquisition expense                                 -            718             -         1,371
   Unit compensation expense                                         -            719             -         1,219
   Net gain on sales of assets                                      38             31            50            42
                                                              --------       --------      --------      --------
       Operating income                                         58,930         74,191        75,010        99,377
Interest expense, net                                            6,900          9,003        13,373        17,120
Amortization of debt issuance costs                                128            151           257           296
                                                              --------       --------      --------      --------
       Income before income taxes and cumulative
         effect of change in accounting principle               51,902         65,037        61,380        81,961
Income tax expense                                                 215            923           328         1,639
                                                              --------       --------      --------      --------
       Income before cumulative change in accounting
         principle                                              51,687         64,114        61,052        80,322
Cumulative effect of change in accounting principle
  for adoption of SFAS No. 133, net of income taxes                  -              -             -         1,466
                                                              --------       --------      --------      --------

       Net income                                             $ 51,687       $ 64,114      $ 61,052      $ 81,788
                                                              ========       ========      ========      ========

       General Partner's interest in net income               $    915       $    964      $  1,105      $  1,247
                                                              --------       --------      --------      --------

Limited Partners' interest in net income                      $ 50,772       $ 63,150      $ 59,947      $ 80,541
                                                              ========       ========      ========      ========

Net income per Limited Partner unit:
   Basic                                                         $2.80          $2.86         $3.40         $3.83
                                                              ========       ========      ========      ========
   Diluted                                                       $2.80          $2.85         $3.40         $3.81
                                                              ========       ========      ========      ========

Weighted average number of Limited Partner
  units outstanding:
   Basic                                                        18,107         22,063        17,651        21,022
                                                              ========       ========      ========      ========
   Diluted                                                      18,107         22,176        17,651        21,135
                                                              ========       ========      ========      ========
</TABLE>



See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

                    STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                  (unaudited)


<TABLE>
<CAPTION>
                                                            Three Months Ended March 31,   Six Months Ended March 31,
                                                            -----------------------------  ---------------------------
(in thousands)                                                       2000           2001           2000          2001
                                                            -------------        -------   ------------       -------

<S>                                                         <C>            <C>             <C>           <C>
Net income                                                        $51,687        $64,114        $61,052       $81,788

Other comprehensive income (loss)
   Unrealized gain (loss) on derivative instruments                     -         (1,803)             -        (8,108)
                                                            -------------        -------   ------------       -------
Comprehensive income                                              $51,687        $62,311        $61,052       $73,680
                                                            =============        =======   ============       =======


Reconciliation of Accumulated Other Comprehensive
  Income

Balance, beginning of period                                $          -         $ 3,889   $          -       $     -
   Cumulative effect of the adoption of SFAS No. 133                    -              -              -        10,544
   Current period reclassification to earnings                          -         (1,927)             -        (2,277)
   Current period other comprehensive gain (loss)                       -         (1,803)             -        (8,108)
                                                            -------------        -------   ------------       -------
Balance, end of period                                      $           -        $   159   $          -       $   159
                                                            =============        =======   ============       =======


</TABLE>


See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>

                    STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
                                  (unaudited)

(in thousands, except per unit amounts)


<TABLE>
<CAPTION>
                                  Number of Units
                         --------------------------------

                                                                                                           Other         Total
                                  Senior  Junior  General               Senior     Junior    General   Comprehensive    Partners'
                          Common   Sub.    Sub.   Partner    Common      Sub.       Sub.     Partner       Income       Capital
                          ------  ------  ------  -------  ----------  ---------  --------  ---------  --------------  ----------
Balance as of
<S>                     <C>       <C>      <C>      <C>    <C>        <C>       <C>       <C>        <C>               <C>
  September 30, 2000      16,045   2,587     345      326   $134,672    $ 6,125    $  (35)   $(1,584)     $       -     $139,178

Issuance of Common
  Units                    3,680                              59,314                                                      59,314

Issuance of Senior
  Subordinated Units                 110                                  1,388                                            1,388

Net income                                                    69,038     10,179     1,324      1,247                      81,788

Other comprehensive
  Income
   Net change                                                                                                   159          159

Distributions:
   ($1.150 per common
     unit)                                                   (21,418)                                                    (21,418)
   ($0.825 per senior
     subordinated unit)                                                  (2,228)                                          (2,228)
   ($0.575 per junior
     subordinated unit)                                                              (199)                                  (199)
   ($0.575 per general
     partner unit)                                                                              (187)                       (187)
                         -------------------------------------------------------------------------------------------------------
Balance as of
  March 31, 2001          19,725   2,697     345      326   $241,606    $15,464    $1,090    $  (524)     $     159     $257,795
                         =======================================================================================================
</TABLE>



See accompanying notes to condensed consolidated financial statements.

                                       6
<PAGE>

                    STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (unaudited)


<TABLE>
<CAPTION>
                                                                                  Six Months Ended March 31,
                                                                                 ----------------------------
(in thousands)                                                                           2000           2001
--------------                                                                           ----           ----

Cash flows used in operating activities:
<S>                                                                                  <C>           <C>
Net income                                                                           $ 61,052      $  81,788
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization                                                          16,600         20,019
Amortization of debt issuance cost                                                        257            296
Unit compensation expense                                                                   -          1,219
Provision for losses on accounts receivable                                               869          3,747
Gain on sales of assets                                                                   (50)           (42)
Cumulative effect of change in accounting principle for the adoption
  of SFAS No. 133                                                                           -         (1,466)
Changes in operating assets and liabilities:
   Increase in receivables                                                            (77,443)      (132,641)
   Decrease in inventories                                                              6,744         12,594
   Decrease in other assets                                                               307            727
   Increase in accounts payable                                                           976          9,137
   Decrease in other current and long-term liabilities                                (28,102)       (23,656)
                                                                                     --------      ---------
       Net cash used in operating activities                                          (18,790)       (28,278)
                                                                                     --------      ---------

Cash flows used in investing activities:
Capital expenditures                                                                   (3,294)        (7,065)
Proceeds from sales of fixed assets                                                       283            207
Acquisitions                                                                          (29,577)       (70,210)
                                                                                     --------      ---------
       Net cash used in investing activities                                          (32,588)       (77,068)
                                                                                     --------      ---------

Cash flows provided by financing activities:
Working capital facility borrowings                                                    70,600        120,850
Working capital facility repayments                                                   (30,750)       (86,297)
Acquisition facility borrowings                                                        29,700         31,700
Acquisition facility repayments                                                       (36,000)       (51,600)
Proceeds from issuance of debt                                                         27,500         69,647
Repayment of debt                                                                      (3,222)        (6,834)
Increase in deferred charges                                                                -           (415)
Proceeds from issuance of Common Units, net                                            22,611         59,314
Distributions                                                                         (16,527)       (24,032)
Other                                                                                    (797)          (989)
                                                                                     --------      ---------
       Net cash provided by financing activities                                       63,115        111,344
                                                                                     --------      ---------

       Net increase in cash                                                            11,737          5,998
Cash at beginning of period                                                             4,492         10,910
                                                                                     --------      ---------
Cash at end of period                                                                $ 16,229      $  16,908
                                                                                     ========      =========
</TABLE>


See accompanying notes to condensed consolidated statements.

                                       7
<PAGE>

                    STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



1)   Partnership Organization

     Star Gas Partners, L.P. ("Star Gas Partners" or the "Partnership") is a
     diversified home energy distributor and services provider, specializing in
     heating oil, propane, natural gas and electricity.  Star Gas Partners is a
     Master Limited Partnership that at March 31, 2001 had 19.7 million common
     limited partner units (trading symbol "SGU" representing a 85.4% limited
     partner interest in Star Gas Partners) and 2.7 million senior subordinated
     units  (trading symbol "SGH" representing an 11.7% limited partnership
     interest in Star Gas Partners) which are traded on the New York Stock
     Exchange.  Additional interest in Star Gas Partners are represented by 0.3
     million junior subordinated units (representing a 1.5% limited partner
     interest in Star Gas Partners) and 0.3 million general partner units
     (representing a 1.4% general partner interest in Star Gas Partners).

     Operationally the Partnership is organized as follows:

          .    Petro Holdings, Inc. ("Petro" or the "heating oil segment"), is
               the nation's largest retail distributor of home heating oil and
               serves approximately 385,000 customers in the Northeast and
               Mid-Atlantic. Petro is an indirect wholly owned subsidiary of
               Star Gas Propane, L.P.

          .    Star Gas Propane, L.P., ("Star Gas Propane" or the "propane
               segment") is a wholly owned subsidiary of Star Gas Partners. Star
               Gas Propane markets and distributes propane gas and related
               products to more than 260,000 customers in the Midwest,
               Northeast, Florida and Georgia.

          .    Total Gas and Electric ("TG&E" or the "natural gas and electric
               reseller segment") is an energy reseller that markets natural gas
               and electricity to residential homeowners in deregulated energy
               markets in the Northeast and Mid- Atlantic states of New York,
               New Jersey, Pennsylvania, Maryland and Florida and serves
               approximately 100,000 residential customers. TG&E is a 72.7%
               owned subsidiary of Star Gas Partners.

2)   Summary of Significant Accounting Policies

     Basis of Presentation

     The Consolidated Financial Statements for the period October 1, 1999
     through April 6, 2000 include the accounts of Star Gas Partners, L.P., and
     subsidiaries, principally Petro and Star Gas Propane.  Beginning April 7,
     2000, the Consolidated Financial Statements also include the accounts and
     results of operations of TG&E and reflect the amounts related to the 27.3%
     minority interest holder.

     The financial information included herein is unaudited; however, such
     information reflects all adjustments (consisting solely of normal recurring
     adjustments) which are, in the opinion of management, necessary for the
     fair statement of financial condition and results for the interim periods.
     The results of operations for the three and six month periods ended March
     31, 2001 are not necessarily indicative of the results to be expected for
     the full year.

     Inventories
     Inventories are stated at the lower of cost or market and are computed on a
     first-in, first-out basis.  At the dates indicated, the components of
     inventory were as follows:

<TABLE>
<CAPTION>
                                             September 30, 2000           March 31, 2001
                                             ------------------           --------------
(in thousands)
<S>                                       <C>                        <C>
Propane gas                                        $ 6,323                    $ 4,092
Propane appliances and equipment                     2,313                      3,664
Fuel oil                                            14,263                      7,552
Fuel oil parts and equipment                         7,374                      8,090
Natural gas                                          4,134                      2,603
                                                   -------                    -------
                                                   $34,407                    $26,001
                                                   =======                    =======
</TABLE>

                                       8
<PAGE>

2)    Summary of Significant Accounting Policies - (continued)

      Accounting Changes

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
     Statement of Financial Accounting Standard No. 133 "Accounting for
     Derivative Instruments and Hedging Activities" (SFAS No. 133) as amended by
     SFAS No. 137 and No. 138.  SFAS No. 133 establishes accounting and
     reporting standards for derivative instruments, including certain
     derivative instruments embedded in other contracts, and hedging activities.
     It requires the recognition of all derivative instruments as assets or
     liabilities in the Partnership's balance sheet and measurement of those
     instruments at fair value and requires that a company formally document,
     designate and assess the effectiveness of transactions that receive hedge
     accounting.

     The accounting treatment of changes in fair value is dependent upon whether
     or not a derivative instrument is designated as a hedge, and if so, the
     type of hedge.  For derivatives designated as Cash Flow Hedges, changes in
     fair value are recognized in other comprehensive income until the hedged
     item is recognized in earnings.  For derivatives recognized as Fair Value
     Hedges, changes in fair value are recognized in the income statement and
     are offset by related changes in the fair value of the item hedged.
     Changes in the fair value of derivative instruments, which are not
     designated as hedges or which do not qualify for hedge accounting are
     recognized currently in earnings.

     The Partnership periodically hedges a portion of its oil, propane and
     natural gas purchases through the use of futures, options, collars and swap
     agreements.  The purpose of the hedges is to provide a measure of price
     stability in the volatile market of oil, propane and natural gas and to
     manage its exposure to commodity price risk under certain existing sales
     commitments.  The Partnership also has derivative agreements that
     management has decided not to treat as hedge transactions for accounting
     purposes and as such, mark-to-market adjustments are recognized currently
     in earnings.

     The Partnership adopted SFAS No. 133 on October 1, 2000, and records its
     derivatives at fair market value.  As a result of adopting the Standard,
     the Partnership recognized current assets of $12.0 million, a $1.5 million
     increase in net income and a $10.5 million increase in additional other
     comprehensive income which were recorded as cumulative effect of a change
     in accounting principle.

     For the three and six month period ended March 31, 2001, the Partnership
     recorded a net decrease to other comprehensive income of $3.7 million and
     $10.4 million respectively, representing in part cash flow hedges
     reclassified into earnings totaling $1.9 million and $2.3 million for the
     three and six month period ended March 31, 2001, respectively.  The
     estimated net amount of existing unrealized gains currently within other
     comprehensive income are expected to be reclassified into earnings within
     the next twelve months.

3)   Long-term Debt

     On October 25, 2000, the heating oil division completed a refinancing of
     $40 million of indebtedness incurred under its bank acquisition facility
     through the issuance of senior notes.  The senior notes bear an average
     interest rate of 8.96% per year, have an average life of five and three-
     quarter years and are guaranteed by Star Gas Partners.  The first maturity
     date of the senior notes is November 1, 2004 with a final maturity date of
     November 1, 2010.

     On March 29, 2001, the propane division issued $29.5 million of senior
     notes to refinance $25.0 million of indebtedness incurred under its bank
     acquisition facility.  The balance of the proceeds, $4.5 million, will be
     used to fund future acquisition activity and to refinance maturities of
     senior notes.  The senior notes bear an average interest rate of 7.89% per
     year and have an average life of nine years.  The senior notes require two
     equal prepayments of $2.5 million on April 1, 2006 and April 1, 2007.  The
     first maturity date of these notes is April 1, 2008 with a final maturity
     date of April 1, 2011.

     In March 2001, the natural gas and electric reseller segment replaced its
     existing revolving credit facility with a new revolving credit facility
     comprised of a $15.4 million working capital facility and a $3.0 million
     acquisition facility.

                                       9
<PAGE>

4)   Segment Reporting

     In accordance with SFAS No. 131, "Disclosures about Segments of an
     Enterprise and Related Information", the Partnership has four reportable
     segments, a retail distributor of heating oil, a retail distributor of
     propane, a reseller of natural gas and electricity and the public master
     limited partnership, Star Gas Partners.  Management has chosen to organize
     the enterprise under these four segments in order to leverage the expertise
     it has in each industry, allow each segment to continue to strengthen its
     core competencies and provide a clear means for evaluation of operating
     results.

     The heating oil segment is primarily engaged in the retail distribution of
     home heating oil, related equipment services, and equipment sales to
     residential and commercial customers.  It operates primarily in the
     Northeast and  Mid-Atlantic states.  Home heating oil is principally used
     by the Partnership's residential and commercial customers to heat their
     homes and buildings, and as a result, weather conditions have a significant
     impact on the demand for home heating oil.

     The propane segment is primarily engaged in the retail distribution of
     propane and related supplies and equipment to residential, commercial,
     industrial, agricultural and motor fuel customers, in the Midwest,
     Northeast, Florida and Georgia.  Propane is used primarily for space
     heating, water heating and cooking by the Partnership's residential and
     commercial customers and as a result, weather conditions also have a
     significant impact on the demand for propane.

     The natural gas and electric reseller segment is primarily engaged in
     offering natural gas and electricity to residential consumers in
     deregulated energy markets.  In deregulated energy markets customers have a
     choice in selecting energy suppliers to power and / or heat their homes.
     As a result, a significant portion of this segment's revenue is directly
     related to weather conditions.  TG&E operates in nine markets in the
     Northeast, Mid-Atlantic states and Florida where competition for energy
     suppliers range from independent resellers, like TG&E, to large public
     utilities.

     The public master limited partnership segment includes the office of the
     Chief Executive Officer and has the responsibility for maintaining investor
     relations and investor reporting for the Partnership.

     The following are the statements of operations and balance sheets for each
     segment as of and for the periods indicated.  The electric and natural gas
     reselling segment was added beginning April 7, 2000.  There were no inter-
     segment sales.

                                       10
<PAGE>

4)   Segment Reporting - (continued)

<TABLE>
<CAPTION>
                                                                        Three Months Ended
                               --------------------------------------------------------------------------------------------------
                                              March 31, 2000                                    March 31, 2001
                                                (unaudited)                                       (unaudited)
                               --------------------------------------------------------------------------------------------------
                                  Heating                                      Heating
(in thousands)                      Oil     Propane   Partners    Consol.        Oil     Propane     TG&E    Partners    Consol.
                                 ---------  --------  ---------  ---------    ---------  --------  --------  ---------  ---------

Statements of Operations
------------------------
Sales:
<S>                              <C>        <C>       <C>        <C>          <C>        <C>       <C>       <C>        <C>
   Product                        $240,857   $57,155  $      -    $298,012     $306,962   $87,246   $45,515  $      -    $439,723
   Installation, service,
    and appliance                   20,778     2,905         -      23,683       25,650     5,074         -         -      30,724
                                  --------   -------  --------    --------     --------   -------   -------   -------    --------
       Total sales                 261,635    60,060         -     321,695      332,612    92,320    45,515         -     470,447
Cost and expenses:                                                                                                  -
   Cost of product                 144,993    30,295         -     175,288      191,506    49,602    40,421         -     281,529
   Cost of installation,
    service, and appliances         28,561       888         -      29,449       34,740     1,701         -         -      36,441
   Delivery and branch              33,219    12,056         -      45,275       42,056    15,783         -         -      57,839
   Depreciation and
    amortization                     5,359     2,837         -       8,196        6,838     3,294       238         2      10,372
   General and
    administrative                   2,417     1,554       624       4,595        2,888     1,615     2,610     1,556       8,669
   TG&E customer
    acquisition expense                  -         -         -           -            -         -       718         -         718
   Unit compensation
    expense                              -         -         -           -            -         -         -       719         719
   Net gain on sales of assets          11        27         -          38            5        26         -         -          31
                                  --------   -------  --------    --------     --------   -------   -------   -------    --------
       Operating income (loss)      47,097    12,457      (624)     58,930       54,589    20,351     1,528    (2,277)     74,191
Interest expense (income), net       4,634     2,274        (8)      6,900        5,747     2,967       805      (516)      9,003
Amortization of debt
 issuance costs                         83        45         -         128           98        53         -         -         151
                                  --------   -------  --------    --------     --------   -------   -------   -------    --------
       Income (loss) before
        income taxes                42,380    10,138      (616)     51,902       48,744    17,331       723    (1,761)     65,037
Income tax expense                     200        15         -         215          850        72         1         -         923
                                  --------   -------  --------    --------     --------   -------   -------   -------    --------
       Net income (loss)          $ 42,180   $10,123     $(616)   $ 51,687     $ 47,894   $17,259   $   722   $(1,761)   $ 64,114
                                  ========   =======  ========    ========     ========   =======   =======   =======    ========

Capital expenditures              $    559   $ 1,166  $      -    $  1,725     $  2,021   $   914   $    12  $      -    $  2,947
                                  ========   =======  ========    ========     ========   =======   =======  ========    ========
</TABLE>

                                       11
<PAGE>

4)  Segment Reporting - (continued)


<TABLE>
<CAPTION>
                                                                           Six Months Ended
                                ----------------------------------------------------------------------------------------------------
                                               March 31, 2000                                     March 31, 2001
                                                (unaudited)                                         (unaudited)
                                ----------------------------------------------------------------------------------------------------
                                  Heating                                     Heating
(in thousands)                      Oil     Propane   Partners   Consol.        Oil       Propane      TG&E      Partners   Consol.
                                  --------  --------  --------- ---------    ----------  ----------  ---------  --------------------

Statements of Operations
------------------------
Sales:
<S>                               <C>       <C>       <C>       <C>          <C>         <C>         <C>        <C>        <C>
   Product                        $364,742  $ 93,810   $     -   $458,552     $511,906    $152,895    $65,513   $        -  $730,314
   Installation, service, and
    Appliance                       43,226     6,803         -     50,029       52,769      10,868          -            -    63,637
                                  --------  --------   -------   --------     --------    --------    -------    ---------  --------
       Total sales                 407,968   100,613         -    508,581      564,675     163,763     65,513            -   793,951
Costs and expenses:                                                                                                      -
   Cost of product                 213,880    47,954         -    261,834      328,600      89,019     58,296            -   475,915
   Cost of installation,
    service, and appliances         58,073     2,261         -     60,334       69,682       3,675          -            -    73,357
   Delivery and branch              62,395    23,182         -     85,577       77,733      29,440          -            -   107,173
   Depreciation and
    amortization                    10,665     5,935         -     16,600       13,111       6,427        477            4    20,019
   General and administrative        5,003     3,025     1,248      9,276        5,278       3,285      4,302        2,697    15,562
   TG&E customer
    acquisition expense                  -         -         -          -            -           -      1,371            -     1,371
   Unit compensation expense             -         -         -          -            -           -          -        1,219     1,219
   Net gain (loss) on sales
    of assets                           14        36         -         50           (8)         50          -            -        42
                                  --------  --------   -------   --------     --------    --------    -------    ---------  --------
       Operating income (loss)      57,966    18,292    (1,248)    75,010       70,263      31,967      1,067       (3,920)   99,377
   Interest expense (income),        8,910     4,473       (10)    13,373       10,911       5,693      1,331         (815)   17,120
    net
   Amortization of debt
    issuance costs                     167        90         -        257          192         104          -            -       296
                                  --------  --------   -------   --------     --------    --------    -------    ---------  --------
       Income (loss) before
        income taxes                48,889    13,729    (1,238)    61,380       59,160      26,170       (264)      (3,105)   81,961
Income tax expense                     275        53         -        328        1,525         113          1            -     1,639
                                  --------  --------   -------   --------     --------    --------    -------    ---------  --------
   Income (loss) before
    cumulative effect of
    adoption of accounting
    principle                       48,614    13,676    (1,238)    61,052       57,635      26,057       (265)      (3,105)   80,322
Cumulative effect of
 adoption of accounting
 principle                               -         -         -          -        2,093        (229)      (398)           -     1,466
                                  --------  --------   -------   --------     --------    --------    -------    ---------  --------

       Net income (loss)          $ 48,614  $ 13,676   $(1,238)  $ 61,052     $ 59,728    $ 25,828    $  (663)   $  (3,105) $ 81,788
                                  ========  ========   =======   ========     ========    ========    =======    =========  ========

Capital expenditures              $  1,012  $  2,282   $     -   $  3,294     $  4,461    $  2,535    $    69    $       -  $  7,065
                                  ========  ========   =======   ========     ========    ========    =======    =========  ========
</TABLE>


                                       12
<PAGE>

4)   Segment Reporting - (continued)

<TABLE>
<CAPTION>

                                              September 30, 2000
                            -------------------------------------------------------
                             Heating                                        (1)
(in thousands)                 Oil       Propane      TG&E    Partners    Consol.
                            ---------   ---------   --------  ---------  ---------

Balance Sheets
--------------
<S>                          <C>         <C>         <C>       <C>        <C>
Assets
Current assets:
   Cash and cash
    equivalents              $  6,288    $  2,765    $   222   $  1,635   $ 10,910
   Receivables, net            51,475       9,976      5,407          -     66,858
   Inventories                 21,637       8,636      4,134          -     34,407
   Prepaid expenses and
    other current assets       12,502       1,017      2,157          -     14,815
                             --------    --------    -------   --------   --------
       Total current
        assets                 91,902      22,394     11,920      1,635    126,990
   Property and
    equipment,  net            39,026     132,008        266          -    171,300
   Long-term portion of
    accounts receivable         7,282           -          -          -      7,282
   Investment in
    subsidiaries                    -      69,309          -    143,036          -
   Intangibles and other
    assets, net               236,069      63,003     14,174        158    313,404
                             --------    --------    -------   --------   --------
       Total assets          $374,279    $286,714    $26,360   $144,829   $618,976
                             ========    ========    =======   ========   ========



Liabilities and              Heating                                        (1)
                               Oil       Propane      TG&E    Partners    Consol.
 Partners' Capital          ---------   ---------   --------  ---------  ---------

Current Liabilities:
   Accounts payable          $ 11,887    $  7,436    $ 8,551  $  -        $ 27,874
   Working capital
    facility
    borrowings                 17,000         800      6,600          -     24,400
   Current maturities of
    long-term debt              7,669       8,846          -          -     16,515
   Accrued expenses and
    other current
     liabilities               36,882       4,006      1,521          -     42,410
   Due to affiliate            (1,115)     (3,674)         -      4,789          -
   Unearned service
    contract revenue           15,654           -          -          -     15,654
   Customer credit
    balances                   26,101       9,805      2,037          -     37,943
                             --------    --------    -------   --------   --------
       Total current
        liabilities           114,078      27,219     18,709      4,789    164,796
Long-term debt                186,397     122,154      1,863          -    310,414
Other long-term
 liabilities                    4,495          93          -          -      4,588
Partners' Capital:
   Equity Capital              69,309     137,248      5,788    140,040    139,178
                             --------    --------    -------   --------   --------
Total liabilities and
 Partners' Capital           $374,279    $286,714    $26,360   $144,829   $618,976
                             ========    ========    =======   ========   ========

<CAPTION>
                                                    March 31, 2001
                                                      (unaudited)
                            ---------------------------------------------------------
                                 Heating                                        (1)
(in thousands)                     Oil       Propane      TG&E    Partners    Consol.
                                ---------   ---------   --------  ---------  ---------

Balance Sheets
--------------
<S>                              <C>         <C>         <C>       <C>        <C>
Assets
Current assets:
   Cash and cash
    equivalents                  $  1,951    $ 10,591    $ 1,554   $  2,812   $ 16,908
   Receivables, net               146,865      26,739     26,238          -    199,842
   Inventories                     15,642       7,756      2,603          -     26,001
   Prepaid expenses and
    other current assets           14,750       1,433      2,952         64     18,337
                                 --------    --------    -------   --------   --------
       Total current
        assets                    179,208      46,519     33,347      2,876    261,088
   Property and
    equipment, net                 43,127     158,741        294          -    202,162
   Long-term portion of
    accounts receivable             7,266           -          -          -      7,266
   Investment in
    subsidiaries                        -     133,896          -    257,725          -
   Intangibles and other
    assets, net                   248,562      71,400     13,737        224    333,923
                                 --------    --------    -------   --------   --------
       Total assets              $478,163    $410,556    $47,378   $260,825   $804,439
                                 ========    ========    =======   ========   ========

Liabilities and                  Heating                                        (1)
                                   Oil       Propane      TG&E    Partners    Consol.
 Partners' Capital              ---------   ---------   --------  ---------  ---------

Current Liabilities:
   Accounts payable              $ 17,581    $  5,055    $14,434       $  -   $ 37,070
   Working capital
    facility
    borrowings                     46,000           -     12,953          -     58,953
   Current maturities of
    long-term debt                 33,178       1,466          -          -     34,644
   Accrued expenses and
    other current
     liabilities                   41,277       5,961      2,609      1,073     50,920
   Due to affiliate                (1,823)       (222)       950      1,095          -
   Unearned service
    contract revenue               16,254           -          -          -     16,254
   Customer credit
    balances                        5,964       2,170      1,055          -      9,189
                                 --------    --------    -------   --------   --------
       Total current
        liabilities               158,431      14,430     32,001      2,168    207,030
Long-term debt                    181,558     151,077      2,563          -    335,198
Other long-term
 liabilities                        4,278          98         40          -      4,416
Partners' Capital:
   Equity Capital                 133,896     244,951     12,774    258,657    257,795
                                 --------    --------    -------   --------   --------
Total liabilities and
 Partners' Capital               $478,163    $410,556    $47,378   $260,825   $804,439
                                 ========    ========    =======   ========   ========
</TABLE>

(1)  The consolidated amounts include the necessary entries to eliminate the
     investment in Petro Holdings, Star Gas Propane and TG&E.

                                       13
<PAGE>

5)   Acquisitions

     During the six-month period ending March 31, 2001, the Partnership acquired
     six unaffiliated retail heating oil dealers and four unaffiliated retail
     propane dealers.  The aggregate consideration for these acquisitions
     accounted for by the purchase method of accounting was approximately $70.2
     million.  Purchase prices have been allocated to the acquired assets and
     liabilities based on their respective fair market values on the dates of
     acquisition.  The purchase prices in excess of the fair values of net
     assets acquired were classified as intangibles in the Condensed
     Consolidated Balance Sheets.

     The following table indicates the allocation of the aggregate purchase
     price paid for these acquisitions and the respective periods of
     amortization assigned:


(in thousands)                                       Useful Lives
                                                     ------------
Land                                   $ 2,032       -
Buildings                                1,523       30 years
Furniture & fixtures                       532       10 years
Fleet                                    5,900       5 - 30 years
Tanks and equipment                     21,579       5 - 30 years
Customer lists                          20,935       7 - 15 years
Restrictive covenants                    2,860       5 years
Goodwill                                 8,224       25 years
Working capital                          6,625       -
                                       -------
       Total                           $70,210
                                       =======


     Sales and net income have been included in the Condensed Consolidated
     Statements of Operations from the respective dates of acquisition.  The
     following pro forma information presents the results of operations for the
     six months ending March 31, 2001 of the Partnership and the acquisitions
     previously described, as if the acquisitions had taken place on October 1,
     2000.



(in thousands, except per share data)
Sales                                                $840,190
Net income                                           $ 86,269
General Partner's interest in net income             $  1,315
Limited Partners' interest in net income             $ 84,954
Basic net income per limited partner unit            $   4.04
Diluted net income per limited partner unit          $   4.02


6)   Supplemental Disclosure of Cash Flow Information

(in thousands)                                 Six Months Ended March 31,
                                               -------------------------
                                              2000                    2001
                                              ----                    ----
Cash paid during the period for:
   Income taxes                            $ 3,544                 $   577
   Interest                                $17,217                 $15,460

                                       14
<PAGE>

7)  Earnings Per Limited Partner Units


<TABLE>
<CAPTION>
(in thousands, except per unit data)                            Three Months Ended   Six Months Ended
                                                                    March 31,           March 31,
                                                                ------------------  ------------------
                                                                    2000      2001      2000      2001
                                                                 -------   -------   -------   -------
Income before cumulative effect of change in
  accounting principle per Limited Partner unit
<S>                                                              <C>       <C>       <C>       <C>
  Basic                                                          $  2.80   $  2.86   $  3.40   $  3.76
  Diluted                                                        $  2.80   $  2.85   $  3.40   $  3.74

Cumulative effect of change in accounting principle per
  Limited Partner unit
  Basic                                                          $  -      $  -      $  -      $  0.07
  Diluted                                                        $  -      $  -      $  -      $  0.07

Net income per Limited Partner unit
  Basic                                                          $  2.80   $  2.86   $  3.40   $  3.83
  Diluted                                                        $  2.80   $  2.85   $  3.40   $  3.81

Basic Earnings Per Unit:
------------------------

Net income                                                       $51,687   $64,114   $61,052   $81,788
Less:  General Partner's interest in net income                      915       964     1,105     1,247
                                                                 -------   -------   -------   -------
  Limited Partners' interest in net income                       $50,772   $63,150   $59,947   $80,541
                                                                 =======   =======   =======   =======


Common Units                                                      15,285    19,021    14,829    18,020
Senior Subordinated Units                                          2,477     2,697     2,477     2,657
Junior Subordinated Units                                            345       345       345       345
                                                                 -------   -------   -------   -------
  Weighted average number of Limited Partner units
     outstanding                                                  18,107    22,063    17,651    21,022
                                                                 =======   =======   =======   =======
  Basic earnings per unit                                        $  2.80   $  2.86   $  3.40   $  3.83
                                                                 =======   =======   =======   =======

Diluted Earnings Per Unit:
--------------------------

  Limited Partners' interest in net income                       $50,772   $63,150   $59,947   $80,541

  Weighted average number of Limited Partner units
     outstanding                                                  18,107    22,063    17,651    21,022
  Senior subordinated units anticipated to be issued under
     employee incentive plan                                           -       113         -       113
                                                                 -------   -------   -------   -------
    Diluted number of Limited Partner units                       18,107    22,176    17,651    21,135
                                                                 =======   =======   =======   =======
     Diluted earnings per unit                                   $  2.80   $  2.85   $  3.40   $  3.81
                                                                 =======   =======   =======   =======


</TABLE>


8)   Subsequent Events

     Cash Distributions - On April 20, 2001, the Partnership announced that it
     would pay a cash distribution of $0.575 per unit on all units for the three
     months ended March 31, 2001. The distribution will be paid on May 15, 2001,
     to unitholders of record on May 4, 2001.

                                       15
<PAGE>

                    STAR GAS PARTNERS, L.P. AND SUBSIDIARIES

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS



                 Statement Regarding Forward-Looking Disclosure

This Report includes "forward-looking statements" within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act which represent
the Partnership's expectations or beliefs concerning future events that involve
risks and uncertainties, including those associated with the effect of weather
conditions on the Partnership's financial performance, the price and supply of
home heating oil, propane, electricity and natural gas and the ability of the
Partnership to obtain new accounts and retain existing accounts.  All statements
other than statements of historical facts included in this Report including,
without limitation, the statements under "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and elsewhere herein, are
forward-looking statements.  Although the Partnership believes that the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from the
Partnership's expectations ("Cautionary Statements") are disclosed in this
Report, including without limitation and in conjunction with the forward-looking
statements included in this Report.  All subsequent written and oral forward-
looking statements attributable to the Partnership or persons acting on its
behalf are expressly qualified in their entirety by the Cautionary Statements.


Overview

In analyzing the financial results of the Partnership, the following matters
should be considered.

The Total Gas and Electric (TG&E) acquisition was made on April 7, 2000.
Accordingly, the results of operations for the three and six month periods ended
March 31, 2001 include TG&E's results whereas the results for the previous
corresponding quarter and six month period do not include TG&E's results.

The primary use for heating oil, propane and natural gas is for space heating in
residential and commercial applications.  As a result, weather conditions have a
significant impact on financial performance and should be considered when
analyzing changes in financial performance.  In addition, gross margins vary
according to customer mix.  For example, sales to residential customers generate
higher profit margins than sales to other customer groups, such as agricultural
customers.  Accordingly, a change in customer mix can effect gross margins
without necessarily impacting total sales.

Also, the heating oil, propane and natural gas industries are seasonal in nature
with peak activity occurring during the winter months.  Accordingly, results of
operations for the periods presented are not indicative of the results to be
expected for a full year.

The Partnership adopted SFAS No. 133 on October 1, 2000 and records its
derivatives at fair market value. As a result of adopting the Standard, the
Partnership's net income for the three and six month periods ended March 31,
2001 was $0.7 million more and $0.4 million less respectively, than what they
would have been had the Standard not been adopted. The effect of the Standard
will have no impact in how the Partnership will evaluate its ability to make the
minimum quarterly distribution.

                                       16
<PAGE>

THREE MONTHS ENDED MARCH 31, 2001
COMPARED TO THREE MONTHS ENDED MARCH 31, 2000
---------------------------------------------


Volume

For the three months ended March 31, 2001, retail volume of home heating oil and
propane increased 50.6 million gallons, or 24.2%, to 259.4 million gallons, as
compared to 208.8 million gallons for the three months ended March 31, 2000.
This increase was due to an additional 39.8 million gallons provided by the
heating oil segment and a 10.8 million gallon increase in the propane segment.
Volume increased in the heating oil and propane segments largely due to the
impact of colder temperatures and additional volume provided by acquisitions.
Temperatures in the Partnership's areas of operations were an average of 9.9%
colder than in the prior year's comparable quarter and approximately 3% warmer
than normal.


Sales

For the three months ended March 31, 2001, sales increased $148.8 million, or
46.2%, to $470.4 million, as compared to $321.7 million for the three months
ended March 31, 2000.  This increase was due to an additional $71.0 million
provided by the home heating oil segment, $45.5 million of TG&E sales and a
$32.3 million increase in the propane segment.  Sales rose in both the heating
oil and propane segments largely due to increased retail volume and to a lesser
extent from increased selling prices.  Selling prices increased versus the prior
year's comparable period in response to higher supply costs.  Sales also
increased in the heating oil division by $4.9 million and by $2.2 million in the
propane division due to an increased focus on the sales of rationally related
products including heating equipment installation and service and water
softeners.


Cost of Product

For the three months ended March 31, 2001, cost of product increased $106.2
million, or 60.6%, to $281.5 million, as compared to $175.3 million for the
three months ended March 31, 2000.  This increase was due to an additional $46.5
million of cost of product at the home heating segment, $40.4 million of TG&E
cost of product and a $19.3 million increase in the propane segment.  The cost
of product for both the heating oil and propane segments increased due to the
impact of higher retail volume sales and as a result of higher supply cost.
While selling prices and supply cost increased on a per gallon basis the
increase in selling prices was greater than the increase in supply costs, which
resulted in an increase in per gallon margins.


Cost of Installation, Service and Appliances

For the three months ended March 31, 2001, cost of installation, service and
appliances increased $7.0 million, or 23.7%, to $36.4 million, as compared to
$29.4 million for the three months ended March 31, 2000.  This increase was due
to an additional $6.2 million of expenses for the heating oil segment and a $0.8
million increase in cost for the propane segment.  The cost of installation,
service and appliances for both the heating oil and propane segments increased
due to the additional sales of rationally related products and as a result of
additional service cost due to the colder temperatures.

                                       17
<PAGE>

Delivery and Branch Expenses

For the three months ended March 31, 2001, delivery and branch expenses
increased $12.6 million, or 27.8%, to $57.8 million, as compared to $45.3
million for the three months ended March 31, 2000.  This increase was due to an
additional $8.8 million of delivery and branch expenses at the heating oil
segment and a $3.7 million increase in delivery and branch expenses for the
propane segment.  Delivery and branch expenses increased both at the heating oil
and propane segments due to additional operating cost associated with higher
retail volume sales, inflation and for additional operating cost of acquired
companies.


Depreciation and Amortization Expenses

For the three months ended March 31, 2001, depreciation and amortization
expenses increased $2.2 million, or 26.5%, to $10.4 million, as compared to $8.2
million for the three months ended March 31, 2000.  This increase was primarily
due to $0.2 million of depreciation and amortization expense for TG&E and
additional depreciation and amortization for heating oil and propane
acquisitions.


General and Administrative Expenses

For the three months ended March 31, 2001, general and administrative expenses
increased $4.1 million, or 88.7%, to $8.7 million, as compared to $4.6 million
for the three months ended March 31, 2000.  The increase was due to $2.6 million
of TG&E general and administrative expenses, a $0.5 million increase in the
heating oil segment largely due to increased incentive compensation and wage
inflation and a $0.9 million increase in general and administrative expenses at
the Partnership level.  The Partnership level increase was primarily due to an
accrual for compensation earned for unit appreciation rights previously granted.


TG&E Customer Acquisition Expense

For the three months ended March 31, 2001, TG&E customer acquisition expense was
$0.7 million.  This TG&E segment expense is for the cost of acquiring new
accounts through the services of a third party direct marketing company.


Unit Compensation Expense

For the three months ended March 31, 2001, unit compensation expense was $0.7
million.  This expense was incurred under the Partnership's Unit Incentive Plan
whereby certain employees were granted senior subordinated units as an incentive
for increased efforts during employment and as an inducement to remain in the
service of the Partnership.


Interest Expense, net

For the three months ended March 31, 2001, net interest expense increased $2.1
million, or 30.5%, to $9.0 million, as compared to $6.9 million for the three
months ended March 31, 2000.  This increase was due to additional interest
expense for higher working capital borrowings necessitated by the higher cost of
product as well as for additional interest expense for the financing of propane
and heating oil acquisitions.

                                       18
<PAGE>

Income Tax Expense (Benefit)

For the three months ended March 31, 2001, income tax expense increased $0.7
million to $0.9 million, as compared to $0.2 million for the three months ended
March 31, 2000.  This increase was due to additional state income taxes for
higher pretax earnings achieved for the three months ended March 31, 2001.


Net Income

For the three months ended March 31, 2001, net income increased $12.4 million,
or 24.0%, to $64.1 million, as compared to $51.7 million for the three months
ended March 31, 2000.  The increase was due to an additional $5.7 million of net
income at the heating oil segment, $0.7 million of TG&E net income and a $7.1
million increase in net income at the propane segment.  The improvement in the
net income for these segments was largely due to colder weather, acquisitions
and a per gallon improvement in gross profit margins.  Partially offsetting
these increases in net income were $1.1 million more of net loss at the
Partnership level, largely the result of the increase in unit compensation
expense recorded at the Partnership level.


Earnings before interest, taxes, depreciation and amortization, TG&E customer
acquisition expense and unit compensation expense, less net gain (loss) on sales
of equipment (EBITDA)

For the three months ended March 31, 2001, earnings before interest, taxes,
depreciation and amortization, TG&E customer acquisition expense and unit
compensation expense, less net gain (loss) on sales of assets (EBITDA) increased
$18.9 million, or 28.1% to $86.0 million as compared to $67.1 million, for the
three months ended March 31, 2000.  This increase was due to $9.0 million of
additional EBITDA generated by the heating oil segment, $2.5 million of TG&E
EBITDA, a $8.4 million increase in the propane segment EBITDA partially offset
by $0.9 million of additional expenses at the Partnership level.   The increase
in the heating oil and propane segments was due to additional EBITDA provided by
the impact of colder temperatures, acquisitions and by higher per gallon gross
profit margins.  EBITDA should not be considered as an alternative to net income
(as an indicator of operating performance) or as an alternative to cash flow (as
a measure of liquidity or ability to service debt obligations), but provides
additional information for evaluating the Partnership's ability to make the
Minimum Quarterly Distribution.  The definition of "EBITDA" set forth above may
be different from that used by other companies. The extent to which TG&E
customer acquisition expense is not deducted in arriving at "EBITDA" is
currently being reviewed by the Partnership.

                                       19
<PAGE>

SIX MONTHS ENDED MARCH 31, 2001
COMPARED TO SIX MONTHS ENDED MARCH 31, 2000
-------------------------------------------


Volume

For the six months ended March 31, 2001, retail volume of home heating oil and
propane increased 89.4 million gallons, or 25.9%, to 434.3 million gallons, as
compared to 344.9 million gallons for the six months ended March 31, 2000.  This
increase was due to an additional 66.6 million gallons provided by the heating
oil segment and a 22.8 million gallon increase in the propane segment.  Volume
increased in the heating oil and propane segments largely due to the impact of
colder temperatures and as a result of additional volume provided by
acquisitions.  Temperatures in the Partnership's areas of operations were an
average of 16.1% colder than in the prior year's comparable period and
approximately 3% colder than normal.


Sales

For the six months ended March 31, 2001, sales increased $285.4 million, or
56.1%, to $794.0 million, as compared to $508.6 million for the six months ended
March 31, 2000.  This increase was attributable to $156.7 million provided by
the home heating oil segment, $65.5 million of TG&E sales and a $63.2 million
increase in the propane segment.  Sales rose in both the heating oil and propane
segments due to increased retail volume and to a lesser extent from increased
selling prices.  Selling prices increased versus the prior year's comparable
period in response to higher supply costs.  Sales also increased in the heating
oil division by $9.5 million and by $4.1 million in the propane division due to
increases in the sales of rationally related products including heating
equipment installation and service and water softeners.


Cost of Product

For the six months ended March 31, 2001, cost of product increased $214.1
million, or 81.8%, to $475.9 million, as compared to $261.8 million for the six
months ended March 31, 2000.  This increase was due to $114.7 million of
additional cost of product at the home heating segment, $58.3 million of TG&E
cost of product and a $41.1 million increase in the propane segment.  The cost
of product for both the heating oil and propane segments increased due to the
impact of higher retail volumes sales and as a result of higher supply cost.
While both selling prices and supply cost increased on a per gallon basis, the
increase in selling prices was equal to the increase in supply costs, which
resulted in six months ended March 31, 2001 having approximately the same per
gallon margins as were achieved in six months ended March 31, 2000.


Cost of Installation, Service and Appliances

For the six months ended March 31, 2001, cost of installation, service and
appliances increased $13.0 million, or 21.6%, to $73.4 million, as compared to
$60.3 million for the six months ended March 31, 2000.  This increase was
primarily due to $11.6 million of expenses for the heating oil segment and a
$1.4 million increase in cost for the propane segment.  The cost of
installation, service and appliances for both the heating oil and propane
segments increased due to the additional sales of rationally related products
and as a result of additional service cost due to the colder temperatures.


Delivery and Branch Expenses

For the six months ended March 31, 2001, delivery and branch expenses increased
$21.6 million, or 25.2%, to $107.2 million, as compared to $85.6 million for the
six months ended March 31, 2000.  This increase was due to an additional $15.3
million of delivery and branch expenses at the heating oil segment and a $6.3
million increase in delivery and branch expenses for the propane segment.
Delivery and branch expenses increased both at the heating oil and propane
segments due to additional operating cost associated with higher retail volume
sales, inflation and for additional operating cost of acquired companies.

                                       20
<PAGE>

Depreciation and Amortization

For the six months ended March 31, 2001, depreciation and amortization expenses
increased $3.4 million, or 20.6%, to $20.0 million, as compared to $16.6 million
for the six months ended March 31, 2000.  This increase was primarily due to
$0.5 million of depreciation and amortization expenses for TG&E and additional
depreciation and amortization for heating oil and propane acquisitions.


General and Administrative Expenses

For the six months ended March 31, 2001, general and administrative expenses
increased $6.3 million, or 67.8%, to $15.6 million, as compared to $9.3 million
for the six months ended March 31, 2000.  This increase was primarily due to
$4.3 million of TG&E general and administrative expenses and a $1.5 million
increase in general and administrative expenses at the Partnership level.  The
Partnership level increase was primarily due to an accrual for compensation
earned for unit appreciation rights previously granted and for professional fees
incurred for the recruitment of certain executive positions.


TG&E Customer Acquisition Expense

For the six months ended March 31, 2001, TG&E customer acquisition expense was
$1.4 million.  This TG&E segment expense is for the cost of acquiring new
accounts through the services of a third party direct marketing company.


Unit Compensation Expense

For the six months ended March 31, 2001, unit compensation expense was $1.2
million.  This expense was incurred under the Partnership's Unit Incentive Plan
whereby certain employees and outside directors were granted senior subordinated
units as an incentive for increased efforts during employment and as an
inducement to remain in the service of the Partnership.


Interest Expense, net

For the six months ended March 31, 2001, net interest expense increased $3.7
million, or 28.0%, to $17.1 million, as compared to $13.4 million for the six
months ended March 31, 2000.  This increase was due to additional interest
expense for higher working capital borrowings necessitated by the higher cost of
product as well as for additional interest expense for the financing of propane
and heating oil acquisitions.


Income Tax Expense

For the six months ended March 31, 2001, income tax expense increased $1.3
million to $1.6 million, as compared to $0.3 million for the six months ended
March 31, 2000.  This increase was due to additional state income taxes for
higher pretax earnings achieved for the six months ended March 31, 2001.


Cumulative Effect of Adoption of Accounting Principle

For the six months ended March 31, 2001, the Partnership recorded a $1.5 million
increase in net income arising from the adoption of SFAS No. 133.


Net Income

For the six months ended March 31, 2001, net income increased $20.7 million, or
34.0%, to $81.8 million, as compared to $61.1 million for the six months ended
March 31, 2000.  The increase was due to an additional $11.1 million of net
income at the heating oil segment and a $12.2 million increase in net income at
the propane segment.  The improvement in the net income for these segments was
largely due to colder weather and as a result of acquisitions.  Partially
offsetting these increases in net income were $0.7 million of net loss for TG&E
and $1.9 million of additional net loss at the Partnership level, largely the
result of the increase in unit compensation expense recorded at the Partnership
level.

                                       21
<PAGE>

Earnings before interest, taxes, depreciation and amortization, TG&E customer
acquisition expense and unit compensation expense, less net gain (loss) on sales
of equipment (EBITDA)

For the six months ended March 31, 2001, earnings before interest, taxes,
depreciation and amortization, TG&E customer acquisition expense and unit
compensation expense, less net gain (loss) on sales of assets (EBITDA) increased
$30.4 million, or 33.2%, to $121.9 million as compared to $91.6 million, for the
six months ended March 31, 2000.  This increase was due to $14.8 million of
additional EBITDA generated by the heating oil segment, $2.9 million of TG&E
EBITDA, a $14.2 million increase in the propane segment EBITDA partially offset
by $1.5 million of additional expenses at the Partnership level.  The increase
in the heating oil and propane segments was largely due to additional EBITDA
provided by the impact of colder temperatures and acquisitions.  EBITDA should
not be considered as an alternative to net income (as an indicator of operating
performance) or as an alternative to cash flow (as a measure of liquidity or
ability to service debt obligations), but provides additional information for
evaluating the Partnership's ability to make the Minimum Quarterly Distribution.
The definition of "EBITDA" set forth above may be different from that used by
other companies. The extent to which TG&E customer acquisition expense is not
deducted in arriving at "EBITDA" is currently being reviewed by the Partnership.



Liquidity and Capital Resources
-------------------------------

During the six months ended March 31, 2001, the Partnership sold 3.7 million
common units (including 0.5 million of overallotment units exercised), the net
proceeds of which, net of underwriter's discount, commission, and offering
expenses was $59.3 million.  These funds combined with net cash provided by
$66.3 million in net working capital and acquisition facility borrowings, $69.6
million of long-term debt borrowings ($40.0 million of senior secured notes
issued by the heating oil segment, $29.5 million of senior notes issued by the
propane segment and $0.1 million of acquisition related notes) and $0.2 million
in proceeds from the sale of fixed assets amounted to $195.4 million.  Such
funds were used for operating activities of $28.3 million, acquisitions of $70.2
million, distributions of $24.0 million, debt and acquisition facility repayment
of $58.4 million, capital expenditures of $7.1 million and other financing
activities of $1.4 million.  As a result of the above activity, cash increased
by $6.0 million to $16.9 million.

The $40.0 million of senior secured notes mentioned above were issued to three
institutional lenders by the heating oil segment to complete a refinancing of
$40.0 million of indebtedness incurred under its bank acquisition facility.  The
senior notes bear interest at the rate of 8.96% per year and have an average
life of five and three-quarter years with a final maturity date of November 1,
2010.

The $29.5 million of senior notes mentioned above were issued to several
institutional lenders by the propane segment to complete a refinancing of $25.0
million of indebtedness incurred under its bank acquisition facility.  The
balance of the proceeds, $4.5 million, will be used to fund future acquisition
activity and to refinance maturities of senior notes.  The senior notes bear
interest at the rate of 7.89% per year and have an average life of nine years
with a final maturity date of April 1, 2011.

For the remainder of fiscal 2001, the Partnership anticipates paying interest of
approximately $15 million and anticipates growth and maintenance capital
additions of approximately $7 million.  In addition, the Partnership plans to
pay distributions on its units in accordance with the partnership agreement.
The Partnership also plans to pursue strategic acquisitions as part of its
business strategy and to prudently fund such acquisitions through a combination
of debt and equity.  Based on its current cash position, bank credit
availability and net cash from operating activities, the Partnership expects to
be able to meet all of its obligations for fiscal 2001.

                                       22
<PAGE>

Item. 3.        Quantitive and Qualitative Disclosures About Market Risk
                --------------------------------------------------------


The Partnership is exposed to interest rate risk primarily through its bank
credit facilities.  The Partnership utilizes these borrowings to meet its
working capital needs and also to fund the short-term needs of its acquisition
program.

At March 31, 2001, the Partnership had outstanding borrowings of approximately
$80.0 million under its Bank Credit Facilities.  In the event that interest
rates associated with these facilities were to increase 100 basis points, the
impact on future cash flows would be a decrease of approximately $0.8 million
annually.

The Partnership also selectively uses derivative financial instruments to manage
its exposure to market risk related to changes in the current and future market
price of home heating oil, propane and natural gas.  The Partnership does not
hold derivatives for trading purposes.  The value of market sensitive derivative
instruments is subject to change as a result of movements in market prices.
Consistent with the nature of hedging activity, associated unrealized gains and
losses would be offset by corresponding decreases or increases in the purchase
price the Partnership would pay for the product being hedged.  Sensitivity
analysis is a technique used to evaluate the impact of hypothetical market value
changes.  Based on a hypothetical ten percent increase in the cost of product at
March 31, 2001, the potential gain on the Partnership's hedging activity would
be to increase the fair market value of these outstanding derivatives by $2.5
million to a fair market value $4.8 million; and conversely a hypothetical ten
percent decrease in the cost of product would decrease the fair market value of
these outstanding derivatives by $2.5 million to a fair market value of ($0.2)
million.



                            PART II OTHER INFORMATION
                            -------------------------


Item 6.  Exhibits and Reports on Form 8-K

(a)    Exhibits Included Within:
       ------------------------

       10.23  Note Purchase Agreement for $7,500,000 - 7.62% First Mortgage
              Notes, Series A, due April 1, 2008 and $22,000,000 - 7.95%
              First Mortgage Notes, Series B, due April 1, 2011.

       10.24  Credit Agreement, dated as of March 30, 2001, by Total Gas &
              Electric, Inc. and Chase Manhattan Bank, as agent.

       27.0   Financial Data Schedule

(b)    Reports on Form 8-K:
       -------------------

       1/22/01 - This Form 8-K consists of the following two historical press
       releases; Star Gas Partners, L.P. Reports Fiscal 2000 Year-End and Fourth
       Quarter Results and Completion of Seven Acquisitions (Released December
       14, 2000), Star Gas Partners, L.P. Reports Record Q1 FY '01 Earnings
       Announces Significant Increase in Senior Subordinated Unit Distribution
       and Declares Regular Common Unit Distribution (Released January 18,
       2001).

       1/26/01 - This Form 8-K consists of a copy of the underwriting agreement
       for a firm commitment public offering of up to 1,900,000 common units of
       the registrant that were previously registered pursuant to a shelf
       registration statement on Form S-3 (SEC File No. 333-94031).

                                       23
<PAGE>

                                   SIGNATURE
                                   ---------



Pursuant to the requirements of the Securities Exchange Act of 1934, the
Partnership has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized:




Star Gas Partners, L.P.
By:  Star Gas LLC (General Partner)



              Signature                 Title                           Date
              ---------                 -----                           ----



/s/  George Leibowitz            Chief Financial Officer           May 10, 2001
     -------------------------   Star Gas LLC
     George Leibowitz            (Principal Financial Officer)


/s/  James J. Bottiglieri        Vice President                    May 10, 2001
     -------------------------   Star Gas LLC
     James J. Bottiglieri

                                       24