<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, 2000

                                       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)

<TABLE>
Delaware                                                         06-1437793
<S>                                                              <C>
-----------------------------------------------------------------------------------------------------

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

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

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

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


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 April 24, 2000:

      16,044,967      Common Units
       2,476,797      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

<S>           <C>                                                                                           <C>
              Item 1 - Condensed Consolidated Financial Statements

                  Condensed Consolidated Balance Sheets as of
                     September 30, 1999 and March 31, 2000                                                      3

                  Condensed Consolidated Statements of Operations for the Three
                     months ended March 31, 1999 and March 31, 2000 and for the
                     Six months ended March 31, 1999 and March 31, 2000                                         4

                  Condensed Consolidated Statement of Partners' Capital for the six months ended
                     March 31, 2000                                                                             5

                  Condensed Consolidated Statements of Cash Flows for the six months ended
                     March 31, 1999 and March 31, 2000                                                          6

                  Notes to Condensed Consolidated Financial Statements                                       7-16

              Item 2 - Management's Discussion and Analysis of Financial Condition
                     and Results of Operations                                                              17-22

              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,    2000
                                                                       1999       (unaudited)
                                                                     ---------    ---------
<S>                                                                 <C>           <C>
Assets
Current assets:
    Cash and cash equivalents                                        $   4,492    $  16,229
    Receivables, net of allowance of $948 and  $2,322 respectively      42,295      117,667
    Inventories                                                         26,317       20,179
    Prepaid expenses and other current assets                           13,764       13,125
                                                                     ---------    ---------
           Total current assets                                         86,868      167,200
                                                                     ---------    ---------

Property and equipment, net                                            154,967      167,422
Long-term portion of accounts receivable                                 5,590        6,847
Intangibles and other assets, net                                      291,919      295,050
                                                                     ---------    ---------
           Total assets                                              $ 539,344    $ 636,519
                                                                     =========    =========
Liabilities and Partners' Capital
Current liabilities:
    Accounts payable                                                 $  12,939    $  13,915
    Bank credit facility borrowings                                      3,150       43,000
    Current maturities of long-term debt                                 1,391       20,260
    Accrued expenses                                                    43,044       37,015
    Unearned service contract revenue                                   14,007       14,208
    Customer credit balances                                            31,094        8,478
                                                                     ---------    ---------
           Total current liabilities                                   105,625      136,876
                                                                     ---------    ---------

Long-term debt                                                         276,638      275,747
Other long-term liabilities                                              6,905        6,584

Partners' Capital:
    Common unitholders                                                 145,906      202,352
    Subordinated unitholders                                             5,878       15,463
    General partner                                                     (1,608)        (503)
                                                                     ---------    ---------
           Total Partners' Capital                                     150,176      217,312
                                                                     ---------    ---------

           Total Liabilities and Partners' Capital                   $ 539,344    $ 636,519
                                                                     =========    =========
</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)                      1999        2000                 1999        2000
                                                        --------    --------             --------    --------
<S>                                                     <C>         <C>                  <C>         <C>
Sales:
   Product                                              $ 49,754    $298,012             $ 76,903    $458,552
   Installation, service and appliances                    2,347      23,683                5,435      50,029
                                                        --------    --------             --------    --------
       Total sales                                        52,101     321,695               82,338     508,581

Costs and expenses:
   Cost of product                                        18,877     175,288               29,829     261,834
   Cost of installation, service and appliances            1,604      29,449                2,630      60,334
   Delivery and branch                                    12,030      45,275               22,325      85,577
   Depreciation and amortization                           3,023       8,196                6,031      16,600
   General and administrative                              1,727       4,595                3,156       9,276
   Net gain (loss) on sales of assets                        (87)         38                  (91)         50
                                                        --------    --------             --------    --------
       Operating income                                   14,753      58,930               18,276      75,010
Interest expense, net                                      2,361       6,900                4,539      13,373
Amortization of debt issuance costs                           45         128                   90         257
                                                        --------    --------             --------    --------
       Income before income taxes                         12,347      51,902               13,647      61,380
Income tax expense                                            32         215                   38         328
                                                        --------    --------             --------    --------
       Net income                                       $ 12,315    $ 51,687             $ 13,609    $ 61,052
                                                        ========    ========             ========    ========

       General Partner's interest in net income         $    246    $    915             $    272    $  1,105
                                                        --------    --------             --------    --------

Limited Partners' interest in net income                $ 12,069    $ 50,772             $ 13,337    $ 59,947
                                                        ========    ========             ========    ========

Basic and diluted net income per Limited  Partner       $   1.75    $   2.80             $   2.03    $   3.40
                                                        ========    ========             ========    ========
unit

Basic and diluted weighted average number of Limited
 Partner units outstanding                                 6,894      18,107                6,571      17,651
                                                        ========    ========             ========    ========
</TABLE>


See accompanying notes to condensed consolidated financial statements.


                                       4
<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
                              ---------------------------------------
                                                                                                                        Total
                                          Senior    Junior   General                 Senior       Junior     General   Partners'
                               Common      Sub.      Sub.    Partner     Common       Sub.         Sub.      Partner    Capital
                              ---------- --------- --------- --------- ----------- ------------ ----------- ---------- -----------
<S>                            <C>       <C>         <C>      <C>      <C>           <C>         <C>         <C>        <C>
Balance as of
   September 30, 1999          14,378     2,477      345        326    $145,906      $5,938      $  (60)     $(1,608)   $150,176

Issuance of Common Units        1,667                                    22,611                                           22,611

Net income                                                               50,362       8,413       1,172        1,105      61,052

Distributions
  ($1.15 per common unit)                                               (16,527)                                         (16,527)
                              ---------- --------- --------- --------- ----------- ------------ ----------- ---------- -----------
Balance as of
   March 31, 2000              16,045     2,477      345        326    $202,352     $14,351      $1,112      $  (503)   $217,312
                              ========== ========= ========= ========= =========== ============ =========== ========== ===========
</TABLE>





See accompanying notes to condensed consolidated financial statements.


                                       5
<PAGE>

                    STAR GAS PARTNERS, L.P. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)


<TABLE>
<CAPTION>
(in thousands)                                                        Six Months Ended March 31,
                                                                      --------------------------
                                                                           1999        2000
                                                                        ---------    ---------
<S>                                                                     <C>          <C>
Cash flows from operating activities:
Net income                                                              $  13,609    $  61,052
Adjustments to reconcile net income to net cash
  provided by (used in) operating activities:
Depreciation and amortization                                               6,031       16,600
Amortization of debt issuance cost                                             90          257
Provision for losses on accounts receivable                                    69          869
Loss (gain) on sales of assets                                                 91          (50)
Changes in operating assets and liabilities, net of amounts acquired:
     Increase in receivables                                               (5,512)     (77,443)
     Decrease in inventories                                                7,726        6,744
     Decrease in other assets                                                 130          307
     Increase (decrease) in accounts payable                               (1,164)         976
     Decrease in other current liabilities                                (13,929)     (28,102)
                                                                        ---------    ---------
              Net cash provided by (used in) operating activities           7,141      (18,790)
                                                                        ---------    ---------

Cash flows from investing activities:
Capital expenditures                                                       (2,351)      (3,294)
Proceeds from sales of fixed assets                                            85          283
Cash acquired in acquisition                                               18,760            3
Acquisitions                                                                 --        (29,580)
                                                                        ---------    ---------
              Net cash provided by (used in) investing activities          16,494      (32,588)
                                                                        ---------    ---------

Cash flows from financing activities:
Credit facility borrowings                                                 10,450       70,600
Credit facility repayments                                                (15,220)     (30,750)
Acquisition facility borrowings                                              --         29,700
Acquisition facility repayments                                            (3,500)     (36,000)
Distributions                                                              (4,386)     (16,527)
Proceeds from issuance of Common Units, net                               116,124       22,611
Repayment of debt, net                                                   (192,316)      (3,222)
Redemption of preferred stock                                             (11,746)        --
Proceeds from issuance of debt                                             87,678       27,500
Other                                                                         (96)        (797)
                                                                        ---------    ---------
              Net cash provided by (used in) financing activities         (13,012)      63,115
                                                                        ---------    ---------

              Net increase in cash                                         10,623       11,737
Cash at beginning of period                                                 1,115        4,492
                                                                        ---------    ---------
Cash at end of period                                                   $  11,738    $  16,229
                                                                        =========    =========
</TABLE>



See accompanying notes to condensed consolidated financial statements.


                                       6
<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
         leading distributor of home heating oil and propane in the United
         States. Star Gas Partners is a Master Limited Partnership whose 16.0
         million common limited partner units (trading symbol "SGU" representing
         a 83.6% limited partner interest in Star Gas Partners) and 2.5 million
         senior subordinated units (trading symbol "SGH" representing a 12.9%
         limited partner interest in Star Gas Partners) 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
         1.8% limited partner interest in Star Gas Partners) and 0.3 million
         general partner units (representing a 1.7% general partner interest in
         Star Gas Partners).

         Petro Holdings, Inc. ("Petro" or "heating oil segment"), is the
         nation's largest distributor of home heating oil and serves
         approximately 335,000 customers in the Northeast and Mid-Atlantic
         region of the United States. Petro is an indirect wholly owned
         subsidiaries 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, that markets and distributes propane gas and related
         products to more than 190,000 customers in the Midwest and Northeast.


2)       Summary of Significant Accounting Policies

         Basis of Presentation

         The Consolidated Financial Statements for the period October 1, 1998
         through March 25, 1999 include the accounts of Star Gas Partners, L.P.,
         Star Gas Propane and its corporate subsidiaries. Beginning March 26,
         1999, the Consolidated Financial Statements also include the accounts
         and results of operations of Petro and its subsidiaries. All material
         intercompany items and transactions have been eliminated in
         consolidation.

         Use of Estimates

         The preparation of financial statements in accordance with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and liabilities at the
         date of the financial statements, and the reported amounts of revenue
         and expenses during the reporting period. Actual results could differ
         from those estimates.

         Revenue Recognition

         Sales of propane, heating oil and equipment are recognized at the time
         of delivery of the product to the customer or at the time of sale,
         service, or installation. Revenue from repairs and maintenance service
         is recognized upon completion of the service. Payments received from
         customers for heating oil equipment service contracts are deferred and
         amortized into income over the terms of the respective service
         contracts, on a straight line basis, which generally do not exceed one
         year.



                                       7
<PAGE>

2)       Summary of Significant Accounting Policies - (continued)

         Basic and Diluted Income (Loss) per Limited Partner Unit

         Net income (loss) per Limited Partner Unit is computed by dividing net
         income (loss), after deducting the General Partner's interest, by the
         weighted average number of Common Units, Senior Subordinated Units, and
         Junior Subordinated Units outstanding.

         Cash Equivalents

         The Partnership considers all highly liquid investments with a maturity
         of three months or less, when purchased, to be cash equivalents.

         Inventories

         Inventories are stated at the lower of cost or market and are computed
         on a first-in, first-out basis.

         Property, Plant, and Equipment

         Property, plant, and equipment are stated at cost. Depreciation is
         computed over the estimated useful lives of the depreciable assets
         using the straight-line method.

         Intangible Assets

         Intangible assets include goodwill, covenants not to compete, customer
         lists and deferred charges.

         Goodwill is the excess of cost over the fair value of net assets in the
         acquisition of a company. Both the propane and heating oil segments
         amortize goodwill using the straight-line method over a twenty-five
         year period.

         Covenants not to compete are non-compete agreements established with
         the owners of an acquired company. For both the propane and heating oil
         segments, covenants not to compete are amortized over the respective
         lives of the covenants, which are generally five years.

         Customer lists are the names and delivery addresses of the acquired
         company's patrons. Based on the historical retention experience of
         these lists, the propane segment amortizes customer lists on a
         straight-line method over fifteen years, and the heating oil segment
         amortizes customer lists on a straight-line method over seven to ten
         years.

         Deferred charges represent the costs associated with the issuance of
         debt instruments. Both the heating oil and propane segments amortize
         deferred charges using the interest method over the lives of the
         related debt instruments.

         It is the Partnership's policy to review intangible assets for
         impairment whenever events or changes in circumstances indicate that
         the carrying amount of such assets may not be recoverable. The
         Partnership determines that the carrying values of intangible assets
         are recoverable over their remaining estimated lives through
         undiscounted future cash flow analysis. If such a review should
         indicate that the carrying amount of the intangible assets is not
         recoverable, it is the Partnership's policy to reduce the carrying
         amount of such assets to fair value.

         Advertising Expenses

         Advertising costs are expensed as they are incurred.


                                       8
<PAGE>

2)       Summary of Significant Accounting Policies - (continued)


         Customer Credit Balances

         Customer credit balances represent pre-payments received from customers
         pursuant to a budget payment plan (whereby customers pay their
         estimated annual propane / heating oil charges on a fixed monthly
         basis) and the payments made have exceeded the charges for deliveries.

         Environmental Costs

         The Partnership expenses, on a current basis, costs associated with
         managing hazardous substances and pollution in ongoing operations. The
         Partnership also accrues for costs associated with the remediation of
         environmental pollution when it becomes probable that a liability has
         been incurred and the amount can be reasonably estimated.

         Derivatives  and Premiums

         The Partnership uses derivatives to hedge the price risk associated
         with the heating oil and propane gallons it sells to guaranteed maximum
         price customers. The realized gains and losses from these derivatives
         are matched with the inventory being hedged and are included with cost
         of goods sold. Premiums paid for derivatives are capitalized and
         amortized as part of cost of goods sold over the useful lives of the
         related instruments.

         Income Taxes

         The Partnership is a master limited partnership. As a result, for
         Federal income tax purposes, earnings or losses are allocated directly
         to the individual partners. Except for the Partnership's corporate
         subsidiaries, no recognition has been given to Federal income taxes in
         the accompanying financial statements of the Partnership. While the
         Partnership's corporate subsidiaries will generate non-qualifying
         Master Limited Partnership revenue, dividends from the corporate
         subsidiaries to the Partnership are included in the determination of
         Master Limited Partnership income. In addition, a portion of the
         dividends received by the Partnership from the corporate subsidiaries
         will be taxable to the limited partners. Net earnings for financial
         statement purposes will differ significantly from taxable income
         reportable to unitholders as a result of differences between the tax
         basis and financial reporting basis of assets and liabilities and due
         to the taxable income allocation requirements of the Partnership
         agreement.

         The Partnership's corporate subsidiaries file a consolidated Federal
         income tax return. Deferred tax assets and liabilities are recognized
         for the future tax consequences attributable to differences between the
         financial statement carrying amount of assets and liabilities and their
         respective tax bases and operating loss carryforwards. Deferred tax
         assets and liabilities are measured using enacted tax rates expected to
         apply to taxable income in the years in which those temporary
         differences are expected to be recovered or settled.

         Accounting Changes

         In June 1998, the Financial Accounting Standards Board ("FASB") issued
         Statement of Financial Accounting Standards ("SFAS") No. 133 -
         "Accounting for Derivative Instruments and Hedging Activities." SFAS
         No. 133 establishes accounting and reporting standards for derivative
         instruments, including certain derivative instruments embedded in other
         contracts, and for hedging activities. In June 1999, FASB amended the
         effective date for SFAS No. 133 to all fiscal quarters of all fiscal
         years beginning after June 15, 2000. The Partnership is assessing the
         impact and disclosure requirements of SFAS No. 133.


                                       9
<PAGE>

3)       Quarterly Distribution of Available Cash

         In general, the Partnership distributes to its partners on a quarterly
         basis all "Available Cash." Available Cash generally means, with
         respect to any fiscal quarter, all cash on hand at the end of such
         quarter less the amount of cash reserves that are necessary or
         appropriate in the reasonable discretion of the General Partner to (1)
         provide for the proper conduct of the Partnership's business, (2)
         comply with applicable law or any of its debt instruments or other
         agreements or (3) in certain circumstances provide funds for
         distributions to the common unitholders and the senior subordinated
         unitholders during the next four quarters. The General Partner may not
         establish cash reserves for distributions to the senior subordinated
         units unless the General Partner has determined that in its judgment
         the establishment of reserves will not prevent the Partnership from
         distributing the Minimum Quarterly Distribution on all common units and
         any common unit arrearages thereon with respect to the next four
         quarters. Certain restrictions on distributions on senior subordinated
         units, junior subordinated units and general partner units could result
         in cash that would otherwise be Available Cash being reserved for other
         purposes. Cash distributions will be characterized as distributions
         from either Operating Surplus or Capital Surplus.

         The senior subordinated units, the junior subordinated units, and
         general partner units are each a separate class of interest in Star Gas
         Partners, and the rights of holders of those interests to participate
         in distributions differ from the rights of the holders of the common
         units.

         The Partnership intends to distribute to the extent there is sufficient
         Available Cash, at least a MQD of $0.575 per common unit, or $2.30 per
         common unit on a yearly basis. In general, Available Cash will be
         distributed per quarter based on the following priorities:

            o     First, to the common units until each has received $0.575,
                  plus any arrearages from prior quarters.

            o     Second, to the senior subordinated units until each has
                  received $0.575.

            o     Third, to the junior subordinated units and general partner
                  units until each has received $0.575.

            o     Finally, after each has received $0.575, available cash will
                  be distributed proportionately to all units until target
                  levels are met.

         If distributions of available cash exceed target levels greater than
         $0.604, the senior subordinated units, junior subordinated units and
         general partner units will receive incentive distributions.

         The subordination period will end once the Partnership has met the
         financial tests stipulated in the partnership agreement, but it
         generally cannot end before October 1, 2002. However, if the general
         partner is removed under some circumstances, the subordination period
         will end. When the subordination period ends, all senior subordinated
         units and junior subordinated units will convert into Class B common
         units on a one-for-one basis, and each common unit will be redesignated
         as a Class A common unit. The main difference between the Class A
         common units and Class B common units is that the Class B common units
         will continue to have the right to receive incentive distributions and
         additional units.

         Distributions will not be made on the senior subordinated units, junior
         subordinated units, or general partner units until August 2000 at the
         earliest, at which time the Board will consider the appropriateness of
         any distribution payments for these units.


                                       10
<PAGE>

3)       Quarterly Distribution of Available Cash - (continued)

         The subordination period will generally extend until the first day of
         any quarter beginning on or after October 1, 2002 that each of the
         following three events occur:

         (1)      distributions of Available Cash from Operating Surplus on the
                  common units, senior subordinated units, junior subordinated
                  units and general partner units equal or exceed the sum of the
                  minimum quarterly distributions on all of the outstanding
                  common units, senior subordinated units, junior subordinated
                  units and general partner units for each of the three
                  non-overlapping four-quarter periods immediately preceding
                  that date;

         (2)      the Adjusted Operating Surplus generated during each of the
                  three immediately preceding non-overlapping four-quarter
                  periods equaled or exceeded the sum of the minimum quarterly
                  distributions on all of the outstanding common units, senior
                  subordinated units, junior subordinated units and general
                  partner units during those periods on a fully diluted basis
                  for employee options or other employee incentive compensation.
                  This includes all outstanding units and all common units
                  issuable upon exercise of employee options that have, as of
                  the date of determination, already vested or are scheduled to
                  vest before the end of the quarter immediately following the
                  quarter for which the determination is made. It also includes
                  all units that have as of the date of determination been
                  earned by but not yet issued to our management for incentive
                  compensation; and

         (3)      there are no arrearages in payment of the minimum quarterly
                  distribution on the common units.


4)       Segment Reporting

         In accordance with SFAS No. 131, "Disclosures about Segments of an
         Enterprise and Related Information," the Partnership has two reportable
         segments, heating oil and propane. Management has chosen to organize
         the enterprise under these two segments in order to leverage the
         expertise it has in each industry, allow each segment to continue to
         strengthen its core competencies and provides 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 and
         the Northeast. 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 following are the statements of operations and balance sheets for
         each segment as of the periods indicated. The heating oil segment was
         consolidated with the propane segment beginning March 26, 1999. There
         were no inter-segment sales between the propane segment and the heating
         oil segment.

                                       11
<PAGE>

4)       Segment Reporting - (continued)


<TABLE>
<CAPTION>
(in thousands)                                       Three Months Ended
                              -----------------------------------------------------------------
                                      March 31, 1999                      March  31, 2000
                              -------------------------------    ------------------------------
                               Heating                            Heating
Statement of Operations            Oil   Propane     Consol.          Oil    Propane    Consol.
-----------------------       --------   --------    --------    --------   --------   --------
<S>                           <C>        <C>         <C>         <C>        <C>        <C>
Sales:
  Product                     $  7,908   $ 41,846    $ 49,754    $240,857   $ 57,155   $298,012
  Installation, service,
    and appliance                  225      2,122       2,347      20,778      2,905     23,683
                              --------   --------    --------    --------   --------   --------
     Total sales                 8,133     43,968      52,101     261,635     60,060    321,695

Costs and expenses:
  Cost of product                3,697     15,180      18,877     144,993     30,295    175,288
  Cost of installation,
    service, and appliances        974        630       1,604      28,561        888     29,449
  Delivery and branch            1,143     10,887      12,030      33,219     12,056     45,275
  Depreciation and
    amortization                  --        3,023       3,023       5,359      2,837      8,196
  General and
    administrative                 150      1,577       1,727       2,717      1,878      4,595
  Net gain (loss) on sales
    of assets                     --          (87)        (87)         11         27         38
                              --------   --------    --------    --------   --------   --------
     Operating income            2,169     12,584      14,753      46,797     12,133     58,930
Interest expense, net              225      2,136       2,361       4,634      2,266      6,900
Amortization of debt
  issuance costs                  --           45          45          83         45        128
                              --------   --------    --------    --------   --------   --------
     Income before
       income taxes              1,944     10,403      12,347      42,080      9,822     51,902
Income tax expense                  25          7          32         200         15        215
                              --------   --------    --------    --------   --------   --------
     Net income               $  1,919   $ 10,396    $ 12,315    $ 41,880   $  9,807   $ 51,687
                              ========   ========    ========    ========   ========   ========
Capital expenditures          $   --     $    782    $    782    $    559   $  1,166   $  1,725
                              ========   ========    ========    ========   ========   ========
</TABLE>


<TABLE>
<CAPTION>
(in thousands)                                         Six Months Ended
                              -----------------------------------------------------------------
                                        March 31, 1999                  March  31, 2000
                              -------------------------------    ------------------------------
                               Heating                            Heating
Statement of Operations            Oil    Propane     Consol.         Oil    Propane    Consol.
                              --------   --------    --------    --------   --------   --------
<S>                           <C>        <C>         <C>         <C>        <C>        <C>
Sales:
  Product                     $  7,908   $ 68,995    $ 76,903    $364,742   $ 93,810   $458,552
  Installation, service,
    and appliance                  225      5,210       5,435      43,226      6,803     50,029
                              --------   --------    --------    --------   --------   --------
     Total sales                 8,133     74,205      82,338     407,968    100,613    508,581

Costs and expenses:
  Cost of product                3,697     26,132      29,829     213,880     47,954    261,834
  Cost of installation,
    service, and appliances        974      1,656       2,630      58,073      2,261     60,334
  Delivery and branch            1,143     21,182      22,325      62,395     23,182     85,577
  Depreciation and
    amortization                  --        6,031       6,031      10,665      5,935     16,600
  General and
    administrative                 150      3,006       3,156       5,603      3,673      9,276
  Net gain (loss) on sales
    of assets                     --          (91)        (91)         14         36         50
                              --------   --------    --------    --------   --------   --------
    Operating income             2,169     16,107      18,276      57,366     17,644     75,010
Interest expense, net              225      4,314       4,539       8,910      4,463     13,373
Amortization of debt
  issuance  costs                 --           90          90         167         90        257
                              --------   --------    --------    --------   --------   --------
     Income before
       income taxes              1,944     11,703      13,647      48,289     13,091     61,380
Income tax expense                  25         13          38         275         53        328
                              --------   --------    --------    --------   --------   --------
     Net income               $  1,919   $ 11,690    $ 13,609    $ 48,014   $ 13,038   $ 61,052
                              ========   ========    ========    ========   ========   ========

Capital expenditures          $   --     $  2,351    $  2,351    $  1,012   $  2,282   $  3,294
                              ========   ========    ========    ========   ========   ========
</TABLE>



                                       12
<PAGE>

4)       Segment Reporting - (continued)

<TABLE>
<CAPTION>
(in thousands)                                           September 30, 1999               March 31, 2000
                                                   ------------------------------   ------------------------------
                                                    Heating                (1)       Heating                 (1)
Balance Sheet                                           Oil    Propane    Consol.        Oil    Propane     Consol.
-------------                                      --------   --------   --------   --------   --------   --------
<S>                                                <C>        <C>        <C>        <C>        <C>        <C>
Assets
Current assets:
  Cash and cash equivalents                        $  4,270   $    222   $  4,492   $  2,122   $ 14,107   $ 16,229
  Receivables                                        35,960      6,335     42,295    102,836     14,831    117,667
  Inventories                                        16,498      9,819     26,317     14,619      5,560     20,179
  Prepaid expenses and other current assets          13,678      1,156     13,764     12,743      1,306     13,125
                                                   --------   --------   --------   --------   --------   --------
         Total current assets                        70,406     17,532     86,868    132,320     35,804    167,200
Property and equipment, net                          39,849    115,118    154,967     38,499    128,923    167,422
Long-term portion of accounts receivable              5,590       --        5,590      6,847       --        6,847
Investment in Petro Holdings                           --       83,233       --         --      123,548       --
Intangibles and other assets, net                   236,981     54,938    291,919    232,331     62,710    295,050
                                                   --------   --------   --------   --------   --------   --------
         Total assets                              $352,826   $270,821   $539,344   $409,997   $350,985   $636,519
                                                   ========   ========   ========   ========   ========   ========

Liabilities and Partners' Capital
Current Liabilities:
  Accounts payable                                 $  7,366   $  5,573   $ 12,939   $ 10,744   $  3,171   $ 13,915
  Bank credit facility borrowings                      --        3,150      3,150     43,000       --       43,000
  Current maturities of long-term debt                1,391       --        1,391     19,803        457     20,260
  Accrued expenses and other current liabilities     39,012      4,231     43,044     33,109      3,959     37,015
  Unearned service contract revenue                  14,007       --       14,007     14,208       --       14,208
  Customer credit balances                           26,657      4,437     31,094      6,395      2,083      8,478
                                                   --------   --------   --------   --------   --------   --------
         Total current liabilities                   88,433     17,391    105,625    127,259      9,670    136,876
Long-term debt                                      174,338    102,300    276,638    152,704    123,043    275,747
Other long-term liabilities                           6,822         92      6,905      6,486         98      6,584
Partners' Capital / Equity Capital                   83,233    151,038    150,176    123,548    218,174    217,312
                                                   --------   --------   --------   --------   --------   --------
         Total Liabilities and Partners' Capital   $352,826   $270,821   $539,344   $409,997   $350,985   $636,519
                                                   ========   ========   ========   ========   ========   ========
</TABLE>

(1) The consolidated amounts include the necessary entries to eliminate the
    Investment in Petro Holdings.

5)       Inventories

         The components of inventory were as follows:

                            September 30, 1999   March 31, 2000
                            ------------------   --------------
(in thousands)
Propane gas                        $ 7,678          $ 3,300
Propane appliances and equipment     2,141            2,260
Fuel oil                             9,959            7,937
Fuel oil parts and equipment
                                     6,539            6,682
                                   -------          -------
                                   $26,317          $20,179
                                   =======          =======

         Substantially all of the Partnership's propane supplies for the
         Northeast retail operations are purchased under supply contracts.
         Certain of the supply contracts provide for minimum and maximum amounts
         of propane to be purchased thereunder, and provide for pricing in
         accordance with posted prices at the time of delivery or include a
         pricing formula that typically is based on current market prices.
         Historically, spot purchases from local refiners supply most of the
         propane for the Midwest operations, with spot purchases from Mont
         Belvieu, Texas accounting for approximately one-seventh of the
         Partnership's total volume of propane purchases. In addition, the three
         single largest suppliers in the aggregate account for approximately
         half of total propane purchases.

         The Partnership obtains home heating oil in either barge or truckload
         quantities, and has contracts with over 80 terminals for the right to
         temporarily store its heating oil at facilities not owned by the
         Partnership. Purchases are made pursuant to supply contracts or on the
         spot market. The Partnership has market price based contracts for
         substantially all its petroleum requirements with 12 different
         suppliers, the majority of which have significant domestic sources for
         their product, and many of which have been suppliers for over 10 years.
         Typically supply contracts have terms of 12 months. All of the supply
         contracts provide for maximum and in some cases minimum quantities, and
         in most cases the price is based upon the market price at the time of
         delivery.


                                       13
<PAGE>

5)       Inventories - (continued)

         The Partnership may enter into forward contracts with Mont Belvieu
         suppliers, heating oil suppliers or refineries which call for a fixed
         price for the product to be purchased based on current market
         conditions, with delivery occurring at a later date. In most cases the
         Partnership has entered into similar agreements to sell this product to
         customers for a fixed price based on market conditions. In the event
         that the Partnership enters into these types of contracts without a
         subsequent sale, it is exposed to some market risk. Currently, the
         Partnership does not have any contracts that if market conditions were
         to change, would have a material affect on its financial statements.

         Concentration of Revenue with Guaranteed Maximum Price Customers

         Approximately 25% of the volume sold in the Partnership's heating oil
         segment is sold to individual customers under an agreement
         pre-establishing the maximum sales price of home heating oil over a
         twelve month period. The maximum price at which home heating oil is
         sold to these capped-price customers is generally renegotiated prior to
         the heating season of each year based on current market conditions. The
         heating oil segment currently enters into forward purchase contracts
         and futures contracts for a substantial majority of the heating oil it
         sells to these capped-price customers in advance and at a fixed cost.
         Should events occur after a capped-sales price is established that
         increases the cost of home heating oil above the amount anticipated,
         margins for the capped-price customers whose heating oil was not
         purchased in advance would be lower than expected, while margins for
         those customers whose heating oil was purchased in advance would be
         unaffected. Conversely, should events occur during this period that
         decrease the cost of heating oil below the amount anticipated, margins
         for the capped-price customers whose heating oil was purchased in
         advance could be lower than expected, while those customers whose
         heating oil was not purchased in advance would be unaffected or higher
         than expected.

         In accordance with SFAS No. 80, "Accounting for Futures Contracts,"
         futures contracts are classified as a hedge when the item to be hedged
         exposes the company to price risk and the futures contract reduces that
         risk exposure. Future contracts that relate to transactions that are
         expected to occur are accounted for as a hedge when the significant
         characteristics and expected terms of the anticipated transactions are
         identified and it is probable that the anticipated transaction will
         occur. If a transaction does not meet the criteria to qualify as a
         hedge, it is considered to be speculative. Any gains or losses
         associated with futures contracts which are classified as speculative
         are recognized in the current period. If a futures contract that has
         been accounted for as a hedge is closed or matures before the date of
         the anticipated transaction, the accumulated change in value of the
         contract is carried forward and included in the measurement of the
         related transaction. Option contracts are accounted for in the same
         manner as futures contracts. Based upon the above the Partnership
         accounts for its derivative activity as hedge transactions.

         To hedge a portion of the heating oil gallons anticipated to be sold to
         its guaranteed maximum price customers, the heating oil segment at
         March 31, 2000 had 8.3 million gallons of forward purchase contracts
         for heating oil with a notional value of $6.1 million and a fair market
         value of $6.5 million; 1.3 million gallons of futures contracts to buy
         heating oil with a notional value of $0.6 million and a fair market
         value of $1.0 million; and 4.2 million gallons of futures contracts to
         sell heating oil with a notional value of $ 2.9 million and a fair
         market value of $2.9 million. The contracts expire at various times
         with no contract expiring later than July 2000.

         At March 31, 2000 the unrealized gains on the heating oil segment's
         hedging activity was approximately $0.7 million. The heating oil
         segment's hedging activity is designed to help it achieve its planned
         margins and represents approximately 25% of the expected total home
         heating oil volume sold in a twelve month period.

         The carrying amount of all hedging financial instruments at March 31,
         2000 was $0.5 million and was included in Prepaid Expenses on the
         Consolidated Balance Sheet. The risk that counterparties to such
         instruments may be unable to perform is minimized by limiting the
         counterparties to major oil companies and major financial institutions,
         including the New York Mercantile Exchange. The Partnership does not
         expect any losses due to counterparty default.


                                       14
<PAGE>

6)       Acquisitions

         During the six month period ending March 31, 2000, the Partnership
         acquired three unaffiliated retail heating oil dealers and three
         unaffiliated retail propane dealers. The aggregate consideration for
         these acquisitions accounted for by the purchase method of accounting
         was approximately $29.6 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:

<TABLE>
<CAPTION>
        (in thousands)                                                       Useful Lives
                                                                             ------------
        <S>                                               <C>                <C>
        Land                                               $    1,394        -
        Buildings                                                 431        30 years
        Furniture and Fixtures                                    160        10 years
        Fleet                                                   2,450        5 - 30 years
        Tanks and equipment                                    11,618        5- 30 years
        Customer lists                                          4,036        7- 15 years
        Restrictive covenants                                     760        5 years
        Goodwill                                                8,139        25 years
        Inventory                                                 592        -
                                                           ----------
            Total                                          $   29,580
                                                           ==========
</TABLE>

         Sales and net income have been included in the Condensed Consolidated
         Statements of Operations from the respective dates of acquisition. The
         following unaudited pro forma information presents the results of
         operations for the six months ending March 31, 2000 of the Partnership
         and the acquisitions previously described, as if the acquisitions had
         taken place on October 1, 1999.

        (in thousands, except per share data)


        Sales                                                   $516,435
                                                                ========
        Net income                                              $ 63,022
                                                                ========

        General Partner's interest in net income                $  1,141
                                                                ========

        Limited Partners' interest in net income                $ 61,881
                                                                ========

        Basic and Diluted net income per limited partner unit   $   3.28
                                                                ========


7)       Supplemental Disclosure of Cash Flow Information

         (in thousands)                  Six Months Ended March 31,
                                         --------------------------
                                             1999       2000
                                             ----       ----
        Cash paid during the period for:
          Income taxes                     $  --      $ 3,544
          Interest                         $ 4,451    $17,217

        Non-cash investing activities:
          Redemption of preferred stock    $(6,858)      --

        Non-cash financing activities:
          Issuance of Common Units         $ 6,858       --




                                       15
<PAGE>

8)      Earnings Per Limited Partner Units

<TABLE>
<CAPTION>
                                                                         Three Months Ended    Six Months Ended
              (in thousands, except per unit data)                            March 31,            March 31
                                                                         ------------------   -----------------
                                                                            1999     2000       1999      2000
                                                                          -------   -------   -------   -------
<S>                                                                       <C>       <C>       <C>       <C>
        Basic Earnings Per Unit:
        ------------------------
        Net income                                                        $12,315   $51,687   $13,609   $61,052
        Less:  General Partner's interest in net income                       246       915       272     1,105
                                                                          -------   -------   -------   -------
               Limited Partner's interest in net income                   $12,069   $50,772   $13,337   $59,947
                                                                          =======   =======   =======   =======
        Common Units                                                        4,470    15,285     4,161    14,829
        Senior Subordinated Units                                             165     2,477        82     2,477
        Junior Subordinated Units                                              23       345        11       345
        Subordinated Units                                                  2,236      --       2,317      --
                                                                          -------   -------   -------   -------
           Weighted average number of Limited Partner units outstanding     6,894    18,107     6,571    17,651
                                                                          =======   =======   =======   =======
           Basic earnings per unit                                        $  1.75   $  2.80   $  2.03   $  3.40
                                                                          =======   =======   =======   =======
        Diluted Earnings Per Unit:
        --------------------------
        Effect of dilutive securities                                     $  --     $  --     $  --     $  --
                                                                          -------   -------   -------   -------
           Limited Partner's interest in net income                       $12,069   $50,772   $13,337   $59,947
                                                                          =======   =======   =======   =======
        Effect of dilutive securities                                        --        --        --        --
                                                                          -------   -------   -------   -------
           Weighted average number of Limited Partner units outstanding     6,894    18,107     6,571    17,651
                                                                          =======   =======   =======   =======
           Diluted earnings per unit                                      $  1.75   $  2.80   $  2.03   $  3.40
                                                                          =======   =======   =======   =======
</TABLE>


9)       Weather Insurance

         The Partnership purchased a weather insurance policy from an
         independent insurance company in January 2000 for a one-time premium of
         approximately $0.5 million. The purpose of the policy was to limit the
         negative impact of warmer than normal weather on the Partnership's
         operating results for the months of February and March 2000. The
         Partnership submitted a notice of loss in the amount of approximately
         $1.8 million under the policy in April 2000. The insurance company,
         while not disclaiming its obligation, is auditing the claim. The
         insurance company has issued a "reservation of rights" letter until
         their investigation is completed and has not made payments in
         accordance with the stipulated payment terms. Attorneys for the
         Partnership, have reviewed the policy and are not aware of any facts or
         legal theories that would provide a valid defense to the Partnership's
         claim. Amounts that are receivable pursuant to the policy are recorded
         as a reduction to operating expenses.


10)      Subsequent Events

         Cash Distribution
         On April 21, 2000 the Partnership announced that it would pay a cash
         distribution of $0.575 per Common Unit for the three months ended March
         31, 2000. The distribution will be paid on May 15, 2000 to holders of
         record as of May 2, 2000.

         Acquisition of Controlling Interest in Electric and Natural Gas
         Marketer
         On April 7, 2000 the Partnership purchased a 72.7% controlling interest
         in Total Gas & Electric, Inc. ("TG&E") for $7.0 million. The
         Partnership believes that TG&E is one of the nation's largest and
         fastest growing independent sellers of electricity and natural gas to
         residential homeowners in deregulated energy markets. TG&E has a one
         year $5.0 million working capital facility and a $3.0 million
         acquisition facility guaranteed by the Partnership. TG&E operates in
         nine markets in the Northeast/Mid Atlantic states of New York, New
         Jersey, Pennsylvania, Maryland and Washington, D.C. and serves
         approximately 80,000 residential customers.


                                       16
<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 and propane, 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 "Business" 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 Petro acquisition was made on March 26, 1999. Accordingly, the results of
operations for the three and six month periods ended March 31, 2000 include
Petro's results for the entire period whereas the results for the previous
corresponding quarter and six month periods only include the heating oil
segment's results of operations for six days.

The primary use for heating oil and propane is for 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 affect gross margins without
necessarily impacting total sales.

Also, the propane and heating oil 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.




                                       17
<PAGE>

THREE MONTHS ENDED MARCH 31, 2000
COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
---------------------------------------------


Volume

For the three months ended March 31, 2000, retail volume of propane and home
heating oil increased 158.3 million gallons, or 313.8%, to 208.8 million
gallons, as compared to 50.5 million gallons for the three months ended March
31, 1999. This increase was due to an additional 157.7 million gallons provided
by the heating oil segment and a 0.6 million gallon increase in the propane
segment. The 0.6 million gallon increase in the propane segment was largely due
to the impact of additional volume provided by propane acquisitions and internal
growth of over 3.0%. Propane volume was negatively impacted by warmer
temperatures which were 7.3% warmer than in the prior year's comparable quarter
and 12.2% warmer than normal.


Sales

For the three months ended March 31, 2000, sales increased $269.6 million, or
517.4%, to $321.7 million, as compared to $52.1 million for the three months
ended March 31, 1999. This increase was due to an additional $253.5 million
provided by the home heating oil segment and a $16.1 million increase in the
propane segment. Sales rose in the propane segment due to increased selling
prices and from the increased retail volume. Selling prices increased versus the
prior year's comparable period in response to higher propane supply costs. Sales
in the propane division also rose by $0.8 million due to an increased focus on
the sales of rationally related products.


Cost of Product

For the three months ended March 31, 2000, cost of product increased $156.4
million, or 828.6%, to $175.3 million, as compared to $18.9 million for the
three months ended March 31, 1999. Cost of product relating to heating oil sales
accounted for $141.3 million of this increase. In the propane segment, cost of
product increased by $15.1 million due to the impact of higher propane supply
cost and for the higher retail volume sales. While both propane selling prices
and propane 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, 2000, cost of installation, service and
appliances increased $27.8 million to $29.4 million, as compared to $1.6 million
for the three months ended March 31, 1999. This increase was almost entirely due
to the inclusion of an additional $27.6 million of expenses relating to the
heating oil segment's cost of installation and service.


Delivery and Branch Expenses

For the three months ended March 31, 2000, delivery and branch expenses
increased $33.2 million, or 276.4%, to $45.3 million, as compared to $12.0
million for the three months ended March 31, 1999. Delivery and branch expenses
at the heating oil segment accounted for $32.1 million of this change. The $1.1
million increase in delivery and branch expenses for the propane segment was due
to additional operating cost of acquired propane companies and expenses relating
to the propane segment's tank set program, which has increased same store
residential volume by approximately 3%.


Depreciation and Amortization Expenses

For the three months ended March 31, 2000, depreciation and amortization
expenses increased $5.2 million, or 171.1%, to $8.2 million, as compared to $3.0
million for the three months ended March 31, 1999. This increase was primarily
due to $5.4 million of heating oil segment depreciation and amortization.


                                       18
<PAGE>

General and Administrative Expenses

For the three months ended March 31, 2000, general and administrative expenses
increased $2.9 million, or 166.1%, to $4.6 million, as compared to $1.7 million
for the three months ended March 31, 1999. The increase was primarily due to an
additional $2.6 million of general and administrative expenses for the heating
oil segment. The $0.3 million increase in general and administrative expenses at
the propane segment was largely due to an increase in professional and
acquisition related expenditures.


Interest Expense, net

For the three months ended March 31, 2000, net interest expense increased $4.5
million, or 192.2%, to $6.9 million, as compared to $2.4 million for the three
months ended March 31, 1999. This increase was primarily due to $4.4 million of
additional interest expense at the heating oil segment.


Net Income

For the three months ended March 31, 2000, net income increased $39.4 million,
or 319.7%, to $51.7 million, as compared to $12.3 million for the three months
ended March 31, 1999. Additional net income provided by the heating oil segment
was $40.0 million. The $0.6 million decrease in net income for the propane
segment was due to the impact of warmer temperatures which more than offset the
favorable impact of acquisitions, internal growth and a per gallon improvement
in gross profit margins.


Earnings before interest, taxes, depreciation and amortization, less net gain
(loss) on sales of equipment (EBITDA)

Earnings before interest, taxes, depreciation and amortization, less net gain
(loss) on sales of equipment (EBITDA) increased $49.2 million, or 275.6%, to
$67.1 million, as compared to $17.9 million for the three months ended March 31,
1999. This increase was due to $50.0 million of additional EBITDA generated by
the heating oil segment and a $0.8 million decrease in the propane segment
EBITDA. The decrease in the propane segment resulted from the impact of warmer
temperatures which was partially offset by additional EBITDA provided by propane
acquisitions, propane internal growth and higher per gallon propane 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.



                                       19
<PAGE>

SIX MONTHS ENDED MARCH 31, 2000
COMPARED TO SIX MONTHS ENDED MARCH 31, 1999
-------------------------------------------


Volume

For the six months ended March 31, 2000, retail volume of propane and heating
oil increased 265.0 million gallons, or 331.9%, to 344.9 million gallons, as
compared to 79.9 million gallons for the six months ended March 31, 1999. This
increase was due to 261.6 million gallons of additional volume provided by the
heating oil segment and a 3.4 million gallon increase in the propane segment.
While retail propane volume was favorably impacted by acquisitions and internal
growth, a 2.6 million gallon reduction in agriculture sales and warmer
temperatures negatively impacted volumes. The abnormal weather conditions during
the first fiscal quarter resulted in a very dry fall harvest, which
significantly reduced propane demand for crop drying. In the Partnership's
propane operating areas, temperatures for the six months ending March 31, 2000,
were 3.9% warmer than in the prior year's comparable period and 12.6% warmer
than normal.


Sales

For the six months ended March 31, 2000, sales increased $426.2 million, or
517.7%, to $508.6 million, as compared to $82.3 million for the six months ended
March 31, 1999. This increase was attributable to $399.8 million additional
sales provided by the heating oil segment and a $26.4 million increase in
propane sales. Propane sales increased due to higher selling prices in response
to higher propane supply costs and from the increased retail volume. Sales in
the propane division also rose by $1.6 million due to an increased focus on the
sales of rationally related products.


Cost of Product

For the six months ended March 31, 2000, cost of product increased $232.0
million, or 777.8%, to $261.8 million, as compared to $29.8 million for the six
months ended March 31, 1999. This increase was due to $210.2 million of
additional costs attributable to the heating oil segment and for higher propane
supply cost of $21.8 million. While both propane selling prices and propane
supply costs increased on a per gallon basis, the increase in selling prices was
more than the increase in supply costs, which resulted in an increase in per
gallon margins.


Cost of Installation, Service and Appliances

For the six months ended March 31, 2000, cost of installation, service and
appliances increased $57.7 million, to $60.3 million, as compared to $2.6
million for the six months ended March 31, 1999. This increase was primarily due
to $57.1 million of additional costs relating to the heating oil segment's cost
of installation and service.


Delivery and Branch Expenses

For the six months ended March 31, 2000, delivery and branch expenses increased
$63.3 million, or 283.3%, to $85.6 million, as compared to $22.3 million for the
six months ended March 31, 1999. This increase was due to $61.3 million of
additional heating oil operating costs and $2.0 million of additional operating
costs for the propane segment. The increase for the propane segment was due to
additional cost of acquired propane companies and expenses related to the
propane segment's tank set program, which has increased same store residential
volume by approximately 3%.


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<PAGE>

Depreciation and Amortization

For the six months ended March 31, 2000, depreciation and amortization expenses
increased $10.6 million, or 175.2%, to $16.6 million, as compared to $6.0
million for the six months ended March 31, 1999. This increase was primarily due
to $10.7 million of heating oil segment depreciation and amortization.


General and Administrative Expenses

For the six months ended March 31, 2000, general and administrative expenses
increased $6.1 million, or 193.9%, to $9.3 million, as compared to $3.2 million
for the six months ended March 31, 1999. This increase was primarily due to the
inclusion of an additional $5.5 million of general and administrative expenses
for the heating oil segment. The $0.6 million increase in general and
administrative expenses at the propane segment was largely due to an increase in
incentive compensation, inflation and acquisition related expenditures.


Interest Expense, net

For the six months ended March 31, 2000, net interest expense increased $8.8
million, or 194.6%, to $13.4 million, as compared to $4.5 million for the six
months ended March 31, 1999. This change was primarily due to $8.7 million of
additional interest expense at the heating oil segment.


Net Income

For the six months ended March 31, 2000, net income increased $47.4 million, or
348.6%, to $61.0 million, as compared to $13.6 million for the six months ended
March 31, 1999. Additional net income provided by the heating oil segment was
$46.1 million. The $1.3 million increase in net income for the propane segment
was due to the segment's acquisition program, internal growth and a per gallon
improvement in gross profit margins, partially reduced by the impact of warmer
temperature on the propane segment's results.


Earnings before interest, taxes, depreciation and amortization, less net gain
(loss) on sales of equipment (EBITDA)

Earnings before interest, taxes, depreciation and amortization, less net gain
(loss) on sales of equipment (EBITDA) increased $67.2 million, or 275.3%, to
$91.6 million for the six months ended March 31, 2000, as compared to $24.4
million for the prior year's comparable period. This increase was due to $65.8
million of additional EBITDA generated by the heating oil segment and a $1.4
million increase in the propane segment EBITDA. The increase in the propane
segment was due to additional EBITDA provided by propane acquisitions, propane
internal growth and higher per gallon propane gross profit margins reduced by
the impact of warmer temperatures on the propane segment's results. 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.


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<PAGE>

Liquidity and Capital Resources

During February 2000, the partnership sold 1.7 million common units (including
0.2 million of overallotment units exercised), the net proceeds of which, net of
underwriter's discounts, commissions, and offering expenses was $22.6 million.
These funds combined with $39.9 million of net credit facility borrowings, $27.5
million of privately placed debt, and $0.2 million from the sale proceeds of
fixed assets amounted to $90.2 million. Such funds were used for operating
activities of $18.8 million, capital expenditures of $3.3 million, acquisitions
of $29.6 million, net acquisition facility repayments of $6.3 million,
distributions of $16.5 million, debt repayment of $3.2 million, and other
financing activities of $0.8 million. As a result of the above activity cash
increased $11.7 million, of which $7.0 million was subsequently used on April 7,
2000, for the Partnership's investment in Total Gas & Electric, Inc.

The seasonal nature of the Partnership's business results in the sale by the
Partnership of approximately 75% of its volume during the first and second
fiscal quarter, resulting in a usual increase in receivables during this period.
In addition, the anomalous spikes in the cost and resulting sales price of home
heating oil and propane during this past heating season, added to the increase
in receivables, and contributed to the operational use of cash of $18.8 million.

The $27.5 million of privately placed debt mentioned above was comprised of two
issuances. In March 2000, the propane division issued $12.5 million of 8.67%
First Mortgage Notes ("8.67% Notes") with a final maturity of March 30, 2012.
The 8.67% Notes require semiannual interest payments on March 30 and September
30. The propane division also issued $15.0 million of 8.72% First Mortgage Notes
("8.72% Notes") that require semiannual interest payments on March 30 and
September 30 and require annual prepayments of $3.0 million commencing on March
30, 2011. The total proceeds from these note issuances of $27.5 million were
used to repay $25.0 million borrowed under the propane division's bank
acquisition facility with the balance of $2.5 million set aside for general
operating purposes within the propane segment.

For the remainder of fiscal 2000, the Partnership anticipates paying interest of
$10.3 million and anticipates growth and maintenance capital additions of
approximately $4.9 million. The Partnership has no material commitments for
capital expenditures. 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 internally generated
cash, 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 2000.

Year 2000

As a result of the preparation and series of analyses and tests performed
before, during and after December 31, 1999, the Partnership did not experience
any significant disruption in information technology or operations as a result
of the date change-over to the year 2000.

Accounting Principles Not Yet Adopted

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133 - "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities.
Subsequently, the FASB issued SFAS No. 137 which amended the effective date for
SFAS No. 133 to all fiscal quarters of all fiscal years beginning after June 15,
2000. The Partnership is assessing the impact and disclosure requirements of
SFAS No. 133.


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<PAGE>

Item 3.     Quantitative 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, 2000, the Partnership had outstanding borrowings of approximately
$48.0 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 $0.5 million annually.

The Partnership also selectively uses derivative financial instruments to manage
its exposure to market risk related to changes in the current and commodity
market price of home heating oil for its heating oil segment. 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 home heating oil 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 home heating oil at March 31, 2000, the potential unrealized gain on the
Partnership's hedging activity would be increased by $0.5 million to an
unrealized gain of $1.2 million; and conversely a hypothetical ten percent
decrease in the cost of home heating oil and propane would decrease the
unrealized gain by $0.5 million to an unrealized gain of $0.2 million.



                           PART II OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits Included Within:

         (27)     Financial Data Schedule

         10.18    Amendment No.2 dated as of February 15,2000, to the Credit
                  Agreement, dated as of March 15, 1999, by and among Petroleum
                  Heat and Power Co., Inc. and Bank of America N.A., The Chase
                  Manhattan Bank, First Union National Bank, CIBC Inc. and Union
                  Bank of California, N.A.

         10.19    $12,500,000 8.67% First Mortgage Notes, Series A, due March
                  30, 2012 and $15,000,000 8.72% First Mortgage Notes, Series B,
                  due March 30, 2015 dated as of March 30, 2000.

(b)      Reports on Form 8-K:

         1/28/00  This form 8-K consists of three historical press releases;
                  Star Gas Partners to acquire certain Midwest propane
                  operations and also signs letter of intent to enter
                  deregulated electric and natural gas markets (Released January
                  28, 2000), Star Gas Partners, L.P. reports fiscal 2000 first
                  quarter results and announces $0.575/unit common unit
                  distribution (Released January 24, 2000) and Star Gas
                  Partners, L.P. reports fiscal 1999 year-end and fourth quarter
                  results (Released December 2, 1999).

         2/7/00   This form 8-K consists of a copy of the underwriting agreement
                  for a firm commitment public offering of up to 1,450,000
                  common units of the registrant that were previously registered
                  pursuant to a shelf registration statement on Form S-3 (SEC
                  File No. 333-94031).


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<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        April 26, 2000
---------------------             Star Gas LLC
     George Leibowitz             (Principal Financial Officer)


/s/  James J. Bottiglieri         Vice President                 April 26, 2000
-------------------------         Star Gas LLC
     James J. Bottiglieri


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