UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549



                                    FORM 10-Q


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

     For  the  quarterly  period  ended  January  31,  1999

     OR

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

     For  the  transition  period  from  ________________  to  _________________


                      Commission  file  number:  000-24394

                           PENN  OCTANE  CORPORATION
        (Exact  Name  of  Registrant  as  Specified  in  Its  Charter)

               DELAWARE                            52-1790357
  (State  or  Other  Jurisdiction                   (I.R.S.
  of Incorporation or Organization)      Employer  Identification  No.)

900  VETERANS  BOULEVARD,  SUITE  240,  REDWOOD  CITY,  CALIFORNIA     94063
     (Address of Principal Executive Offices)                         (Zip Code)

Registrant's  Telephone  Number,  Including  Area  Code:    (415)  368-1501

     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
     ----

     The number of shares of Common Stock, par value $.01 per share, outstanding
on  March  12,  1999  was  10,821,557.

                                        1
<PAGE>
<TABLE>
<CAPTION>
                             PENN OCTANE CORPORATION
                               TABLE  OF  CONTENTS


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

              Consolidated Balance Sheets as of January 31, 1999 (unaudited)        3-4
              and July 31, 1998

              Consolidated Statements of Operations for the three and six months
              ended January 31, 1999 and 1998 (unaudited)                             5

              Consolidated Statements of Cash Flows for the six months
              ended January 31, 1999 and 1998 (unaudited)                             6

              Notes to Consolidated Financial Statements (unaudited)               7-17

          2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                           18-24

Part II   1.  Legal Proceedings                                                      25

          2.  Changes in Securities                                                  25

          3.  Defaults Upon Senior Securities                                        25

          4.  Submission of Matters to a Vote of Security Holders                    25

          5.  Other Information                                                      25

          6.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K    25-27
</TABLE>

                                        2
<PAGE>
PART  I
ITEM  1.

<TABLE>
<CAPTION>
                                       PENN OCTANE CORPORATION AND SUBSIDIARIES

                                             CONSOLIDATED BALANCE SHEETS

                                                        ASSETS


                                                                                             January 31,
                                                                                                1999        July 31,
                                                                                             (Unaudited)      1998
                                                                                            -------------  ----------
<S>                                                                                         <C>            <C>
Current Assets
 Cash                                                                                       $     510,992  $  157,513
 Trade accounts receivable, less allowance for doubtful accounts of $418,796 and $418,796       1,584,444   1,195,653
 Inventories (note D)                                                                             425,189     377,097
 Prepaid expenses and other current assets                                                        314,276      95,775
                                                                                            -------------  ----------
   Total current assets                                                                         2,834,901   1,826,038
Property, plant and equipment - net (note C)                                                    3,052,899   3,001,387
Lease rights (net of accumulated amortization of $501,457 and $478,560)                           652,582     675,479
CNG assets held for sale (note E)                                                               1,100,000   1,100,000
Other noncurrent assets                                                                           140,050      95,077
                                                                                            -------------  ----------
   Total assets                                                                             $   7,780,432  $6,697,981
                                                                                            =============  ==========
</TABLE>


     The  accompanying  notes  are  an  integral  part  of  these  statements.

                                        3
<PAGE>
<TABLE>
<CAPTION>
                                   PENN OCTANE CORPORATION AND SUBSIDIARIES

                                   CONSOLIDATED BALANCE SHEETS - CONTINUED

                                     LIABILITIES AND STOCKHOLDERS' EQUITY


                                                                               January 31,
                                                                                  1999           July 31,
                                                                               (Unaudited)         1998
                                                                             ---------------  ---------------
<S>                                                                          <C>              <C>
Current Liabilities
     Current maturities of long-term debt (notes G, H and M)                 $    1,697,603   $    1,693,897 
     Revolving line of credit (note I)                                              587,501          991,823 
     Trade accounts payable                                                       2,438,090        2,050,575 
     Borrowings from IBC-Brownsville (note L)                                             -          672,552 
                                                                                  1,301,716        1,555,262 
                                                                             ---------------  ---------------
     Accrued liabilities
          Total current liabilities                                               6,024,910        6,964,109 
Long-term debt, less current maturities (note G)                                          -           60,000 
Commitments and contingencies (note I)                                                    -                - 
Stockholders' Equity (note H)
     Senior Preferred stock-$.01 par value, 5,000,000 shares authorized; 0
     shares issued and outstanding at January 31, 1999 and July 31, 1998                  -                - 
     Preferred stock-$.01 par value, 5,000,000 shares authorized; 0
     convertible shares issued and outstanding at January 31, 1999 and July 31,
     1998                                                                                 -                - 
     Common stock-$.01 par value, 25,000,000 shares authorized;
     10,771,557 and 9,952,673 shares issued and outstanding at January 31, 1999
     and July 31, 1998                                                              107,716           99,527 
     Additional paid-in capital                                                  14,572,865       13,318,592 
     Notes receivable from the president of the Company and a related party
     for exercise of warrants, less reserve of $223,000 at January 31, 1999 and
     July 31, 1998                                                             (  2,763,006)    (  2,763,006)
      Accumulated deficit                                                     (  10,162,053)   (  10,981,241)
                                                                             ---------------  ---------------
        Total stockholders' equity                                                1,755,522       (  326,128)
                                                                             ---------------  ---------------
          Total liabilities and stockholders' equity                         $    7,780,432   $    6,697,981 
                                                                             ===============  ===============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        4
<PAGE>
<TABLE>
<CAPTION>


                                   PENN OCTANE CORPORATION AND SUBSIDIARIES

                                    CONSOLIDATED STATEMENTS OF OPERATIONS

                                                 (UNAUDITED)

                                                         Three Months Ended           Six Months Ended
                                                   ----------------------------  ----------------------------
                                                    January 31,    January 31,    January 31,    January 31,
                                                       1999           1998           1999           1998
                                                   -------------  -------------  -------------  -------------
<S>                                                <C>            <C>            <C>            <C>
Revenues                                           $  8,353,027   $  9,813,766   $ 14,831,593   $ 16,356,247 
Cost of goods sold                                    7,413,785      8,805,890     13,323,218     15,055,308 
                                                   -------------  -------------  -------------  -------------
 Gross profit                                           939,242      1,007,876      1,508,375      1,300,939 
                                                   -------------  -------------  -------------  -------------
Selling, general and administrative expenses
 Legal and professional fees                            223,617        223,926        426,699        348,019 
 Salaries and payroll related expenses                  228,870        203,317        416,698        332,407 
 Travel                                                  43,740         22,306         80,105         81,099 
 Other                                                  148,465        154,752        258,200        179,219 
                                                   -------------  -------------  -------------  -------------
                                                        644,692        604,301      1,181,702        940,744 
                                                   -------------  -------------  -------------  -------------
 Operating income                                       294,550        403,575        326,673        360,195 
Other income (expense)
 Interest expense                                    (  200,681)    (  100,510)    (  293,074)    (  159,609)
 Interest income                                            879         59,356          1,297        116,860 
 Award from litigation (note L)                         987,114              -        987,114              - 
                                                   -------------  -------------  -------------  -------------
   Income from continuing operations
   before taxes                                       1,081,862        362,421      1,022,010        317,446 
Provision for income taxes                                    -              -              -              - 
                                                   -------------  -------------  -------------  -------------
   Income from continuing
   operations                                         1,081,862        362,421      1,022,010        317,446 
Discontinued operations, net of taxes (note E)
 (Loss) from operations of CNG segment                ( 121,403)     ( 103,744)     ( 202,822)     ( 183,217)
                                                   -------------  -------------  -------------  -------------
   Net income                                      $    960,459   $    258,677   $    819,188   $    134,229 
                                                   =============  =============  =============  =============
Income from continuing operations
per common share (note B)                          $       0.10   $       0.02   $       0.10   $       0.01 
                                                   =============  =============  =============  =============
Net income (loss) per
common share (note B)                              $       0.09   $       0.00   $       0.08   $    (  0.01)
                                                   =============  =============  =============  =============
Income from continuing
operations per common share
assuming dilution (note B)                         $       0.10   $       0.01   $       0.10   $       0.01 
                                                   =============  =============  =============  =============
Net income (loss) per
common share assuming
dilution (note B)                                  $       0.09   $       0.00   $       0.08   $    (  0.01)
                                                   =============  =============  =============  =============
Weighted average common shares outstanding           10,479,319      8,716,337     10,215,996      8,620,819 
                                                   =============  =============  =============  =============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        5
<PAGE>
<TABLE>
<CAPTION>
                                   PENN OCTANE CORPORATION AND SUBSIDIARIES

                                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                  (UNAUDITED)
                                                                                     Six  Months  Ended
                                                                                 -----------------------------
                                                                                  January 31,    January 31,
                                                                                     1999            1998
                                                                                 -------------  --------------
<S>                                                                              <C>            <C>
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net income                                                                       $    819,188   $     134,229 
Adjustments to reconcile net income to net cash used in (provided by) operating
Activities:
 Depreciation and amortization                                                        159,291         142,946 
 Amortization of lease rights                                                          22,897          22,897 
 Amortization of loan discount                                                         94,255          28,125 
 Interest income from related party notes receivables                                       -     (   115,008)
 Award from litigation                                                             (  987,114)              - 

Changes in current assets and liabilities:
 Trade accounts receivable                                                         (  388,874)   (  1,957,631)
 Related party receivable                                                                  82          47,809 
 Costs and estimated earnings in excess of billing on uncompleted contracts                 -         133,218 
 Inventories                                                                        (  48,092)     (  118,937)
 Prepaids and other current assets                                                     54,375       (  85,155)
 Deferred registration costs                                                                -      (  473,132)
 Construction and trade accounts payable                                              413,793       2,274,019 
 Billings in excess of costs and estimated earnings on uncompleted contracts                -        (  7,596)
 Other assets and liabilities                                                       (  48,568)      (  99,514)
 Accrued liabilities                                                                   75,847         269,819 
                                                                                 -------------  --------------
   Net cash  provided by operating activities                                         167,080         196,089 

Cash flows from investing activities:
 Capital expenditures                                                              (  170,485)      (  75,449)
 CNG assets held for sale                                                                   -      (  664,405)
                                                                                 -------------  --------------

   Net cash used in investing activities                                           (  170,485)     (  739,854)

Cash flows from financing activities:
 Revolving credit facilities                                                       (  404,332)     (  140,000)
 Issuance of debt                                                                      43,706       1,500,000 
 Issuance of Common Stock                                                             717,500       1,131,250 
 Reduction in debt                                                                          -      (  923,395)
                                                                                 -------------  --------------
   Net cash provided by financing activities                                          356,884       1,567,855 
                                                                                 -------------  --------------

     Net increase in cash                                                             353,479       1,024,090 
Cash at beginning of period                                                           157,513          31,142 
                                                                                 -------------  --------------
Cash at end of period                                                            $    510,992   $   1,055,232 
                                                                                 =============  ==============
Supplemental disclosures of cash flow information:
 Cash paid during the period for:
   Interest                                                                      $    125,800   $     129,007 
                                                                                 =============  ==============
Supplemental disclosures of noncash transactions:
 Common stock and warrants issued                                                $    144,883   $     263,000 
                                                                                 =============  ==============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                        6
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE  A  -  ORGANIZATION

Penn  Octane  Corporation, formerly International Energy Development Corporation
(IEDC)  and The Russian Fund, a Delaware corporation, was incorporated on August
27,  1992.  On  October 21, 1993, IEDC acquired Penn Octane Corporation, a Texas
corporation, whose primary asset was a liquid petroleum gas (LPG) pipeline lease
agreement  (Pipeline  Lease)  with  Seadrift  Pipeline Corporation (Seadrift), a
subsidiary  of  Union  Carbide Corporation (Union Carbide).  On January 6, 1995,
the  Board  of  Directors  approved  the  change  of  IEDC's name to Penn Octane
Corporation.  The  Company  is  engaged primarily in the business of purchasing,
transporting  and  selling  LPG  and  has provided services and equipment to the
compressed  natural  gas  (CNG)  industry.  Substantially  all  of the LPG sales
volume  since  inception  has been to PMI Trading Limited (PMI), a subsidiary of
Petroleos  Mexicanos  (PEMEX),  the  Mexican  state  owned  oil  company.

In  February 1997, the Company formed Wilson Acquisition Corporation, a Delaware
corporation  and  a  wholly-owned subsidiary, for the purpose of engaging in the
business  of designing, constructing, installing and servicing equipment for CNG
fueling stations and related products for use in the CNG industry throughout the
world.  The  subsidiary's  name was changed to PennWilson CNG, Inc. (PennWilson)
in  August  1997.

In  October  1997,  the  Company  formed  Penn  CNG Holdings, Inc. (Holdings), a
Delaware  corporation  and  a  wholly-owned  subsidiary.  In  February 1998, the
Company  formed PennWill, S.A. de C.V., Camiones Ecologicos, S.A. de C.V., Grupo
Ecologico  Industrial,  S.A. de C.V., Estacion Ambiental, S.A. de C.V., Estacion
Ambiental  II,  S.A.  de C.V., and Serinc, S.A. de C.V. (collectively Estacion),
all Mexican corporations.  To date there has not been significant operations for
any  of  these  entities.

     In  March 1999, the Company approved the sale of certain CNG related assets
to a director and officer of the Company (see note E).  As a result of the sale,
the  Company  will  no  longer  be  in  the  CNG  business and has reflected the
historical  results  of  the CNG segment as a discontinued operation.  All prior
periods  have  been  restated.

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

     The  accompanying  financial  statements  include  the  Company  and  its
subsidiaries,  PennWilson  and Holdings (Company).  All significant intercompany
accounts  and  transactions  are  eliminated.

The  unaudited  consolidated balance sheet as of January 31, 1999, the unaudited
consolidated statements of operations for the three and six months ended January
31,  1999  and 1998, and the unaudited consolidated statements of cash flows for
the six months ended January 31, 1999 and 1998 have been prepared by the Company
without  audit.  In  the opinion of management, the financial statements include
all  adjustments  (which include only normal recurring adjustments) necessary to
present  fairly  the unaudited consolidated financial position of the Company as
of January 31, 1999 and the unaudited consolidated results of operations for the
three and six months ended January 31, 1999 and 1998, and unaudited consolidated
cash  flows  for  the  six  months  ended  January  31,  1999  and  1998.

Certain  information  and  footnote  disclosures  normally included in financial
statements  prepared in accordance with generally accepted accounting principles
have  been  omitted.  These  financial  statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Annual
Report  on  Form  10-K  for  the  year  ended  July  31,  1998.

Certain  reclassifications have been made to prior period balances to conform to
the  current  presentation. All reclassifications have been applied consistently
to  the  periods  presented.

                                        7
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



NOTE  B  -  INCOME  (LOSS)  PER  COMMON  SHARE

Income  (loss)  per  share  of  common stock is computed on the weighted average
number  of  shares  outstanding.  During  periods  in which the Company incurred
losses,  giving  effect to common stock equivalents is not presented as it would
be  antidilutive.

The  FASB issued Statement of Financial Accounting Standards No. 128 (SFAS 128),
"Earnings  Per  Share", which supersedes Accounting Principles Board Opinion No.
15 (APB 15), "Earnings Per Share".  The statement became effective for financial
statements  issued for periods ending after December 15, 1997, including interim
periods.  Early  adoption  was  not  permitted.

The following table presents reconciliations from income (loss) per common share
to income (loss) per common share assuming dilution (see note H for the warrants
and  convertible  preferred  stock):


<TABLE>
<CAPTION>
                                 For the six months ended January 31, 1999  For the six months ended January 31, 1998
                                 -----------------------------------------  ------------------------------------------
                                 Income (Loss)      Shares      Per-Share   Income (Loss)      Shares       Per-Share
                                  (Numerator)    (Denominator)    Amount     (Numerator)    (Denominator)    Amount
                                 --------------  -------------  ----------  --------------  -------------  -----------
<S>                              <C>             <C>            <C>         <C>             <C>            <C>
Income (loss) from continuing
 operations                      $    1,022,010              -           -  $     317,446               -           - 
                                 --------------                                                                       
Net income (loss)                       819,188              -           -        134,229               -           - 
                                 --------------                                                                       
Less:  Dividends on preferred
 stock                                        -              -           -     (  225,000)              -           - 
BASIC EPS
Income (loss) from continuing
 operations available to
 common stockholders                  1,022,010     10,215,966  $     0.10         92,446       8,620,819  $     0.01 
                                                                ==========                                 ===========
Net income (loss) available to
common stockholders                     819,188     10,215,966  $     0.08      (  90,771)      8,620,819  $  (  0.01)
                                                                ==========                                 ===========
EFFECT OF DILUTIVE SECURITIES
Warrants                                      -         98,686           -              -         916,962           - 
Convertible Preferred Stock                   -              -           -              -         989,041           - 
DILUTED EPS
Income (loss) from continuing
   operations available to
 common stockholders                  1,022,010     10,314,682  $     0.10         92,446      10,526,822  $     0.01 
                                                                ==========                                 ===========
Net income (loss) available to
common stockholders              $      819,188     10,314,682  $     0.08            n/a             n/a         n/a
                                 ==============  =============  ==========  ==============  =============  ===========
</TABLE>


                                        8
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  B  -  INCOME  (LOSS)  PER  COMMON  SHARE  (CONTINUED)

<TABLE>
<CAPTION>
                               For the three months ended January 31, 1999  For the three months ended January 31, 1998
                                 -----------------------------------------  -----------------------------------------
                                 Income (Loss)      Shares      Per-Share   Income (Loss)      Shares      Per-Share
                                  (Numerator)    (Denominator)    Amount     (Numerator)    (Denominator)    Amount
                                 --------------  -------------  ----------  --------------  -------------  ----------
<S>                              <C>             <C>            <C>         <C>             <C>            <C>
Income (loss) from continuing
 operations                      $    1,081,862              -           -  $     362,421               -           -
                                 --------------                                                                      
Net income (loss)                       960,459              -           -        258,677               -           -
                                 --------------                                                                      
Less:  Dividends on preferred
 stock                                        -              -           -     (  225,000)              -           -
BASIC EPS
Income (loss) from continuing
 operations available to
 common stockholders                  1,081,862     10,479,319  $     0.10        137,421       8,716,337  $     0.02
                                                                ==========                                 ==========
Net income (loss) available to
common stockholders                     960,459     10,479,319  $     0.09         33,677       8,716,337  $     0.00
                                                                ==========                                 ==========
EFFECT OF DILUTIVE SECURITIES
Warrants                                      -         19,396           -              -         846,047           -
Convertible Preferred Stock                   -              -           -              -         978,173           -
DILUTED EPS
Income (loss) from continuing
 operations available to
 common stockholders                  1,081,862     10,498,715  $     0.10        137,421      10,540,557  $     0.01
                                                                ==========                                 ==========
Net income (loss) available to
common stockholders              $      960,459     10,498,715  $     0.09  $      33,677      10,540,557  $     0.00
                                 ==============  =============  ==========  ==============  =============  ==========
</TABLE>

                                        9
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  C  -  PROPERTY,  PLANT  AND  EQUIPMENT

          Property,  plant  and  equipment  consists  of  the  following:

<TABLE>
<CAPTION>
                                      January  31,     July  31,
                                         1999            1998
                                    --------------  --------------
<S>                                 <C>             <C>
LPG:                             
 Building                           $     173,500   $     173,500 
 LPG terminal                           3,426,440       3,426,440 
 Automobile and equipment                 388,839         391,138 
 Office equipment                          35,738          35,738 
 Capital construction in progress         329,347          75,389 
 Leasehold improvements                   291,409         291,409 


CNG:                              
 Furniture, fixtures and equipment              -          35,575 
 Automobiles                                    -           3,500 
 Capital construction in progress               -          45,485 
                                            8,575           8,575 
 Leasehold improvements             --------------  --------------
                                        4,653,848       4,486,749 

Less: accumulated depreciation and
 Amortization                        (  1,600,949)   (  1,485,362)
                                    --------------  --------------
                                    $   3,052,899   $   3,001,387 
                                    ==============  ==============

NOTE  D  -  INVENTORIES

Inventories  consist  of  the  following:
                                      January  31,     July  31,
                                         1999            1998
                                    --------------  --------------

LPG:
 Pipeline                           $     294,732   $     276,938
 LPG terminal                             130,457         100,159
                                    --------------  --------------
                                    $     425,189   $     377,097
                                    ==============  ==============
</TABLE>


                                       10
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  E  -  DISCONTINUED  OPERATIONS

In  March 1999, the Company approved the sale of certain CNG related assets to a
company  (Buyer) controlled by a director and officer of the Company.  Under the
terms  of  the  sale, Buyer will purchase approximately $1,100,000 of CNG assets
and  the  Company  will  receive  promissory  notes  totaling  $1,100,000.  The
promissory  notes  are secured by certain assets to be acquired by Buyer and the
director  and officer has pledged his stock in Buyer as well as 200,000 warrants
to  purchase  200,000  shares  of  common  stock  of  the Company, as additional
collateral.  As  a  result  of the sale, the Company has effectively disposed of
its  CNG  segment  and  discontinued operations.  In accordance with APB 30, the
results  of  the  CNG segment have been recorded as a discontinued operation for
all  periods  presented.  The assets of the CNG segment to be sold are presented
separately  at January 31, 1999 and July 31, 1998.


NOTE  F  -  NYDOT  CNG  FUELING  STATION

During the year ended July 31, 1998, the Company recorded additional revenues of
approximately $821,994 related to change-orders for additional work performed by
the  Company  in connection with the construction of equipment for a CNG fueling
station  for  the  New  York  City  Department  of  Transportation (NYDOT).  The
change-orders  have  been  submitted to the customer for approval.  During March
1998, the Company was requested to furnish additional documentation with respect
to  the submitted change-orders which was subsequently provided on May 15, 1998.
On  April  30,  1998,  the  Company  received  notification  from  the  general
contractor,  A.E.  Schmidt  Environment ("AES"), that the Company was in default
under  the  agreement  between  AES  and  the  Company relating to the NYDOT CNG
fueling  station.  The  Company  has  responded to AES indicating that AES is in
default  with  the  terms  of  the  agreement  and  that the Company is awaiting
satisfactory  resolution  of  these matters prior to completion of the remaining
work  outlined  under  the  agreement.  The Company is currently exploring legal
remedies  available.  As  of  July  31,  1998,  the Company revised its estimate
related to the work preformed in connection with the change-orders.  As a result
of  this revision the Company reduced revenues associated with the change-orders
by  $500,000  and  recorded  an allowance for doubtful accounts of $321,994.  In
connection with this contract, the Company does not anticipate a material amount
of  additional  costs  associated  with  either  completion  of  the contract or
subsequent  warranties  provided  for  in  the  contract.

For  the  three  months  and  six months ended January 31, 1998, the Company had
recorded  additional  revenues  of  approximately  $221,994  and  $821,994,
respectively,  related to change-orders in connection with the NYDOT CNG fueling
station.


                                       11
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  G  -  LONG-TERM  DEBT

Long-term  debt  consists  of  the  following:

<TABLE>
<CAPTION>
                                                                                         January 31,    July 31,
                                                                                             1999         1998
                                                                                         ------------  ----------
<S>                                                                                      <C>           <C>
Contract for Bill of Sale; due in semi-annual payments of $22,469, including interest
at 11.8%; due in October 1998; collateralized by a building.                             $     91,197  $   91,197

Unsecured note with principal due in equal annual installments of $20,000
beginning June 5, 1998, plus interest at the prime rate due June 5, 2002 (note H).                  -     100,000

Note issued in connection with settlement of vendor obligation.  Principal due in
monthly installments.                                                                          62,700      62,700

Promissory note to Seadrift, due February 1999 (paid February 1999).                           43,706           -

1,500,000 in promissory notes, with warrants to purchase up to 250,000 shares of
common stock at an exercise price of $6.00 per share expiring October 21, 2000 and
warrants to purchase up to 337,500 shares of common stock at an exercise price of
1.75 per share expiring November 30, 2001; principal due June 30, 1999, or from
proceeds received by the Company from any public offering of debt or equity of the
Company in excess of $2,250,000.  Promissory notes are secured by an assignment
of net proceeds received by the Company in connection with the Judgment; interest
at 10.0% on the principal amount of the promissory notes is due quarterly on March
31, June 30, September 30 and December 31.  The effective interest rate after
consideration of the discount, is 18.0% per annum. Purchasers of the promissory
notes were granted one demand registration right with respect to the shares issuable
upon exercise of the warrants (note M).                                                     1,500,000   1,500,000
                                                                                         ------------  ----------

                                                                                            1,697,603   1,753,897
Current maturities.                                                                         1,697,603   1,693,897
                                                                                         ------------  ----------
                                                                                         $          -  $   60,000
                                                                                         ============  ==========
</TABLE>


NOTE  H  -  STOCKHOLDERS'  EQUITY

     PREFERRED  STOCK
     ----------------

On September 18, 1993, in a private placement, the Company issued 150,000 shares
of its $.01 par value, 11% convertible, cumulative non-voting preferred stock at
a  purchase  price of $10.00 per share.  On June 10, 1994 the Company declared a
2-for-1  stock split.  The preferred stock was convertible into voting shares of
common  stock  of  the  Company  at a conversion ratio of one share of preferred
stock  for  3.333  shares  of  common stock. On September 10, 1997, the Board of
Directors  of  the Company approved the issuance of an additional 100,000 shares
of  common  stock as an inducement for the preferred stockholders to convert the
shares  of  preferred stock and release all rights with respect to the preferred
stock. In January 1998, all 270,000 shares of the preferred stock were converted
into  an  aggregate  of  999,910  shares  of  common  stock of the Company.  The
issuance  of  the  additional  100,000 common shares was recorded as a preferred
stock  dividend  in  the  amount  of  $225,000  at  January  30,  1998.


                                       12
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)



NOTE  H  -  STOCKHOLDERS'  EQUITY  -  Continued


     COMMON  STOCK
     -------------

          On  November  13,  1998,  the  Company issued 250,000 shares of common
stock  of  the  Company  and warrants to purchase 125,000 shares of common stock
with  an  exercise price of $1.25 per warrant and an expiration date of November
12,  2000  for  an amount of $250,000.  Net proceeds from the sale were used for
working  capital  purposes.

          On  December  14,  1998,  the  Company issued 500,000 shares of common
stock  of  the  Company  and warrants to purchase 300,000 shares of common stock
with  an  exercise price of $1.75 per warrant and an expiration date of December
13, 2003 for an amount of $500,000.  Net proceeds  from  the  sale were used for
working  capital  purposes.

          During December 1998, the Company issued 53,884 shares of common stock
of  the  Company  to  Zimmerman  Holdings  Inc.  (ZHI),  as payment for and full
cancellation  of  a  note  payable  of  $100,000  and related interest and other
obligations  totaling  $18,000 and the cancellation of any further obligation to
pay  any  future  royalties in connection with Company's purchase of certain CNG
assets  from  Wilson  Technologies  Inc.,  a  wholly  owned  subsidiary  of ZHI.

          During  December,  1998,  the  Company  issued 15,000 shares of common
stock of the Company and warrants to purchase 10,000 shares of common stock with
an  exercise  price  of $3.25 per warrant and an expiration date of December 31,
2000  in  exchange  for  cancellation  of  all  outstanding obligations totaling
approximately  $26,000 and other obligations as outlined in an agreement between
the  parties.


     STOCK  AWARD  PLAN
     ------------------

Under the Company's 1997 Stock Award Plan, the Company has reserved for issuance
150,000  shares  of  Common  Stock,  of which 129,686 shares were unissued as of
October  31,  1998,  to  compensate  consultants  who  have rendered significant
services to the Company.  The Plan is administered by the Compensation Committee
of  the Board of Directors of the Company which has complete authority to select
participants,  determine  the awards of Common Stock to be granted and the times
such  awards  will  be granted, interpret and construe the 1997 Stock Award Plan
for  purposes of its administration and make determinations relating to the 1997
Stock  Award Plan, subject to its provisions, which are in the best interests of
the  Company  and  its  stockholders.  Only  consultants  who  have  rendered
significant  advisory  services  to  the Company are eligible to be participants
under  the  Plan.  Other  eligibility  criteria  may  be  established  by  the
Compensation  Committee  as  administrator  of  the  Plan.

     In  October  1997,  the  Company  issued 20,314 shares of Common Stock to a
Mexican  consultant  in  payment  for services rendered to the Company valued at
$113,000  pursuant  to  the  plan.


                                       13
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  I  -  COMMITMENTS  AND  CONTINGENCIES

     LITIGATION

On  August  24, 1994, the Company filed an Original Petition and Application for
Injunctive  Relief  against  the  International  Bank  of  Commerce-Brownsville
("IBC-Brownsville"),  a  Texas  state  banking  association,  seeking (i) either
enforcement  of  a  credit facility between the Company and IBC-Brownsville or a
release of the Company's property granted as collateral thereunder consisting of
significantly  all of the Company's business and assets; (ii) declaratory relief
with  respect  to  the  credit  facility;  and  (iii)  an  award for damages and
attorneys' fees.  After completion of an arbitration proceeding, on February 28,
1996, the 197th District Court in and for Cameron County, Texas entered judgment
(the  "Judgment") confirming the arbitral award for $3,246,754 to the Company by
IBC-Brownsville.

In  connection  with the lawsuit, IBC-Brownsville filed an appeal with the Texas
Court  of  Appeals  on  January 21, 1997.  The Company responded on February 14,
1997.  On September 18, 1997, the appeal was heard by the Texas Court of Appeals
and on June 18, 1998, the Texas Court of Appeals issued its opinion in the case,
ruling  essentially in favor of the Company.  IBC-Brownsville sought a rehearing
of  the  case  on  August  3,  1998.  On December 30, 1998, The Court denied the
IBC-Brownsville  request  for  rehearing.  On February 16, 1999, IBC-Brownsville
filed  a  petition for review with the Supreme Court of Texas. As of January 31,
1999,  the  net  amount  of the Judgment is approximately $3.5 million, which is
comprised  of  (i)  the  original  judgment,  including  attorneys'  fees,  (ii)
post-award interest, (iii) cancellation of the note and accrued interest payable
to  IBC-Brownsville,  less attorneys' fees.  The decision to actually review the
case  is  solely  up  to  the Supreme Court of Texas.  Management of the Company
believes that if the Supreme Court of Texas should elect to review the case, the
Company  will  prevail.

For  the three months ended January 31, 1999, the Company has recorded a gain of
approximately  $987,000,  which  represents the amount of the Judgment which was
recorded as a liability on the Company's balance sheet at December 31, 1998 (see
note L).  The remaining net amount of the Judgment to be realized by the Company
is  approximately $2.4 million.  The Company will record the remaining amount of
the  Judgment  when  it  realizes  the  proceeds  associated  with the Judgment.

On  April  18,  1996,  the  Company  reached  an  agreement (the "IBC Settlement
Agreement")  to  accept  $400,000  to  settle a lawsuit it filed in October 1995
against  International  Bank  of  Commerce-San  Antonio,  a  bank  related  to
IBC-Brownsville  ("IBC-San  Antonio").  As part of the settlement agreement, the
parties, including IBC-Brownsville and IBC-San Antonio, executed mutual releases
from  future  claims  related  to the IBC-Brownsville litigation.  Additionally,
IBC-San  Antonio  agreed  to  indemnify  the Company for any such claims made or
asserted.

On  June  26,  1996,  IBC-Brownsville filed a suit against the Company (Case No.
96-06-3502) in the 357th Judicial District Court of Cameron County alleging that
the  Company,  in  filing the Judgment against IBC-Brownsville in order to clear
title  to  its  assets,  slandered the name of IBC-Brownsville.  IBC-Brownsville
contends  that  the  Judgment  against  it  prevented  it  from  selling certain
property.  IBC-Brownsville  has claimed actual damages of $600,000 and requested
punitive  damages  of  $2,400,000.  On September 23, 1996, the court entered the
Judgment  on  behalf  of  the Company indicated in a preliminary ruling that the
Company  was  privileged  in  filing  the Judgment to clear title to its assets.

On July 30, 1996, the Company filed suit in the District Court of Harris County,
Texas  against  Jorge  V.  Duran,  former  Chairman of the Board of the Company,
regarding  alleged  conversion  and  fraud  by  Mr.  Duran  during

                                       14
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  I  -  COMMITMENTS  AND  CONTINGENCIES  -  Continued

his  time as an employee of the Company.  The Company has not yet quantified its
damages  and  is seeking a declaration that the termination of employment of Mr.
Duran  was  lawful  and  within  the  rights of the Company based on Mr. Duran's
status  as  an at-will employee of the Company.  On December 12, 1996, Mr. Duran
filed a counterclaim in the District Court of Harris County, Texas asserting the
following  claims:  breach  of  contract  against  the  Company and Mr. Richter;
wrongful  discharge  against  the  Company, Mr. Richter, and Mr. Mark Casaday, a
former  officer and director of the Company; defamation against the Company, Mr.
Richter,  Mr.  Mark  Casaday,  and  Mr. Jorge Bracamontes; and interference with
contract  against  Mr. Jorge Bracamontes.  On February 27, 1997, the two actions
were  consolidated  into  Case No. 96-37447, Penn Octane Corporation v. Jorge V.
Duran  in  the 164th District Court of Harris County, Texas and on September 30,
1998,  Mr. Duran filed a Fourth Amended Original Petition.  Mr. Duran is seeking
judgment  against  the  Company and Messrs. Richter, Casaday and Bracamontes for
damages  in  excess of $12.0 million, including prejudgment interest as provided
for  by  law,  and  attorneys'  fees  and such further relief to which he may be
justly  entitled.  The  Company intends to vigorously defend against Mr. Duran's
counterclaim.

On  October  14,  1998, a complaint was filed by Amwest Surety Insurance Company
("Amwest")  naming  as  defendants,  among  others,  PennWilson  and the Company
seeking  reimbursement  for  payments  made  to  date by Amwest of approximately
$160,000  on claims made against the performance and payment bonds in connection
with  services  provided  by suppliers, laborers and other materials and work to
complete  the  NYDOT  contract.  In addition, Amwest is seeking reimbursement of
approximately  $600,000  for  claims presented to Amwest against the performance
and  payment  bonds,  but  have  not  yet  been authorized or paid  to  date  by
Amwest.  The  Company  is currently considering its legal options and intends to
file an answer to  Amwest's  complaint.

The  Company  and  its  subsidiaries  are  also involved with other proceedings,
lawsuits  and  claims.  The  Company  is of the opinion that the liabilities, if
any,  ultimately resulting from such proceedings, lawsuits and claims should not
materially  affect  its  consolidated  financial  position.

CREDIT  FACILITY,  LETTERS  OF  CREDIT  AND  OTHER

In  connection  with  the  PMI  Sales  Agreement, invoicing occurs weekly.  From
November  1996  to  early November 1997, the Company and PMI made an arrangement
under  which  PMI  provided financing on the Company's behalf under the terms of
the  Company's  supply  agreement with Exxon, the Company's main supplier.  As a
result  of  this  arrangement,  invoicing  occurred  on a monthly, rather than a
weekly  basis.

On  October 22, 1997, the Company entered into a $6,000,000 credit facility with
RZB  Finance  L.L.C.  (RZB)  for demand loans and standby letters of credit (RZB
Credit  Facility)  to finance the Company's purchase of LPG and propylene (PPL).
Under  the  RZB  Credit  Facility,  the  Company pays a fee with respect to each
letter  of credit thereunder in an amount equal to the greater of (i) $500, (ii)
1.5%  of  the maximum face amount of such letter of credit, or (iii) such higher
amount  as  may  be agreed between the Company and RZB.  Any amounts outstanding
under  the RZB Credit Facility shall accrue interest at a rate equal to the rate
announced  by the Chase Manhattan Bank as its prime rate plus 2.5%.  Pursuant to
the  RZB  Credit Facility, RZB has sole and absolute discretion to terminate the
RZB  Credit  Facility  and  to  make  any  loan  or  issue  any letter of credit
thereunder.  RZB  also  has  the  right to demand payment of any and all amounts
outstanding  under  the RZB Credit Facility at any time.  In connection with the
RZB  Credit  Facility,  the  Company  granted  a mortgage, security interest and
assignment  in any and all of the Company's real property, buildings, pipelines,
fixtures  and  interests  therein  or  relating  thereto,  including,  without
limitation, the lease with the Brownsville Navigation District of Cameron County
for  the  land  on which the Company's Brownsville Terminal Facility is located,
the  Pipeline Lease, and in connection therewith entered into leasehold deeds of
trust, security agreements, financing statements and assignments of rent.  Under
the  RZB Credit Facility, the Company may not permit to exist any lien, security
interest,  mortgage,  charge  or  other  encumbrance of any nature on any of its
properties  or  assets, except in favor of RZB, without the consent of RZB.  The
Company's  President,  Chairman  and  Chief  Executive  Officer  has  personally
guaranteed  all  of  the  Company's  payment obligations with respect to the RZB
Credit  Facility.  Upon  establishment  of  the  RZB  Credit Facility, beginning
November

                                       15
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  I  -  COMMITMENTS  AND  CONTINGENCIES  -  Continued

11, 1997, PMI no longer provided any financing on behalf of the Company, and the
Company  began  invoicing  PMI  on  a  weekly  basis.

Effective  April  22,  1998, the aggregate amount available under the RZB Credit
Facility  was  increased  to  $7,000,000.  In January 1999, the fee charged  for
letters  of  credit  issued  was increased to 2.5%.

In  connection  with  the  Company's purchases of LPG from Exxon and/or PG&E NGL
Marketing,  L.P.,  the Company issues letters of credit on a monthly basis based
on  anticipated  purchases.

As  of  January  31,  1999,  letters  of credit established under the RZB Credit
Facility  in  favor  of  Exxon  for purchases of LPG totaled $6,000,000 of which
$1,499,020  was  being  used to secure unpaid purchases from Exxon as of January
31,  1999.  In  addition,  as  of  January 31, 1999, the Company had $587,501 of
loans  outstanding  under  the  RZB  Credit  Facility.  In connection with these
purchases,  as of January 31, 1999, the Company had unpaid invoices due from PMI
totaling  $1,265,966  and  cash  balances  maintained in the RZB Credit Facility
collateral  account  of  $507,094.

During  June  1998,  a  letter  of  credit  was established under the RZB Credit
Facility  in  favor  of  PG&E  NGL Marketing, L.P. for purchases of LPG totaling
$360,000.  The  letter  of  credit  expired  in  August  1998.

During  November  1998,  a letter of credit was established under the RZB Credit
Facility  in  favor  of  PG&E  NGL Marketing, L.P. for purchases of LPG totaling
$176,000.  The  letter  of  credit  expired  in  January  1999.


NOTE  J  -  REALIZATION  OF  ASSETS

     The accompanying financial statements have been prepared in conformity with
generally  accepted accounting principles, which contemplate continuation of the
Company  as  a  going concern.  The Company has incurred losses since inception,
has  used cash in operations, has a deficit in working capital and is delinquent
under  certain  loan and lease agreements.  In addition, the Company is involved
in  litigation,  the  outcome of which cannot be determined at the present time.
As  discussed  in note A, the Company has historically depended heavily on sales
to  one  major  customer.

     In view of the matters described in the preceding paragraph, recoverability
of  a  major  portion of the recorded asset amounts as shown in the accompanying
consolidated balance sheet is dependent upon the collection of the Judgment, the
Company's  ability to obtain additional financing and to raise additional equity
capital,  and  the  success  of  the Company's future operations.  The financial
statements  do  not  include  any  adjustments related to the recoverability and
classification  of  recorded  asset  amounts  or  amounts  and classification of
liabilities  that might be necessary should the Company be unable to continue in
existence.

     To  provide  the Company with the ability it believes necessary to continue
in existence, management is taking steps to 1) collect the Judgment, 2) increase
sales  to  its  current  customers, 3) increase its customer base, 4) extend the
terms  and capacity of the Pipeline Lease and the Brownsville Terminal Facility,
5)  expand its product lines and 6) raise additional debt and/or equity capital.

     At  July  31,  1998,  the  Company had net operating loss carryforwards for
federal income tax purposes of approximately $8,826,000.  The ability to utilize
such  net  operating  loss  carryforwards  may  be  significantly limited by the
application of the "change of ownership" rules under Section 382 of the Internal
Revenue  Code.


                                       16
<PAGE>
                    PENN OCTANE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE  K  -  CONTRACTS

     LPG  BUSINESS

     The  Company  has entered into a sales agreement (Agreement) with its major
customer,  PMI,  to  provide  a  minimum  monthly  volume  of LPG to PMI through
September  30,  1999.  During  October 1998, the Company was purchasing LPG on a
month-to-month  basis from Exxon Company, U.S.A. (Exxon), its major supplier, to
meet  the minimum monthly volumes required in the Agreement.  Effective November
1,  1998,  the  Company  entered  into  a supply contract with Exxon to purchase
minimum  monthly  volumes  of  LPG  through  September  1999 under payment terms
similar to those required in the Agreement.  The supply price is below the sales
price  provided  for  in  the  Agreement.

          LPG  SUPPLY  CONTRACT

Effective  November  1,  1998, the Company entered into a supply contract with a
major supplier to purchase minimum monthly volumes of LPG through September 1999
under  payment  terms  similar  to  those required in the Agreement.  The supply
price  is  below  the  sales  price  provided  for  in  the  Agreement.


NOTE  L  -  AWARD  FROM  LITIGATION

     On  December  31,  1998,  the  Company received notification from the Texas
Court  of  Appeals  that  the  request by IBC-Brownsville for a rehearing of the
previous  appellate  decision upholding the judgment of The State District Court
(the  "Judgment")  against  IBC-Brownsville  in favor of the Company, was denied
(see  note  I).

As a result of this latest decision, IBC-Brownsville has now exhausted all legal
remedies  under  the  appeals  process  available  to it.  On February 16, 1999,
IBC-Brownsville  petitioned  the  Supreme  Court  of  Texas  to  hear  its case.
However,  the  decision  to actually review the case is solely up to the Supreme
Court  of Texas.  If the Supreme Court of Texas should elect to review the case,
there  is  no  certainty  that  the  outcome  of  the  Judgment  will  change.

As  a result of the above, the Company will record the gain when it realizes the
proceeds  associated  with  the  Judgment.  Due  to  the  fact that the Judgment
included an offset related to a liability, which the Company had recorded on its
balance sheet, the Company has realized a portion of the Judgment, which relates
to  that  liability.  When  the  cash  portion of the Judgment is collected, the
Company  will  record  the  remaining  amount  of  the  Judgment.

For  the three and six months ended January 31, 1999, the Company has recorded a
gain  to  the  extent  of  the  amount  which was recorded as a liability on the
Company's  balance  sheet  at December 31, 1998 totaling approximately $987,114.

NOTE  M  -  SUBSEQUENT  EVENTS

               EXCHANGE  OF  PROMISSORY  NOTES

     On  March  3,  1999,  the  Company  completed  an  exchange  of $900,000 of
promissory  notes for 90,000 shares of the Company's Senior Preferred Stock (the
Senior  Preferred  Stock)  at  a  purchase price of $10.00 per share. The Senior
Preferred  Stock  is  non-voting  and  dividends  are  payable  at a rate of 12%
annually, payable in cash or in kind, semi-annually.  The Preferred Stock may be
converted  in whole or in part at any time at a conversion ratio of one share of
Senior  Preferred  Stock  for  4.0  shares  of  common stock of the Company.  In
connection  with the exchange, the holder of the Senior Preferred Stock received
50,000  shares  of  common  stock  of  the Company and may receive an additional
50,000  shares  of common stock of the Company, if the Senior Preferred Stock is
not  redeemed  by  the  Company  prior  to  September  3,  1999.

                                       17
<PAGE>

ITEM  2.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL CONDITION AND
RESULTS  OF  OPERATIONS

     The  following  discussion  of  the  Company's  results  of  operations and
liquidity  and  capital  resources  should  be  read  in  conjunction  with  the
Consolidated  Financial  Statements  of  the  Company  and related Notes thereto
appearing  elsewhere  herein.  References to specific years preceded by "fiscal"
(e.g.  fiscal  1999)  refer  to  the  Company's  fiscal year ended July 31.  The
results of operations related to the Company's CNG segment, primarily consisting
of  PennWilson, which began operations in March 1997, have been  included in the
Company's  results  of operations for fiscal 1999 and 1998,  have been presented
separately  as  a  discontinued  operation.

OVERVIEW

     The  Company  has  been principally engaged in the purchase, transportation
and  sale of LPG and, since 1997, the provision of equipment and services to the
CNG  industry.  Beginning  July  1994,  the  Company has bought and sold LPG for
distribution  into  northeast  Mexico  and  the  U.S.  Rio  Grande  Valley.

     Historically,  the  Company  has  derived substantially all of its revenues
from sales to PMI, its primary customer, of LPG purchased from Exxon.  In fiscal
1998,  the  Company derived approximately 95% of its revenues from sales of LPG,
of  which  sales  to  PMI  accounted  for  nearly  100%  of  total  LPG  sales.

     As  part  of  its  business  strategy,  in  March 1997 the Company acquired
certain assets and hired certain former employees from WTI, a company engaged in
the  engineering,  design  and construction of equipment for turnkey CNG fueling
stations.  In  connection  with  this acquisition, the Company paid $394,000 and
was  committed  to  pay  up  to $2.0 million in royalty payments based on future
sales,  if  any.  The  acquisition  was accounted for as a purchase and has been
reflected  as  such in the Company's consolidated financial statements beginning
in  fiscal  1997.

     The  Company's  CNG revenues were previously derived from contracts awarded
on  a  fixed-price,  as-completed basis.  During March 1999, the company entered
into  an  agreement to sell certain of the CNG assets.  The Company is no longer
pursuing  business  opportunities  related to CNG (see note E) and is once again
focusing  primarily  on  its  LPG  operations,  including  the  expansion of its
pipeline  facilities.

     The  Company  provides  products  and  services  through  a  combination of
fixed-margin and fixed-price contracts.  Under the Company's agreements with its
customers  and  suppliers,  the  buying  and  selling prices of LPG are based on
variable  posted  prices  that  provide  the Company with a fixed margin.  Costs
included  in costs of goods sold other than the purchase price of LPG may affect
actual  profits from sales, including costs relating to transportation, storage,
leases,  maintenance  and financing.  The Company generally attempts to purchase
in volumes commensurate with projected sales. However, mismatches in volumes and
prices  of  LPG  purchased  from  Exxon  and  resold  to  PMI  could  result  in
unanticipated  costs.

                                       18
<PAGE>

LPG  SALES

     The  following table shows the Company's volume sold in gallons and average
sales price of LPG for the three and six months ended January 31, 1999 and 1998.

<TABLE>
<CAPTION>
                               Three  Months  Ended         Six  Months  Ended
                            --------------------------  --------------------------
                            January 31,    January 31,   January 31,   January 31,
                                1999         1999           1998          1998
                            ------------  ------------  ------------  ------------
<S>                         <C>           <C>           <C>           <C>
Volume Sold

 LPG (millions of gallons)          31.5          26.1          54.0          41.2

Average sales price
                           
 LPG (per gallon)           $       0.26  $       0.37    $     0.27  $       0.39
</TABLE>



RESULTS  OF  OPERATIONS

     THREE  MONTHS  ENDED  JANUARY  31,  1999,  COMPARED  THE THREE MONTHS ENDED
JANUARY  31,  1998

     Revenues.  Revenues  for  the three months ended January 31, 1999 were $8.4
million  compared with $9.8 million for the three months ended January 31, 1998,
a  decrease  of  $1.3  million  or  13.8%.  This  decrease was attributable to a
decrease  in  average  sales price for LPG during the three months ended January
31,  1999  of  $2.8  million,  partially offset by increased volumes of LPG sold
during  the  three  months  ended  January 31, 1999, resulting in an increase in
sales  of  $1.5  million.

     Cost  of  sales.  Cost of sales for the three months ended January 31, 1999
was  $7.4  million compared with $8.8 million for the three months ended January
31,  1998,  a decrease of $1.4 million or 15.8%.  This decrease was attributable
to  a  decrease  in  average  purchase  price for LPG purchased during the three
months  ended January 31, 1999 of $2.7 million, offset by the increase in volume
of  LPG  sold  during  the  three months ended January 31, 1999, resulting in an
increase  in  cost  of  goods  sold  of  $1.2  million.

     Selling,  general  and  administrative  expenses.  Selling,  general  and
administrative  expenses  were  $644,692  for the three months ended January 31,
1999  compared  with  $604,301  for  the three months ended January 31, 1998, an
increase  of  $40,391  or  6.7%.  This  increase  was  primarily attributable to
payroll  and  other  related  costs.

     Other  income  and expenses, net.  Other income (expense), net was $787,312
for  the  three  months  ended  January 31, 1999 compared with ($41,154) for the
three  months  ended  January 31, 1998.  The increase in other income (expense),
net,  during  the  three  months ended January 31, 1999 was due primarily to the
award  from litigation of $987,114, partially offset by increased interest costs
and  lower  interest  income  on  a note from the president of the Company and a
related  party  which  during  fiscal  1999,  will be recorded only when cash is
actually  received.

     Income  tax.  Due  to  the availability of net operating loss carryforwards
($8.8  million  and  $5.3 million at July 31, 1998 and 1997), net income for the
three  months  ended  January 31, 1999 and 1998 did not result in any income tax
expense.  The  ability  to  utilize such net operating loss carryforwards, which
expire  in  the  years  2009  to  2013,  may  be  significantly  limited  by the
application of the "change of ownership" rules under Section 382 of the Internal
Revenue  Code.

                                       19
<PAGE>

SIX  MONTHS  ENDED  JANUARY  31, 1999, COMPARED THE SIX MONTHS ENDED JANUARY 31,
1998

     Revenues.  Revenues  for  the  six months ended January 31, 1999 were $14.8
million compared with $16.4 million for the six months ended January 31, 1998, a
decrease  of $1.6 million or 9.3%.  This decrease was attributable to a decrease
in average sales price for LPG during the three months ended January 31, 1999 of
$4.9 million, partially offset by increased volumes of LPG sold during the three
months  ended  January  31,  1999,  resulting  in  an  increase in sales of $3.5
million.

     Cost of sales.  Cost of sales for the six months ended January 31, 1999 was
$13.3  million  compared with $15.1 million for the six months ended January 31,
1998,  a decrease of $1.8 million or 11.5%.  This decrease was attributable to a
decrease in average purchase price for LPG purchased during the six months ended
January  31,  1999 of $4.8 million, offset by the increase in volume of LPG sold
during  the  six months ended January 31, 1999, resulting in an increase in cost
of  goods  sold  of  $2.9  million.

     Selling,  general  and  administrative  expenses.  Selling,  general  and
administrative  expenses  were $1.2 million for the six months ended January 31,
1999  compared  with  $940,744  for  the  six  months ended January 31, 1998, an
increase  of  $240,958  or  25.6%.  This  increase was primarily attributable to
payroll  and  other  related  costs.

     Other  income  and expenses, net.  Other income (expense), net was $695,337
for  the  six  months ended January 31, 1999 compared with ($42,749) for the six
months  ended  January  31,  1998.  The increase in other income (expense), net,
during the six months ended January 31, 1999 was due primarily to the award from
litigation  of  $987,114, partially offset by increased interest costs and lower
interest  income on a note from the president of the Company and a related party
which  during fiscal 1999, will be recorded only when cash is actually received.

     Income  tax.  Due  to  the availability of net operating loss carryforwards
($8.8  million  and  $5.3 million at July 31, 1998 and 1997), net income for the
six  months  ended  January  31,  1999 and 1998 did not result in any income tax
expense.  The  ability  to  utilize such net operating loss carryforwards, which
expire  in  the  years  2009  to  2013,  may  be  significantly  limited  by the
application of the "change of ownership" rules under Section 382 of the Internal
Revenue  Code.

     Historically,  the  Company  has  received the majority of its total annual
revenues  during  the  months  of  October  through  March.  Such  pattern  is
attributable  to the seasonal demand for LPG, which is typically greatest during
the winter months of the second and third quarters of the Company's fiscal year.
The Company's quarterly earnings may vary considerably due to the impact of such
seasonality.

LIQUIDITY  AND  CAPITAL  RESOURCES

     General.  The Company has had an accumulated deficit since its inception in
1992,  has  used  cash in operations and has a deficit in working capital and is
delinquent under certain loan and lease agreements.  In addition, the Company is
involved in litigation, the outcome of which cannot be determined at the present
time.  The  Company  depends  heavily  on  sales  to  one  major  customer.  The
Company's  sources  of  liquidity  and  capital resources historically have been
provided  by  sales of LPG and CNG-related equipment, proceeds from the issuance
of  short-term  and  long-term  debt,  revolving  credit  facilities  and credit
arrangements,  sale or issuance of preferred and common stock of the Company and
proceeds  from  the  exercise  of  warrants  to purchase shares of the Company's
common  stock.

                                       20
<PAGE>

     The  following  summary  table  reflects comparative cash flows for the six
months  ended  January  31,  1999  and  1998.  All  information is in thousands.

<TABLE>
<CAPTION>
                                            January 31,    January 31,
                                               1999           1998
                                           -------------  -------------
<S>                                        <C>            <C>
Net cash provided by operating activities  $        167   $        196 
Net cash provided by (used in) investing
 Activities                                        (171)          (740)
Net cash provided by financing activities           357          1,568 
                                           -------------  -------------
Net increase (decrease) in cash            $        353   $      1,024 
                                           =============  =============
</TABLE>


     The  PMI  Sales  Agreement is effective for the period from October 1, 1998
through  September  30,  1999  and  provides  for the purchase by PMI of minimum
monthly  volumes  of  LPG  aggregating  a  minimum annual volume of 69.0 million
gallons,  similar  to  minimum  volume  requirements  under  the  previous sales
agreement with PMI effective during the period from October 1, 1997 to September
30,  1998.  During  October  1998,  the  Company  entered  into a monthly supply
agreement with Exxon pursuant to which Exxon agreed to supply minimum volumes of
LPG  to  the  Company.  Effective  November  1, 1998, the Company entered into a
supply  agreement  with Exxon to purchase minimum monthly volumes of LPG through
September 1999.  The Company believes it has access to an adequate supply of LPG
from  Exxon and other suppliers to satisfy the requirements of PMI under the PMI
Sales  Agreement.  In  determining  whether  any  supplier will be utilized, the
Company  will  consider  the applicable prices charged as well as any additional
fees  that  may  be  required  to be paid under the Pipeline Lease.  The Company
anticipates  10%  -  15%  lower  gross  margins  on its LPG sales as a result of
increased  LPG  costs  beginning  October  1998  compared  with  the  previous
agreements.

     Pipeline  Lease.  The  Pipeline  Lease currently expires on March 31, 2013,
pursuant  to  an  amendment entered into between the Company and Seadrift on May
21,  1997,  effective  on  April  1, 1998 (the "Pipeline Lease Amendment").  The
Pipeline  Lease  Amendment  provides, among other things, for additional storage
access  and  inter-connection  with  another  pipeline  controlled  by Seadrift,
thereby  providing  greater  access  to  and from the Pipeline.  Pursuant to the
Pipeline Lease Amendment, the Company's fixed annual fee associated with the use
of  the  Pipeline  was  increased  by  $350,000. In addition, the Pipeline Lease
Amendment  also  provides for variable rental increases based on monthly volumes
purchased  and  flowing into the Pipeline.  Beginning February 1, 1999, Seadrift
started  invoicing the Company as prescribed under the Pipeline Lease Amendment.
The  Company  believes  the  extension  of  the Pipeline Lease gives the Company
increased  flexibility  in  negotiating  sales  and  supply  agreements with its
customers  and suppliers.  During November 1998, the Company issued a promissory
note  to  Seadrift for $261,206, representing all outstanding rental obligations
owed  to Seadrift through November 1998.  The promissory note was payable in six
installments  beginning November 25, 1998 and ending February 3, 1999.  Interest
on  the  promissory  note  was  10%  per  annum.  The  Company made all payments
required  under  the  promissory  note.

     Credit Arrangements.  In connection with the PMI Sales Agreement, invoicing
is  to occur weekly.  From November 1996 to early November 1997, the Company and
PMI  made  an  arrangement  under  which PMI provided financing on the Company's
behalf  under  the  terms  of  the  Company's  supply  agreement with Exxon, the
Company's main supplier.  As a result of this arrangement, invoicing occurred on
a  monthly,  rather  than  a  weekly  basis.

                                       21
<PAGE>

     On  October  22,  1997,  the  Company  entered  into  a $6.0 million credit
facility  with  RZB Finance L.L.C. (RZB) for demand loans and standby letters of
credit  (RZB  Credit  Facility) to finance the Company's purchase of LPG.  Under
the  RZB  Credit Facility, the Company pays a fee with respect to each letter of
credit  thereunder  in  an amount equal to the greater of (i) $500, (ii) 1.5% of
the maximum face amount of such letter of credit, or (iii) such higher amount as
may be agreed to between the Company and RZB.  Any amounts outstanding under the
RZB  Credit Facility shall accrue interest at a rate equal to the rate announced
by  the  Chase  Manhattan Bank as its prime rate plus 2.5%.  Pursuant to the RZB
Credit  Facility,  RZB  has  sole  and  absolute discretion to terminate the RZB
Credit  Facility  and to make any loan or issue any letter of credit thereunder.
RZB  also  has  the  right  to demand payment of any and all amounts outstanding
under  the  RZB  Credit Facility at any time.  In connection with the RZB Credit
Facility,  the  Company  granted a mortgage, security interest and assignment in
any  and  all of the Company's real property, buildings, pipelines, fixtures and
interests  therein or relating thereto, including, without limitation, the lease
with the Brownsville Navigation District of Cameron County for the land on which
the  Company's Brownsville Terminal Facility is located, the Pipeline Lease, and
in  connection therewith agreed to enter into leasehold deeds of trust, security
agreements,  financing statements and assignments of rent, in forms satisfactory
to  RZB.  Under the RZB Credit Facility, the Company may not permit to exist any
lien,  security interest, mortgage, charge or other encumbrance of any nature on
any  of its properties or assets, except in favor of RZB, without the consent of
RZB.  The  Company's  President,  Chairman  and  Chief  Executive  Officer  has
personally  guaranteed  all of the Company's payment obligations with respect to
the  RZB  Credit  Facility.  Upon  establishment  of  the  RZB  Credit Facility,
beginning  November  11, 1997, PMI no longer provided any financing on behalf of
the  Company,  and  the  Company  began  invoicing  PMI  on  a  weekly  basis.

     Effective  April  22,  1998,  the  aggregate amount available under the RZB
Credit  Facility was increased to $7.0 million.  The Company believes that based
on  current market prices of LPG and LPG volume requirements under the PMI Sales
Agreement,  the  RZB  Credit  Facility  is  adequate.   In January 1999, the fee
charged for letters of credit issued under the RZB Credit Facility was increased
to  2.5%.

     In  connection  with  the Company's purchases of LPG from Exxon and/or PG&E
NGL  Marketing,  L.P.,  the  Company issues letters of credit on a monthly basis
based  on  anticipated  purchases.

               As  of  January 31, 1999, letters of credit established under the
RZB  Credit Facility in favor of Exxon for purchases of LPG totaled $6.0 million
of which $1.5 million was being used to secure unpaid purchases from Exxon as of
January 31, 1999.  In addition, as of January 31, 1999, the Company had $587,501
of  loans  outstanding  under the RZB Credit Facility.  In connection with these
purchases,  as of January 31, 1999, the Company had unpaid invoices due from PMI
totaling  $1.3  million  and cash balances maintained in the RZB Credit Facility
collateral  account  of  $507,094.

     During  June  1998, a letter of credit was established under the RZB Credit
Facility  in  favor  of  PG&E  NGL Marketing, L.P. for purchases of LPG totaling
$360,000.  The  letter  of  credit  expired  during  August  1998.

     During  November  1998,  a  letter  of credit was established under the RZB
Credit  Facility  in  favor  of  PG&E  NGL  Marketing, L.P. for purchases of LPG
totaling  $176,000.  This  letter  of  credit  expired  in  January  1999.

     Private  Placements  and  Other  Transactions.     On October 21, 1997, the
Company  completed  a  private  placement pursuant to which it issued promissory
notes in the aggregate principal amount of $1.5 million and warrants to purchase
250,000 shares of common stock exercisable until October 21, 2000 at an exercise
price  of  $6.00 per share.  The notes were unsecured.  Proceeds raised from the
private  placement  totaled  $1.5  million,  which  the Company used for working
capital  requirements.  Interest at 10% per annum was due quarterly on March 31,
June  30,  September  30  and December 31.  Payment of the principal and accrued
interest on the promissory notes was due on June 30, 1998.  On December 1, 1998,
the  Company completed a rollover and assignment agreement effectively extending
the  due  date  of  the  promissory  notes  until  June  30, 1999 (the "Rollover
Agreement").  In  connection  with the Rollover Agreement, the Company agreed to
assign its rights to any net cash collected from the Judgment towards any unpaid
principal  and  interest owing on the promissory notes.  The Company also agreed
to use any net proceeds received by the Company from any public offering of debt
or  equity  of the Company in excess of than $2.3 million, towards the repayment
of  any  balances owing under the promissory notes.  The promissory note holders

                                       22
<PAGE>

also  received  additional  warrants to purchase 337,500 shares of common stock,
exercisable  until  November  30, 2001, at an exercise price of $1.75 per share.
The  purchasers  in  the  private placement were granted one demand registration
right  with  respect  to  the  shares  issuable  upon  exercise of the warrants.

     On  March 3, 1999, the Company completed an exchange of $0.9 million of the
promissory  notes for 90,000 shares of the Company's Senior Preferred Stock (the
Senior  Preferred  Stock)  at  a  purchase price of $10.00 per share. The Senior
Preferred  Stock  is  non-voting  and  dividends  are  payable  at a rate of 12%
annually, payable in cash or in kind, semi-annually.  The Preferred Stock may be
converted  in whole or in part at any time at a conversion ratio of one share of
Senior  Preferred  Stock  for  4.0  shares  of  common stock of the Company.  In
connection  with the exchange, the holder of the Senior Preferred Stock received
50,000  shares  of  common  stock  of  the Company and may receive an additional
50,000 shares of common  stock  of the Company, if the Senior Preferred Stock is
not redeemed by the  Company  prior  to  September  3,  1999.

     On  November 13, 1998, the Company issued 250,000 shares of common stock of
the  Company  and  warrants  to  purchase  75,000 shares of common stock with an
exercise  price of $1.25 per warrant and an expiration date of November 12, 2000
for  an  amount  of  $250,000.  Net proceeds from the sale were used for working
capital  purposes.

     On  December 14, 1998, the Company issued 500,000 shares of common stock of
the  Company  and  warrants  to  purchase 300,000 shares of common stock with an
exercise  price of $1.75 per warrant and an expiration date of December 13, 2003
for  an amount of $500,000.  Net proceeds from the sale were  used  for  working
capital  purposes.

     During  December  1998, the Company issued 53,884 shares of common stock of
the  Company  to  Zimmerman  Holdings  Inc.  (ZHI),  as  payment  for  and  full
cancellation  of  a  note  payable  of  $100,000  and related interest and other
obligations  totaling  $18,000 and the cancellation of any further obligation to
pay  any  future  royalties in connection with Company's purchase of certain CNG
assets  from  Wilson  Technologies  Inc.,  a  wholly  owned  subsidiary  of ZHI.

     During  December, 1998, the Company issued 15,000 shares of common stock of
the  Company  and  warrants  to  purchase  10,000 shares of common stock with an
exercise  price of $3.25 per warrant and an expiration date of December 31, 2000
in  exchange  for  cancellation  of  all  outstanding  obligations  totaling
approximately  $26,000 and other obligations as outlined in an agreement between
the  parties.

     Judgment  in  favor of the Company.  Judgment has been rendered in favor of
the  Company  in  connection  with its litigation against IBC-Brownsville in the
amount  of $3.2 million.  As of January 31, 1999, the net amount of the award is
approximately  $3.5  million,  which is comprised of the sum of (i) the original
award,  including  attorney's  fees,  (ii)  post-award  interest,  and  (iii)
cancellation  of  the  note  and accrued interest payable, less attorneys' fees.
The  Judgment  is  being  reviewed  by  the Supreme Court of Texas.  Although no
assurance  can  be  made,  management  believes that the Company will ultimately
prevail, and will receive the proceeds from such Judgment. In addition, a former
officer of the Company is entitled to 5% of the net proceeds (after expenses and
legal  fees).  The  remaining  proceeds  available  from  the Judgment have been
assigned  to the promissory note holders to the extent of any amounts then owing
under  the  promissory  notes.  See  notes  G,  I,  L  and M to the Consolidated
Financial  Statements.

     Realization  of  Assets.  Recoverability of a major portion of the recorded
asset amounts on the Company's balance sheet is dependent upon the collection of
the  Judgment, the Company's ability to obtain additional financing and to raise
additional  equity  capital, and the success of the Company's future operations.

     To  provide  the Company with the ability it believes necessary to continue
in  existence,  management  is  taking  steps  to (i) collect the Judgment, (ii)
increase  sales to its current customers, (iii) increase its customer base, (iv)
extend the terms and capacity of the Pipeline Lease and the Brownsville Terminal
Facility,  (v)  expand  its  product lines and (vi) raise additional debt and/or
equity  capital.  See  note  J  to  the  Consolidated  Financial  Statements.

     Year 2000 Date Conversion.  Management has determined that the consequences
of  its  Year  2000  issues  will  not  have  a material effect on the Company's
business,  results  of  operations,  or  financial  condition.

                                       23
<PAGE>

FINANCIAL  ACCOUNTING  STANDARDS

     In February 1997, the Financial Accounting Standards Board issued Statement
of  Financial Accounting Standards No. 128 (SFAS 128), Earnings per Share.  SFAS
128  supersedes  APB  Opinion  No.  15 (Opinion No. 15), Earnings per Share, and
requires the calculation and dual presentation of basic and diluted earnings per
share (EPS), replacing the measures of primary and fully-diluted EPS as reported
under Opinion No. 15.  SFAS 128 became effective for financial statements issued
for  periods  ending  after  December  15,  1997;  earlier  application  was not
permitted.  Accordingly,  EPS  for  the  periods  presented  in the accompanying
consolidated  statements of operations are calculated under the guidance of SFAS
128.

     In  June 1997, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No.  130  (SFAS  130), Reporting Comprehensive
Income  and  Statement  of  Financial  Accounting  Standards No. 131 (SFAS 131),
Disclosure  about  Segments  of an Enterprise and Related Information.  Both are
effective  for  periods  beginning  after  December  15,  1997,  with  earlier
application  encouraged  for  SFAS  131.  The Company adopted SFAS 131 in fiscal
1997.

                                       24
<PAGE>

PART  II

ITEM  1.     LEGAL  PROCEEDINGS

     See Note I to the unaudited Consolidated Financial Statements and Note O to
     the Company's Annual Report on Form 10-K for the year ended July 31, 1998.

ITEM  2.     CHANGES  IN  SECURITIES

     None.

ITEM  3.     DEFAULTS  UPON  SENIOR  SECURITIES

     None.

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

     None.

ITEM  5.     OTHER  INFORMATION

     None.

ITEM  6.     EXHIBITS,  FINANCIAL  STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.


     The following Exhibits are incorporated herein by reference:

EXHIBIT  NO.
------------


10.71     LPG Mix Purchase  Contract  dated  September  28, 1998 between  P.M.I.
          Trading  Limited and the  Company.  (Incorporated  by reference to the
          Company's  Annual Report on Form 10-K for the year ended July 31, 1998
          filed on November 13, 1998, SEC File No. 000-24394).

10.72     LPG Sales  Agreement  dated  November 16, 1998  between  Exxon and the
          Company.  (Incorporated by reference to the Company's Quarterly Report
          on Form 10-Q for the quarterly  period ended October 31, 1998 filed on
          December 18, 1998, SEC File No. 000-24394).

10.73     Rollover and Assignment  Agreement dated December 1, 1998 among Castle
          Energy Corporation,  Clint Norton,  Southwest Concept,  Inc., James F.
          Meara,  Jr.,   Donaldson  Luftkin  Jenrette   Securities   Corporation
          Custodian SEP FBO James F. Meara IRA,  Lincoln Trust Company FBO Perry
          D.  Snavely IRA and the  Company.  (Incorporated  by  reference to the
          Company's Quarterly Report on Form 10-Q for the quarterly period ended
          October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

10.74     Registration  Rights  Agreement  dated  December 1, 1998 among  Castle
          Energy Corporation,  Clint Norton,  Southwest Concept,  Inc., James F.
          Meara,  Jr.,   Donaldson  Luftkin  Jenrette   Securities   Corporation
          Custodian SEP FBO James F. Meara IRA,  Lincoln Trust Company FBO Perry
          D.  Snavely IRA and the  Company.  (Incorporated  by  reference to the
          Company's Quarterly Report on Form 10-Q for the quarterly period ended
          October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

10.75     Collateral  Agreement  dated  December  1, 1998  among  Castle  Energy
          Corporation,  Clint Norton,  Southwest Concept,  Inc., James F. Meara,
          Jr., Donaldson Luftkin Jenrette Securities  Corporation  Custodian SEP
          FBO James F. Meara IRA, Lincoln Trust Company FBO Perry D. Snavely IRA
          and the Company. (Incorporated by reference to the Company's Quarterly
          Report on Form 10-Q for the  quarterly  period ended  October 31, 1998
          filed on December 18, 1998, SEC File No. 000-24394).

                                       25
<PAGE>

10.76     Assignment of Judgment  Agreement  dated December 1, 1998 among Castle
          Energy Corporation,  Clint Norton,  Southwest Concept,  Inc., James F.
          Meara,  Jr.,   Donaldson  Luftkin  Jenrette   Securities   Corporation
          Custodian SEP FBO James F. Meara IRA,  Lincoln Trust Company FBO Perry
          D.  Snavely IRA and the  Company.  (Incorporated  by  reference to the
          Company's Quarterly Report on Form 10-Q for the quarterly period ended
          October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

10.77     Amended  Promissory  Note dated December 1, 1998 between Castle Energy
          Corporation  and  the  Company.  (Incorporated  by  reference  to  the
          Company's Quarterly Report on Form 10-Q for the quarterly period ended
          October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

10.78     Common Stock Purchase  Warrant dated December 1, 1998 issued to Castle
          Energy  Corporation by the Company.  (Incorporated by reference to the
          Company's Quarterly Report on Form 10-Q for the quarterly period ended
          October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

10.79     Amended  Promissory  Note dated  December 1, 1998 between Clint Norton
          and the Company. (Incorporated by reference to the Company's Quarterly
          Report on Form 10-Q for the  quarterly  period ended  October 31, 1998
          filed on December 18, 1998, SEC File No. 000-24394).

10.80     Common Stock  Purchase  Warrant dated December 1, 1998 issued to Clint
          Norton by the Company.  (Incorporated  by  reference to the  Company's
          Quarterly  Report on Form 10-Q for the quarterly  period ended October
          31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

10.81     Amended  Promissory  Note dated  December  1, 1998  between  Southwest
          Concept,  Inc.  and the  Company.  (Incorporated  by  reference to the
          Company's Quarterly Report on Form 10-Q for the quarterly period ended
          October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

10.82     Common  Stock  Purchase  Warrant  dated  December  1,  1998  issued to
          Southwest Concept, Inc. by the Company.  (Incorporated by reference to
          the Company's  Quarterly  Report on Form 10-Q for the quarterly period
          ended  October  31,  1998 filed on  December  18,  1998,  SEC File No.
          000-24394).

10.83     Amended Promissory Note dated December 1, 1998 between James F. Meara,
          Jr. and the  Company.  (Incorporated  by  reference  to the  Company's
          Quarterly  Report on Form 10-Q for the quarterly  period ended October
          31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

10.84     Common Stock  Purchase  Warrant dated December 1, 1998 issued to James
          F.  Meara,  Jr. by the  Company.  (Incorporated  by  reference  to the
          Company's Quarterly Report on Form 10-Q for the quarterly period ended
          October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

10.85     Amended  Promissory  Note dated  December  1, 1998  between  Donaldson
          Luftkin  Jenrette  Securities  Corporation  Custodian SEP FBO James F.
          Meara IRA and the Company. (Incorporated by reference to the Company's
          Quarterly  Report on Form 10-Q for the quarterly  period ended October
          31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

10.86     Common  Stock  Purchase  Warrant  dated  December  1,  1998  issued to
          Donaldson Luftkin Jenrette  Securities  Corporation  Custodian SEP FBO
          James F. Meara IRA and the Company.  (Incorporated by reference to the
          Company's Quarterly Report on Form 10-Q for the quarterly period ended
          October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

                                       26
<PAGE>

10.87     Amended  Promissory  Note dated December 1, 1998 between Lincoln Trust
          Company FBO Perry D.  Snavely IRA and the  Company.  (Incorporated  by
          reference  to the  Company's  Quarterly  Report  on Form  10-Q for the
          quarterly  period  ended  October 31, 1998 filed on December 18, 1998,
          SEC File No. 000-24394).

10.88     Common Stock Purchase Warrant dated December 1, 1998 issued to Lincoln
          Trust  Company FBO Perry D. Snavely IRA by the Company.  (Incorporated
          by reference to the  Company's  Quarterly  Report on Form 10-Q for the
          quarterly  period  ended  October 31, 1998 filed on December 18, 1998,
          SEC File No. 000-24394).

10.89     Purchase Agreement dated November 13, 1998 between Van Moer Santerre &
          Company and the Company.  (Incorporated  by reference to the Company's
          Quarterly  Report on Form 10-Q for the quarterly  period ended October
          31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

10.90     Registration  Rights  Agreement dated November 13, 1998 among Van Moer
          Santerre & Company and the Company.  (Incorporated by reference to the
          Company's Quarterly Report on Form 10-Q for the quarterly period ended
          October 31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

10.91     Common Stock  Purchase  Warrant dated  November 13, 1998 issued to Van
          Moer Santerre & Company by the Company.  (Incorporated by reference to
          the Company's  Quarterly  Report on Form 10-Q for the quarterly period
          ended  October  31,  1998 filed on  December  18,  1998,  SEC File No.
          000-24394).

10.92     Purchase  Agreement dated December 14, 1998 between KFP Grand LTD. and
          the Company.  (Incorporated  by reference to the  Company's  Quarterly
          Report on Form 10-Q for the  quarterly  period ended  October 31, 1998
          filed on December 18, 1998, SEC File No. 000-24394).

10.93     Registration  Rights Agreement dated December 14, 1998 among KFP Grand
          LTD. and the  Company.  (Incorporated  by  reference to the  Company's
          Quarterly  Report on Form 10-Q for the quarterly  period ended October
          31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

10.94     Common Stock  Purchase  Warrant dated  December 14, 1998 issued to KFP
          Grand LTD. by the Company. (Incorporated by reference to the Company's
          Quarterly  Report on Form 10-Q for the quarterly  period ended October
          31, 1998 filed on December 18, 1998, SEC File No. 000-24394).

10.95     Second Amendment of the Interim Operating Agreement dated December 15,
          1998 among Wilson Technologies Inc., Zimmerman Holdings,  Inc. and the
          Company.  (Incorporated by reference to the Company's Quarterly Report
          on Form 10-Q for the quarterly  period ended October 31, 1998 filed on
          December 18, 1998, SEC File No. 000-24394).

The  following  material  contracts  are  filed  as  part  of  this  report:

27.1      Financial Data Schedule. (Filed herewith.)

b.   Reports  on  Form  8-K.

The  following  Reports  on  Form  8-K  are  incorporated  herein  by reference:

Company's  Current  Report  on  Form 8-K filed on February 9, 1999 regarding the
Company's  realization  of  the  IBC-Brownsville  award.

Company's  Current  Report  on  Form  8-K  filed  on March 4, 1999 regarding the
Company's  exchange of $.9 million of indebtedness for Senior Preferred Stock of
the  Company.

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                               SIGNATURES

Pursuant  to  the  requirements of  the Securities and Exchange Act of 1934, the
registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned,  thereunto  duly  authorized.


                       PENN  OCTANE  CORPORATION



March 17, 1999         By:  /s/  Ian  T.  Bothwell
                            ----------------------
                                 Ian  T.  Bothwell
                                 Vice President, Treasurer, Assistant Secretary,
                                 Chief  Financial  Officer


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