10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

OR

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

For the transition period from                      to                     

Commission file number: 000-50394

Rio Vista Energy Partners L.P.

(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)	20-0153267 (I.R.S. Employer Identification No.)
1313 E. Alton Gloor Blvd., Suite J, Brownsville, Texas	78526
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (956) 831-0886

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Units

Indicate by check mark if the registrant is a well-known seasonal issuer as defined in Rule 405 of the Securities Act.

Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No þ

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 þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See the definitions of “accelerated filer” and “large accelerated filer” and “smaller accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes o No þ

The aggregate market value of the voting units held by non-affiliates of the Registrant was $ 10,452,086 as of June 29, 2007.

The number of Common Units outstanding on March 28, 2008 was 2,515,518.

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS

	ITEM		PAGE NO.
Part I	1 and 2. Business and Properties			1
	1A.	Risk Factors		19
	1B.	Unresolved Staff Comments		38
	3.	Legal Proceedings		39
	4.	Submission of Matters to a Vote of Security Holders		40
Part II	5.	Market for Registrant's Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities		41
	6.	Selected Financial Data		43
	7.	Management's Discussion and Analysis of Financial Condition and Results of Operations		44
	7A.	Quantitative and Qualitative Disclosures About Market Risks		56
	8.	Financial Statements and Supplementary Data		57
	9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		105
	9A(T).	Controls and Procedures		105
	9B.	Other Information		106
Part III	10.	Directors, Executive Officers and Corporate Governance		107
	11.	Executive Compensation		110
	12.	Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters		113
	13.	Certain Relationships and Related Transactions, and Director Independence		116
	14.	Principal Accountant Fees and Services		119
Part IV	15.	Exhibits and Financial Statement Schedules		120
Exhibit 10.52
Exhibit 10.53
Exhibit 10.54
Exhibit 10.55
Exhibit 10.56
Exhibit 10.57
Exhibit 21
Exhibit 23.1
Exhibit 23.2
Exhibit 31.1
Exhibit 31.2
Exhibit 32

i

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The statements contained in this Annual Report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. This Annual Report contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control, which may include statements about:

• the volatility of realized natural gas prices;

• the discovery, estimation, development and replacement of oil and natural gas reserves;

• our business and financial strategy;

• our drilling locations;

• technology;

• our cash flow, liquidity and financial position;

• our production volumes;

• our lease operating expenses, general and administrative costs and finding and development costs;

• the availability of drilling and production equipment, labor and other services;

• our future operating results;

• our prospect development and property acquisitions;

• the marketing of oil and natural gas;

• competition in the oil and natural gas industry and the transportation and terminalling business;

• the impact of weather and the occurrence of natural disasters such as fires, floods, hurricanes, earthquakes and other catastrophic events and natural disasters;

• governmental regulation of the oil and natural gas industry and the transportation and terminalling business;

• required capital expenditures;

• cash distributions and qualified income;

• developments in oil producing and natural gas producing countries; and

• our strategic plans, objectives, expectations and intentions for future operations.

All of these types of statements, other than statements of historical fact included in this Annual Report are forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as “may,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology.

The forward-looking statements contained in this Annual Report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this Annual Report are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to factors listed in the “Risk Factors” section and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and elsewhere in this Annual Report. All forward-looking statements speak only as of the date of this Annual Report. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise.

ii

GLOSSARY OF TERMS

As commonly used in the oil and gas industry and as used in this Annual Report on Form 10-K, the following terms have the following meanings:

Bbl. One stock tank barrel or 42 United States gallons liquid volume.

Bcf. One billion cubic feet.

Bcfe. One billion cubic feet equivalent, determined using a ratio of six Mcf of gas to one Bbl of oil, condensate or natural gas liquids.

Btu. One British thermal unit, which is the heat required to raise the temperature of a one-pound mass of water from 58.5 to 59.5 degrees Fahrenheit.

Development well. A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive.

Dry hole or well. A well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production would exceed production expenses and taxes.

Field. An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition.

FERC. Federal Energy Regulatory Commission.

Gross acres or gross wells. The total acres or wells, as the case may be, in which a working interest is owned.

Hp. Horsepower

MBbls. One thousand barrels of oil or other liquid hydrocarbons.

Mcf. One thousand cubic feet.

Mcfe. One thousand cubic feet equivalent, determined using the ratio of six Mcf of gas to one Bbl of oil, condensate or natural gas liquids.

MMBbls. One million barrels of oil or other liquid hydrocarbons.

MMBtu. One million Btus.

MMcf. One million cubic feet.

MMcf/d. One MMcf per day.

MMcfe. One million cubic feet equivalent, determined using a ratio of six Mcf of gas to one Bbl of oil, condensate or natural gas liquids.

MMcfe/d. One MMcfe per day.

MMMBtu. One billion Btus.

Net acres or net wells. The sum of the fractional working interests owned in gross acres or gross wells, as the case may be.

NYMEX. The New York Mercantile Exchange.

Oil. Crude oil, condensate and natural gas liquids.

iii

Productive well. A well that is found to be capable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceeds production expenses and taxes.

Proved developed reserves. Reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. Additional oil and gas expected to be obtained through the application of fluid injection or other improved recovery techniques for supplementing the natural forces and mechanisms of primary recovery are included in “proved developed reserves” only after testing by a pilot project or after the operation of an installed program has confirmed through production response that increased recovery will be achieved.

Proved reserves. Proved oil and gas reserves are the estimated quantities of gas, natural gas liquids and oil which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based on future conditions. The definition of proved reserves is in accordance with the Securities and Exchange Commission’s definition set forth in Regulation S-X Rule 4-10(a) and its subsequent staff interpretations and guidance.

Proved undeveloped drilling location. A site on which a development well can be drilled consistent with spacing rules for purposes of recovering proved undeveloped reserves.

Proved undeveloped reserves or PUDs. Reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage are limited to those drilling units offsetting productive units that are reasonably certain of production when drilled. Proved reserves for other undrilled units are claimed only where it can be demonstrated with certainty that there is continuity of production from the existing productive formation. Estimates for proved undeveloped reserves are not attributed to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual tests in the area and in the same reservoir.

Recompletion. The completion for production of an existing wellbore in another formation from that which the well has been previously completed.

Reservoir. A porous and permeable underground formation containing a natural accumulation of economically productive oil and/or gas that is confined by impermeable rock or water barriers and is individual and separate from other reserves.

Standardized Measure. Standardized Measure, or standardized measure of discounted future net cash flows relating to proved oil and gas reserve quantities, is the present value of estimated future net revenues to be generated from the production of proved reserves, determined in accordance with the rules and regulations of the Securities and Exchange Commission (using prices and costs in effect as of the date of estimation) without giving effect to non-property related expenses, such as general and administrative, expenses, debt service and future income tax expenses or to depreciation, depletion and amortization, and discounted using an annual discount rate of 10%. Our Standardized Measure does not include future income tax expenses because our reserves are owned by our subsidiary Rio Vista Penny LLC, which is not subject to income taxes.

Successful well. A well capable of producing oil and/or gas in commercial quantities.

Undeveloped acreage. Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and gas regardless of whether such acreage contains proved reserves.

Unproved reserves. Lease acreage on which wells have not been drilled and where it is either probable or possible that the acreage contains reserves.

Working interest. The operating interest that gives the owner the right to drill, produce and conduct operating activities on the property and a share of production.

Workover. Operations on a producing well to restore or increase production

iv

PART I

Items 1 and 2. Business and Properties.

Rio Vista Energy Partners L.P. and its consolidated subsidiaries (not including the General Partner) are hereinafter referred to as “Rio Vista”. When referring to Rio Vista and using phrases such as “we,” “our,” “us,” or the “Company,” our intent is to refer to Rio Vista and its consolidated subsidiaries as a whole or on a entity basis, depending on the context in which the statements are made.

General

Rio Vista Energy Partners L.P. (Rio Vista), a Delaware limited partnership, was formed by Penn Octane Corporation (Penn Octane) on July 10, 2003 and was a wholly owned subsidiary of Penn Octane until September 30, 2004, the date that Penn Octane completed a series of transactions that (i) transferred substantially all of its owned pipeline and terminal assets in Brownsville, Texas and Matamoros, Mexico and certain immaterial liabilities to Rio Vista Operating Partnership L.P. (RVOP), (ii) transferred Penn Octane’s 99.9% interest in RVOP to Rio Vista and (iii) distributed all of its limited partnership interests (Common Units) in Rio Vista to its common stockholders (Spin-Off), resulting in Rio Vista becoming a separate public company. The Common Units represented 98% of Rio Vista’s outstanding capital and 100% of Rio Vista’s limited partnership interests. The remaining 2% represented the General Partner interest. The General Partner interest is solely owned and controlled by Rio Vista GP LLC (General Partner). Our General Partner is 75% owned by Penn Octane and Penn Octane has 100% voting control over the General Partner pursuant to a voting agreement with the other owner of the General Partner. Our General Partner is responsible for the management of Rio Vista. Common unitholders do not participate in the management of Rio Vista.

Our principal executive offices are located at 1313 Alton Gloor, Suite J, Brownsville, Texas 98526, and our telephone number is (956) 831-0886. Our website is located at http://www.riovistaenergy.com.

Historical Assets and Operations

From inception until 2007, Rio Vista was focused on the operation of the assets acquired from Penn Octane, including a liquefied petroleum gas, or LPG, terminal facility in Matamoros, Mexico and approximately 23 miles of pipelines connecting the Matamoros Terminal Facility to an LPG terminal facility in Brownsville, Texas.

In August 2006, Rio Vista completed the disposition of substantially all of its U.S. LPG assets to TransMontaigne, including the Brownsville, Texas terminal facility and refined products tank farm, together with associated improvements, leases, easements, licenses and permits; an LPG sales agreement; and all of LPG inventory. In December 2007, Rio Vista completed the disposition of its remaining LPG assets to TransMontaigne, including the U.S. portion of the two pipelines from a Brownsville, Texas terminal owned by TransMontaigne to the U.S. border, along with all associated rights-of-way and easements; all of the outstanding equity interests in entities owning interests in the portion of the two pipelines that extend from the U.S. border to Matamoros, Mexico; and all of the rights for indirect control of an entity that owns a terminal site in Matamoros, Mexico. As a result, effective January 1, 2008, Rio Vista no longer operates the assets acquired from Penn Octane or conducts the businesses it had historically conducted.

Current Assets and Operations

In July 2007, Rio Vista acquired Regional Enterprises, Inc. (Regional), and in November 2007, Rio Vista acquired certain oil and natural gas producing properties and related assets in the State of Oklahoma formerly owned by GM Oil Properties, Inc., Penny Petroleum Corporation and GO LLC. The businesses and assets we acquired in 2007 are described further below under the subheadings “Regional Enterprises” and “Oklahoma assets.” As a result of these acquisitions in 2007, Rio Vista is now focused on the acquisition, development and production of oil and natural gas properties and related midstream assets, and the operation and development of Regional’s business consisting of transportation and terminalling.

1

Regional Enterprises

In July 2007, Rio Vista acquired the business of Regional Enterprises, Inc., a Virginia corporation. The principal business of Regional is storage, transportation and railcar transloading of bulk liquids, including chemical and petroleum products owned by its customers.

Regional’s principal facilities are located on the James River in Hopewell, Virginia, where it receives bulk chemicals and petroleum products from ships and barges into approximately 10,000,000 gallons of available storage. Regional also receives product from a rail spur which is capable of receiving 14 rail cars at any one time for transloading of chemical and petroleum liquids for delivery throughout the mid-Atlantic region.

Regional utilizes its fleet of 32 tractors and 50 trailers to distribute the various products it receives as well as to perform direct hauling operations on behalf of its customers.

Transportation. Regional transports a broad range of hazardous and non-hazardous liquid products, including the following: aluminum sulfate solution, sulfuric acid, sodium hydroxide, hydrogen peroxide, ferric chloride, ferric sulfate, hypochlorite solution, hydrochloric acid, ferrous chloride and aqua ammonia. Regional’s transportation services are primarily for the most part short-haul in nature, with an estimated 85% of Regional’s deliveries being made within 150 miles of its Hopewell, Virginia terminal. Virtually all of Regional’s transportation services are provided within the states of Virginia, North Carolina, South Carolina, Georgia, Tennessee, Maryland, Pennsylvania and Delaware.

Regional currently has a fleet of approximately 50 trailers units and 32 tractors dedicated to its transportation services. The majority of tankers are constructed of stainless steel, with 11 being rubber or chlorobutyl lined, which enables them to carry the toughest corrosives. The tanker fleet also includes four aluminum-constructed tanks, which are equipped with vapor recovery. Rio Vista believes that this extensive inventory of tankers enables Regional to service the majority of its customers’ needs. The tractor fleet consists of late model, Western Star and Mack units.

Storage. Regional’s Hopewell facility has a total of 15 tanks, six of which have capacities in excess of one million gallons; of these 15 tanks, 13 tanks are for customer utilization. These tanks have a combined storage capacity of 10.4 million gallons. As of December 31, 2007, Regional had five vacant tanks with a combined storage capacity of .5 millions gallons.

Regional’s loading dock is parallel to the main shipping channel with berthing dolphin clusters approximately 210 feet in length. Two six-inch and one ten-inch steel pipelines service the various tanks. All of the tanks are constructed of carbon steel, both insulated and bare skin and some with internal walls lined and unlined. Several tanks and all of the associated piping are equipped with heat via either heat transfer (hot oil) or steam. As of December 31, 2007, Regional stored the following products: two grades of asphalt, asphalt additive, sodium hydroxide and #2 oil.

Regional receives the products it stores by ship, barge, rail and truck. The products Regional stores are owned by its customers. Certain customers for whom Regional provides storage services also use Regional’s transportation services.

There is approximately 2.25 acres of undeveloped acreage at Regional’s Hopewell facility, which could be used to accommodate additional construction of up to an additional 4.2 million gallons of storage capacity.

Transloading. Regional provides transloading services utilizing its rail siding and off-loading facilities to transfer products from railcars to tanker trucks. Open rail access to the Norfolk Southern and CSX rail lines offers competitive rail economics and flexibility for Regional’s customers. Customers who utilize Regional’s transloading services typically do so because either their own rail service is at full capacity or Regional’s strategic location provides them with an important distribution point not available in their own distribution system. Transloading products, either from storage tanks or tankers, in railcar quantities provides a logistical pricing advantage over long-haul transportation in tanker trucks. Steam heat and compressed air is available at each railcar spot.

2

Regional has two transloading facilities. Regional leases siding tracks and 14 railcar slots at its Hopewell, Virginia facility, with Norfolk Southern conducting switching operations. As of December 31, 2007, Regional had four vacant slots but anticipates acquiring an additional 900 feet of track, which would result in 16 additional rail slots. Regional also has a transloading facility in Johnson City, Tennessee, where it leases siding tracks and six railcar slots. Switching operations for the Johnson City, Tennessee facility are provided by East Tennessee Railway, which services tracks over which both the CSX and Norfolk Southern railroads operate.

Headquarters Facility. Regional has approximately 2,000 square feet of office facilities at its Hopewell, Virginia headquarters from which it provides most of its management, administrative and marketing operations.

Customers. For the fiscal year period ended December 31, 2007, General Chemical Corporation accounted for approximately 14% of Regional’s revenues, with no other individual customer accounting for more than 10% of Regional’s revenues.

Competition. The terminalling and transportation industry is highly competitive. We encounter strong competition from other independent operators and from companies in acquiring equipment and securing trained personnel. Many of these competitors have financial and technical resources and staffs substantially larger than ours. As a result, our competitors may be able to bid for contracts at rates which are more attractive to customers than our financial or human resources permit.

We are also affected by competition for availability of specialized equipment. Certain trucking equipment, including tankers, require significant lead time and possible higher prices to obtain. Accordingly, we may not be able to bid for additional business which require equipment not currently available to us.

Employees. As of December 31, 2007, Regional had a total of approximately 51 full- and part-time employees, consisting of 26 drivers, 14 terminal operators, three mechanics and 14 office staff.

Environmental and Regulatory. Regional is a licensed contract or common carrier and holds permits with the Hopewell wastewater treatment facility for treatment and disposal of its wastewater generated through rainwater runoff and tanker washing operations. Regional is subject to various laws and regulations, including those relating to labor, maritime, transportation, environment and motor carrier.

Tax Structure. Regional’s assets and operations are conducted within a C-Corp for federal income tax purposes, as many of its activities are not considered “Qualified Income”. Rio Vista intends to explore options regarding the reorganization of some or all of its assets that produce qualifying income into a more efficient tax structure.

Other. Regional qualifies as a small business contractor and vendor capable of storing, transporting and supplying bulk chemical and petroleum products on behalf of U.S. government agencies. Regional intends to seek contracts with the Department of Defense and the Defense Energy Support Center based on the proximity of its Hopewell facilities to multiple U.S. military bases.

Oklahoma assets

In November 2007, Rio Vista Penny LLC (Rio Vista Penny), an indirect, wholly-owned subsidiary of Rio Vista completed the purchase of assets from G M Oil Properties, Inc., an Oklahoma corporation (GM Oil) and Penny Petroleum Corporation, an Oklahoma corporation (Penny Petroleum) pursuant to which we acquired real and personal property interests in certain oil and gas properties located in Haskell, McIntosh and Pittsburg counties in Oklahoma, including all of the outstanding capital stock of MV Pipeline Company (MV), an Oklahoma corporation.

The total purchase price for the GM Assets was paid by assumption of the TCW Credit Facility in the amount of $16.75 million (including $0.25 million of unpaid interest included in the TCW Credit Facility) plus payment of additional accrued but unpaid interest in the amount of $0.34 million. The TCW Credit Facility is payable to the TCW Noteholders and is administered by TAMCO as agent pursuant to the TCW Credit Facility. No cash or equity consideration was paid to GM Oil or its shareholders as part of the purchase price of the GM Assets.

3

In addition, in November 2007, Rio Vista GO, LLC (Rio Vista GO) an indirect, wholly-owned subsidiary of Rio Vista, acquired all of the membership interests of GO, LLC, an Oklahoma limited liability company (GO). GO operates an oil and gas pipeline business located in Haskell and Pittsburg counties in Oklahoma.

The total purchase price for the acquisition of the Oklahoma assets was approximately $33.0 million consisting of a cash payment in the amount of $10.0 million, including $3.0 million from the TCW Credit Facility, which included acquisition fees and other assumed liabilities of $1.9 million, the issuance of $1.5 million of common units, the issuance of a $500,000 short-term convertible note, and the assumption the TCW Credit Facility with a balance of $21.7 million including $2.0 million payment to TCW to obtain the credit facility. In December 2008, the TCW Credit Facility will convert to an eight-year amortizing loan with a fixed interest rate of 10.5%.

Exploration and Production Assets. The Oklahoma assets include approximately 15,100 net acres located in McIntosh, Haskell and Pittsburg counties in Oklahoma. The Oklahoma assets also include a 25% participation interest on 4,800 acres owned by Concorde Resources. These assets represent a majority interest in 93 wells that we now operate and 20 non-operated wells in the Booch Sand, Hartshorne Cold Bed Methane, Georgia’s Fork and Spiro formations.

Gathering. The Oklahoma assets also include a wholly-owned and operated 25-mile Brooken pipeline that gathers natural gas from several properties located in Haskell and Pittsburg counties, as well as MV’s wholly-owned and operated 40-mile pipeline that receives natural gas from leases in the Texanna area north of Lake Eufaula and delivers product to the ONEOK intrastate pipeline in McIntosh County, Oklahoma. The pipeline consists of 40 miles of Class I pipelines, a low-pressure gas gathering system and a 3,000 horsepower central compressor station with a capacity of 50 MMcf per day.

Proved Reserves. Our proved reserves at December 31, 2007 were 35.6 Bcf, all of which were gas. Approximately 12.8 Bcf were classified as proved developed, with a total Standardized Measure value of $41.3 million. At December 31, 2007, we operated 103 wells, or 81.1%, of our 127 productive wells. Our average proved reserves-to-production ratio, or average reserve life, is approximately 66.1 years, based on our December 31, 2007 reserve report and annualized production of current production levels.

Core Operating Areas

The long-lived proved producing properties are principally comprised of majority interests in 103 operated wells and 24 non-operated wells located on either side of Lake Eufaula in the “Crouch Area”, the “Texanna Area”, the “Brooken Area” and the “Canadian Area” with production derived primarily from the Booch sand, Hartshorne Coal Bed Methane reservoirs. We also derive a smaller portion of our reserves from the George’s Fork and Spiro reservoirs. Rio Vista estimates that it has an average revenue interest of approximately 75% in these leased interests. Characteristics of our reservoirs are as follows:

Booch sand:

• Acreage surrounding Lake Eufaula has net sand thickness of 25 feet

• Land surrounding the edges and underneath Lake Eufaula has locations with net sand thickness up to 200 feet

• Well potential: 5-10 thin, up to 5 thick wells, 800 MMcf — 4 Bcf per well

Hartshorne coal bed methane:

• Coal thickness contours ranging from a minimum of 2 feet to over 4 feet in select areas

• Well potential: 90-100 vertical, 5-10 horizontal, 250 — 900 MMcf per well

4

The following diagram illustrates the location of the principal fields and pipeline facilities associated with the Oklahoma assets.

Texanna. The Texanna Area, which is located on the north side of Lake Eufaula, is the area where there has been a significant amount of Booch operating history. Historically, over 200 Bcf has been produced from this formation in this area. Our current proved reserves in this region are based on a second Booch formation which overlays the original Booch formation. In addition there is current production from Hartshorne formations.

Crouch. The Crouch Area, which is located on the north side of Lake Eufaula, immediately north of the Texanna Area currently produces from the Booch, Georges Fork, Spiro, Hartshorne and Cromwell formations.

The Texanna and Crouch Areas are located with our MV Pipeline gathering system. The MV pipeline gathers natural gas from leases in the Texanna and Crouch Areas north of Lake Eufaula and delivers to the ONEOK Gas Transportation, LLC (Oneok) intrastate pipeline in McIntosh County. The MV Pipeline is 40 miles in length, Class I, low-pressure gas gathering system and is joined to a 3,000 hp central compressor station with capacity of 50 MMcf/d. This gathering system was originally constructed in 1984, upgraded in 1998 and 2 new compressors were added during 2006.

All of our production associated with the MV Pipeline and Brooken Pipeline (see below) is sold to Clearwater Enterprises LLC (Clearwater). The price we receive (excluding the impact of hedges) is based on the Oneok monthly index price (MV Pipeline production) or the Centerpoint Energy Gas Transmission (CEGT) index less fuel, gathering and compression. The Oneok and CEGT indexes historically trade at an approximate 10% discount to the NYMEX monthly averages.

5

Brooken. The Brooken Area is located on the south side of Lake Eufaula at the intersection of Haskell, McIntosh and Pittsburg counties. Our proven reserves in this are primarily relate to the Booch sand, and Hartshorne Coal Bed Methane formations. All of the production in this area is gathered by our Brooken pipeline gathering system. The Brooken pipeline is 25 miles long and has a capacity of 10 MMcf/d. The Brooken Pipeline was originally constructed in 1992. All of the production on the Brooken Pipeline connects to the Centerpoint Energy Field Services gathering system and is sold by Clearwater based on the monthly CEGT index less fuel, gathering, and compression.

We also perform limited gas gathering activities for third-parties which utilize our Brooken pipeline system. The fee charged to third-party producers is set by contract and ranges from $0.70 to $0.75 per Mcf plus line loss and any compressor fuel. We aggregate these volumes with our production and sell all the gas through our meters to the same purchasers. These revenues are collected and distributed to the third-party producers in the normal course of our revenue distribution cycle. We do not take any commodity risk associated with third party gas as we buy and sell this production on similarly posted indexes which provide a guaranteed fixed margin. Most of our gas gathering lines are not subject to United States Department of Transportation (US DOT) safety regulations.

Canadian. The Canadian Area is located southwest of the Brooken Area. It is an area characterized by horizontal drilling for the Hartshorne coal beds. These wells typically produce at significantly higher rates and higher ultimate reserve recovery than the wells in the vertical drilling areas. The cost for the horizontal wells is about three times greater than drilling a vertical well for the same Hartshorne target. Most of the wells currently producing in this area are operated by third parties. All of the wells operated and non-operated feed into third party gathering systems. All of the production from this area is sold under sales agreements which provide for prices that are tied to the CEGT monthly and/or beginning of month indexes, less fuel, gathering, compression and marketing fees.

Drilling Activity

We intend to concentrate our drilling activity on lower risk, development properties. The number, types, and location of wells we drill will vary depending on our capital budget, the cost of each well, anticipated production and the estimated recoverable reserves attributable to each well. We did not commence development activities on our Oklahoma assets until January 2008. Currently, we are funded to complete a planned deep test, upgrade of existing infrastructure and workovers on various existing wells which we expect to complete during the second quarter of 2008. We currently require additional funding to allow us to complete the remainder of our development program. The following details our current development plan for the upcoming annual period which is based on our ability to obtain additional funding.

Formation	Number of Wells
Coal Vertical		36
Coal Horizontal		7
Booch Vertical		5
Booch Horizontal		3
		51

We currently estimate that the cost to drill a new vertical well will be approximately $170,000, and the cost to drill a new horizontal well will be approximately $600,000.

The information should not be considered indicative of future performance, nor should it be assumed that there is necessarily any correlation between the number of productive wells drilled, quantities of reserves found or economic value. Productive wells are those that produce commercial quantities of oil and gas, regardless of whether they generate a reasonable rate of return. The ability for us to develop a portion or all of the above wells is contingent on our having adequate capital on hand.

6

As shown in the tables below, as of December 31, 2007, we had 69 proved undeveloped drilling locations (specific drilling locations as to which our independent engineering firm, Lee Keeling and Associates, Inc., assigned proved undeveloped reserves as of such date). We have also identified 5 additional unproved drilling locations (specific drilling locations as to which Lee Keeling and Associates, Inc. has not assigned any proved reserves) on acreage that we have under existing leases. As successful development wells frequently result in the reclassification of adjacent lease acreage from unproved to proved, we expect that a significant number of our unproved drilling locations will be reclassified as proved drilling locations prior to the actual drilling of these locations.

GAS RESERVES BY FIELD

	OPERATED
			GAS RESERVES-MCF
FIELD	WELLS		GROSS		NET
BROOKEN		22		20,575,326		9,127,757
CANADIAN		9		5,436,924		2,151,826
TEXANNA		38		15,183,172		11,542,940
TOTAL UNDEVELOPED		69		41,195,422		22,822,523

GAS RESERVES BY RESERVOIR

	OPERATED
			GAS RESERVES-MCF
RESERVOIR	WELLS		GROSS		NET
BOOCH		8		6,098,291		4,608,974
HARTSHORNE COAL		61		35,097,131		18,213,549
TOTAL PROVED UNDEVELOPED		69		41,195,422		22,822,523

Oil and Natural Gas Prices

Our natural gas production is sold to purchasers based on the local monthly index price, which typically is approximately 90% of the NYMEX monthly average gas prices less any direct costs for transportation, fuel and shrinkage. We recoup certain of the transportation costs paid for fees related to our own gathering systems.

We enter into hedging arrangements in the form of guaranteed future price contracts to reduce the impact of commodity price volatility on our cash flow from operations. By removing the price volatility from a significant portion of our oil and gas production, we have mitigated, but not eliminated, the potential effects of fluctuating oil and gas prices on our cash flow from operations for those periods. We have entered into sales contracts for substantially all of our production on wells which we operate through March 2009.

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Oil and Gas Data

Proved Reserves

Proved oil and gas reserves are the estimated quantities of oil and gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided by contractual arrangements, but not escalations based on future conditions. For additional information regarding estimates of oil and gas reserves, including estimates of proved and proved developed reserves, the standardized measure of discounted future cash flows and the changes in discounted future cash flows, see Supplementary Oil and Gas Data (Unaudited) in Item 8. “Financial Statements and Supplementary Data.”

The following table presents our estimated net proved oil and gas reserves and the present value of our estimated proved reserves at December 31, 2007, based on the reserve report prepared by Lee Keeling and Associates, Inc. The Standardized Measure values shown in the table are not intended to represent the market value of our estimated oil and gas reserves at such dates.

	December
	31, 2007
Reserve Data:
Estimated net proved reserves:
Gas (Bcf)		35.588
Oil (MMbls)		0.0
Total (Bcfe)		35.588
Proved developed (Bcfe)		12.766
Proved undeveloped (Bcfe)		22.822
Proved developed reserves as a % of total proved reserves		35.87	%
Standardized Measure (in millions) (1)	$	41.272
Representative Gas Price per MCF(2):	$	5.03

(1)

Does not give effect to hedging related contracts

(2)

Rio Vista sells its production based on monthly average index prices and therefore the price of gas used to determine the Standardized Measure was based on the monthly weighted average price received by Rio Vista for all its production during December 2007 regardless of whether Rio Vista was the operator. The weighted average price excludes any impact associated with hedges in effect during the period.

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Breakdown of Gas Sales — December 2007

	Price
	Realized (a)		Gas Production
	(MCF)		(MCF)
Total Operated Wells	$	5.19		31,905
Total Non-operated Wells	$	4.35		7,566
Weighted Average Price Realized	$	5.03		39,471
Relevant Indexes (b)
NYMEX December 2007	$	7.20
Oneok December 2007 Index	$	6.38
CEGT Index — Daily Average December 2007	$	6.30
CEGT Index — December 2007	$	6.15

(a)	Ignores impact of hedging contracts and includes fuel, compression, gathering charges and marketing
(b)	Excludes fuel, compression, gathering and marketing charges

The data in the above tables are estimates. Oil and gas reserve engineering is inherently a subjective process of estimating underground accumulations of oil and gas that cannot be measured exactly. The accuracy of any reserve estimate is a function of the quality of available data and engineering and geological interpretation and judgment. Accordingly, reserve estimates may vary from the quantities of oil and gas that are ultimately recovered.

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These reserve estimates are reviewed internally by management, with final approval by our Chairman of the Board. The process performed by Lee Keeling and Associates, Inc. to estimate the December 31, 2007 reserve amounts included their preparation of our estimated reserve quantities, future producing rates, future net revenue and the present value of such future net revenue. The independent engineering firm also prepared our estimates with respect to reserve categorization, using the definitions for proved reserves set forth in Regulation S-X Rule 4-10 (a) and subsequent Securities and Exchange Commission (SEC) staff interpretations and guidance. In the conduct of their preparation of the reserve estimates, Lee Keeling and Associates, Inc. independently verified the accuracy and completeness of information and data furnished by the Company with respect to ownership interests, oil and gas production, well test data, historical costs of operation and development, product prices, and any agreements relating to current and future operations of the properties and sales of production. However, if in the course of their work, something came to their attention which brought into question the validity or sufficiency of any such information or data, they did not rely on such information or data until they had satisfactorily resolved their questions relating thereto. Their estimates of reserves conform to the guidelines of the SEC, including the criteria of “reasonable certainty,” as it pertains to expectations about the recoverability of reserves in future years, under existing economic and operating conditions. We have not filed reserve estimates with any Federal authority or agency.

Future prices received for production may vary, perhaps significantly, from the prices assumed for purposes of our estimate of Standardized Measure. The Standardized Measure shown should not be construed as the market value of the reserves at the date shown. The 10% discount factor used to calculate Standardized Measure, which is required by Statement of Financial Accounting Standard (SFAS) No. 69, “Disclosures about Oil and Gas Producing Activities,” is not necessarily the most appropriate discount rate. The Standardized Measure, no matter what discount rate is used, is materially affected by assumptions as to timing of future production, which may prove to be inaccurate.

Production and Price History

The following table sets forth information regarding net production of oil and gas and certain price information for the period indicated, which is the period during which we owned the Oklahoma assets:

	Operated		Non-Operated
	Wells		Wells		Total
Production:
Gas production (Mcf)		64,391		15,905		80,296
Oil production (MBbls)		—		—		—
Total production (Mcfe)		64,391		15,905		80,296
Average daily production (Mcfe/d)		1,056		260		1,316
Weighted Average Realized Prices (1),(2):
Gas (Mcf)	$	5.33	$	4.23	$	5.11
Oil (Bbl)	$	—	$	—	$	—
Total (Mcfe)	$	5.33	$	4.23	$	5.11

(1)	Includes the effect of realized prices from hedging contracts.
(2)	The final NYMEX settled price for December 2007 was $7.20 (Mcf) before fuel, gathering and compression.

10

Productive Wells

The following table sets forth information relating to the productive wells in which we owned a working interest as of December 31, 2007. Productive wells consist of producing wells and wells capable of production, including gas wells awaiting pipeline connections to commence deliveries. “Gross” wells refers to the total number of producing wells in which we have an interest, and “net” wells refers to the sum of our fractional revenue interests owned in gross wells.

GAS RESERVES BY FIELD

	OPERATED
			NET		GAS RESERVES-MCF				NET REVENUE
	WELLS		ACRES		GROSS		NET		INTERESTS
BROOKEN		36		4,999		6,006,618		4,174,503		69.50	%
CANADIAN		13		574		2,609,128		921,040		35.30	%
CROUCH AREA		47		6,620		1,948,277		1,532,132		78.64	%
OTHER		7		2,242		823,395		598,181		72.65	%
TOTAL PROVED DEVELOPED		103		14,435		11,387,418		7,225,856		63.45	%

	NON-OPERATED
			NET		GAS RESERVES-MCF				NET REVENUE
	WELLS		ACRES		GROSS		NET		INTERESTS
BROOKEN		12		217		676,765		591,026		87.33	%
CANADIAN		6		199		4,037,242		4,037,242		100.00	%
CROUCH AREA		2		0		0		0		0.00	%
OTHER		4		160		912,843		912,843		100.00	%
TOTAL PROVED DEVELOPED		24		576		5,626,850		5,541,111		98.48	%

	TOTAL
			NET		GAS RESERVES-MCF				NET REVENUE
	WELLS		ACRES		GROSS		NET		INTERESTS
BROOKEN		48		5216		6,683,383		4,765,529		71.30	%
CANADIAN		19		773		6,646,370		4,958,282		74.60	%
CROUCH AREA		49		6620		1,948,277		1,532,132		78.64	%
OTHER		11		2402		1,736,238		1,511,024		87.03	%
TOTAL PROVED DEVELOPED		127		15011		17,014,268		12,766,967		75.04	%

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GAS RESERVES BY RESERVOIR

	OPERATED
			NET		GAS RESERVES-MCF				NET REVENUE
	WELLS		ACRES		GROSS		NET		INTERESTS
BOOCH		30		6,072		4,417,886		2,886,823		65.34	%
HARTSHORNE COAL		26		723		5,819,203		3,494,322		60.05	%
GEORGES FORK		33		4,939		253,504		199,803		78.82	%
SPIRO		8		1,721		467,526		359,883		76.98	%
OTHER		6		980		429,299		285,025		66.39	%
TOTAL PROVED DEVELOPED		103		14,435		11,387,418		7,225,856		63.45	%

	NON-OPERATED
			NET		GAS RESERVES-MCF				NET REVENUE
	WELLS		ACRES		GROSS		NET		INTERESTS
BOOCH		12		217		676,765		591,026		87.33	%
HARTSHORNE COAL		12		359		4,950,085		4,950,085		100.00	%
GEORGES FORK		0		0		0		0		0.00	%
SPIRO		0		0		0		0		0.00	%
OTHER		0		0		0		0		0.00	%
TOTAL PROVED DEVELOPED		24		576		5,626,850		5,541,111		98.48	%

	TOTAL
			NET		GAS RESERVES-MCF				NET REVENUE
	WELLS		ACRES		GROSS		NET		INTERESTS
BOOCH		42		6289		5,094,651		3,477,849		68.26	%
HARTSHORNE COAL		38		1082		10,769,288		8,444,407		78.41	%
GEORGES FORK		33		4939		253,504		199,803		78.82	%
SPIRO		8		1721		467,526		359,883		76.98	%
OTHER		6		980		429,299		285,025		66.39	%
TOTAL PROVED DEVELOPED		127		15011		17,014,268		12,766,967		75.04	%

Developed and Undeveloped Acreage

The following table sets forth information as of December 31, 2007, relating to our leasehold acreage:

	Developed				Undeveloped				Total
	Acreage				Acreage				Acreage
	Gross		Net		Gross		Net		Gross		Net
Operated		18,640		14,435		0		0		18,640		14,435
Non-operated		2,880		576		0		0		2,880		576
Total		21,520		15,011		0		0		21,520		15,011

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Oil and Gas Operational Overview

We seek to be the operator of wells in which we have an interest. Effective March 1, 2008, Rio Vista Penny LLC became the operator of the wells which were previously operated, under a transition operating agreement, by the predecessor entity, GM Oil Properties Inc., from the date of acquisition of the Oklahoma assets through February 29, 2008. As operator, we design and manage the drilling and enhancement activities and supervise operation and maintenance activities on a day-to-day basis. In connection with the acquisition of the Oklahoma assets, we obtained a completion and drilling rig, and we currently have a consulting arrangement with an outside third party to supervise certain aspects of our drilling operations. We plan to enter contracts for additional third-party drilling rigs as needed to carry out our planned 2008 drilling program. Our own personnel are able to operate our own drilling rig. In addition, we employ drilling, production and reservoir engineers, geologists and other specialists who work to improve production rates, increase reserves and lower the cost of operating our oil and gas properties.

As it is customary in the oil and gas industry, we initially conduct only a cursory review of the title to our properties on which we do not have proved reserves. Prior to the commencement of drilling operations on those properties, we conduct a thorough title examination and perform curative work with respect to significant defects. To the extent title opinions or other investigations reflect title defects on those properties; we are typically responsible for curing any title defects at our expense prior to commencing drilling operations. Prior to completing an acquisition of producing gas leases, we perform title reviews on the most significant leases and, depending on the materiality of properties, we may obtain a title opinion or review previously obtained title opinions. As a result, we have obtained title opinions on a significant portion of our oil and gas properties and believe that we have satisfactory title to our producing properties in accordance with standards generally accepted in the oil and gas industry. Our oil and gas properties are subject to customary royalty and other interests, liens for current taxes and other burdens which we believe do not materially interfere with the use of or affect our carrying value of the properties.

Seasonal weather conditions and lease stipulations can limit our drilling and producing activities and other operations in Oklahoma, and, as a result, we perform the majority of our drilling during the summer months in these areas. These seasonal anomalies can pose challenges for meeting our well drilling objectives and increase competition, for equipment, supplies and personnel during the spring and summer months, which could lead to employee shortages, increased costs or delays in operations. The demand for gas typically decreases during the summer months and increases during the winter months. Seasonal anomalies such as mild winters or hot summers sometimes lessen this fluctuation. In addition, certain gas users utilize gas storage facilities and purchase some of their anticipated winter requirements during the summer. This can also lessen seasonal demand fluctuations.

Employees

At December 31, 2007, Rio Vista did not employ any personnel in connection with operation of the Oklahoma assets. Beginning March 1, 2008, Rio Vista Operating LLC became the operator of the Oklahoma assets and employs approximately six employees, consisting of four field workers and two office staff personnel as of such date.

Principal Customers

From the date of acquisition through December 31, 2007, 66.2% of our gas production was sold through Clearwater Enterprises LLC (Clearwater). Clearwater in turns sells our production to retail customers within proximity of our gathering system. We believe that if we were to lose Clearwater as a customer, we would be able to sell our production to other customers under similar sales terms.

Competition

The oil and gas industry is highly competitive. We encounter strong competition from other independent operators and from major oil companies in acquiring properties, contracting for drilling equipment and securing trained personnel. Many of these competitors have financial and technical resources and staffs substantially larger than ours. As a result, our competitors may be able to pay more for desirable leases, or to evaluate, bid for and purchase a greater number of properties or prospects, than our financial or human resources permit.

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We are also affected by competition for drilling rigs and the availability of related equipment. In the past, the oil and gas industry has experienced shortages of drilling rigs, equipment, pipe and personnel, which has delayed development drilling and has caused significant price increases. We are unable to predict when, or if, such shortages may occur or how they would affect our drilling program.

Competition is also strong for attractive oil and gas producing properties, undeveloped leases and drilling rights, and we cannot guarantee that we will be able to compete satisfactorily when attempting to make further acquisitions.

Environmental Matters and Regulation

We believe that our properties and operations are in compliance with applicable environmental laws and regulations, and our operations to date have not resulted in any material environmental liabilities. To protect against potential environmental risk, we typically obtain Phase I environmental assessments of any properties to be acquired prior to completing each acquisition.

General. Our operations are subject to stringent federal, state and local laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Our operations are subject to the same environmental laws and regulations as other companies in the oil and gas industry. These laws and regulations may:

• require the acquisition of various permits before drilling commences;

• require the installation of expensive pollution control equipment;

• restrict the types, quantities and concentration of various substances that can be released into the environment in connection with drilling and production activities;

• limit or prohibit drilling activities on lands lying within wilderness, wetlands and other protected areas;

• require remedial measures to prevent pollution from former operations, such as pit closure and plugging of abandoned wells;

• impose substantial liabilities for pollution resulting from our operations; and

• with respect to operations affecting federal lands or leases, require preparation of a Resource Management Plan, an Environmental Assessment, and/or an Environmental Impact Statement.

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These laws, rules and regulations may also restrict the rate of oil and gas production below the rate that would otherwise be possible. The regulatory burden on the oil and gas industry increases the cost of doing business and consequently affects profitability. In addition, Congress and federal and state agencies frequently revise environmental laws and regulations, and any changes that result in more stringent and costly waste handling, disposal and clean-up requirements for the oil and gas industry could have a significant impact on our operating costs. We believe that we substantially comply with all current applicable environmental laws and regulations and that our continued compliance with existing requirements will not have a material adverse impact on our financial condition and results of operations. However, we cannot predict how future environmental laws and regulations may impact our properties or operations. For the year ended December 31, 2007, we did not incur any material capital expenditures for installation of remediation or pollution control equipment at any of our facilities. We are not aware of any environmental issues or claims that will require material capital expenditures during 2008 or that will otherwise have a material impact on our financial position or results of operations.

Environmental laws and regulations that have a material impact on the oil and gas industry include the following:

National Environmental Policy Act. Oil and gas production activities on federal lands are subject to the National Environmental Policy Act (NEPA). NEPA requires federal agencies, including the Department of Interior, to evaluate major agency actions having the potential to significantly impact the environment. In the course of such evaluations, an agency will typically prepare an Environmental Assessment to assess the potential direct, indirect and cumulative impacts of a proposed project and, if necessary, will prepare a more detailed Environmental Impact Statement that may be made available for public review and comment. All of our current development and production activities, as well as proposed development plans, on federal lands require governmental permits that are subject to the requirements of NEPA. This process has the potential to delay the development of oil and gas projects.

Resource Conservation and Recovery Act. The Resource Conservation and Recovery Act (RCRA), and comparable state statutes, regulate the generation, transportation, treatment, storage, disposal and cleanup of “hazardous wastes” and the disposal of non-hazardous wastes. Under the auspices of the Environmental Protection Agency (EPA), individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. Drilling fluids, produced waters and most of the other wastes associated with the development and production of oil, gas or geothermal energy constitute “solid wastes,” which are regulated under the less stringent non-hazardous waste provisions, but there is no guarantee that the EPA or individual states will not adopt more stringent requirements for the handling of non-hazardous wastes or recategorize some non-hazardous wastes as hazardous for future regulation.

We believe that we are currently in substantial compliance with the requirements of RCRA and related state and local laws and regulations, and that we hold all necessary and up-to-date permits, registrations and other authorizations to the extent that our operations require them under such laws and regulations. Although we do not believe the current costs of managing our wastes as they are presently classified to be significant, any legislative or regulatory reclassification of oil and gas development and production wastes could increase our costs to manage and dispose of such wastes.

Comprehensive Environmental Response, Compensation and Liability Act. The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), also known as the “Superfund” law, imposes joint and several liability, without regard to fault or legality of conduct, on persons who are considered to be responsible for the release of a “hazardous substance” into the environment. These persons include the owner or operator of the site where the release occurred and companies that disposed or arranged for the disposal of the hazardous substance at the site. Under CERCLA, such persons may be liable for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. In addition, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment.

15

We currently own, lease, or operate numerous properties that have been used for oil and gas development and production for many years. Although we believe we have utilized operating and waste disposal practices that were standard in the industry at the time, hazardous substances, wastes or hydrocarbons may have been released on or under the properties owned or leased by us, or on or under other locations, including off-site locations, where such substances have been taken for disposal. In addition, some of these properties have been operated by third parties or by previous owners or operators whose treatment and disposal of hazardous substances, wastes or hydrocarbons was not under our control. These properties and the substances disposed or released on them may be subject to CERCLA, RCRA and analogous state laws. Under such laws, we could be required to remove previously disposed substances and wastes, remediate contaminated property or perform remedial plugging or pit closure operations to prevent future contamination.

Water Pollution Control Act. The Federal Water Pollution Control Act, also known as the Clean Water Act, and analogous state laws impose restrictions and strict controls on the discharge of pollutants, including produced waters and other oil and gas wastes, into waters of the United States. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued by the Environmental Protection Agency (EPA) or the relevant state. The Clean Water Act also prohibits the discharge of dredge and fill material in regulated waters, including wetlands, unless authorized by a permit issued by the U.S. Army Corps of Engineers. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with discharge permits or other requirements of the federal Clean Water Act and analogous state laws and regulations. We believe we are in substantial compliance with the requirements of the Clean Water Act.

Clean Air Act. The Clean Air Act, and associated state laws and regulations, regulate emissions of various air pollutants through the issuance of permits and the imposition of other requirements. In addition, the EPA has developed, and continues to develop, stringent regulations governing emissions of toxic air pollutants at specified sources. Some of our new facilities may be required to obtain permits before work can begin, and existing facilities may be required to incur capital costs in order to comply with new emission limitations. These regulations may increase the costs of compliance for some facilities, and federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance. We believe that we are in substantial compliance with the requirements of the Clean Air Act.

Oil Pollution Act. The Federal Oil Pollution Act (OPA) requires owners and operators of facilities that could be the source of an oil spill into waters of the U.S. (a term defined to include rivers, creeks, wetlands and coastal waters) to adopt and implement plans and procedures to prevent any such oil spill. OPA also requires affected facility owners and operators to demonstrate that they have at least $35 million in financial resources to pay the costs of cleaning up an oil spill and to compensate any parties damaged by an oil spill. Such financial assurances may be increased to as much as $150 million if a formal assessment indicates such an increase is warranted.

Other Laws and Regulation. The Kyoto Protocol to the United Nations Framework Convention on Climate Change (the Protocol) became effective in February 2005. Under the Protocol, participating nations are required to implement programs to reduce emissions of certain gases, typically referred to as greenhouse gases, that are suspected of contributing to global warming. The United States is not currently a participant in the Protocol, and Congress has resisted recent proposed legislation directed at reducing greenhouse gas emissions. However, there has been support in various regions of the country for legislation that requires reductions in greenhouse gas emissions, and some states have already adopted legislation addressing greenhouse gas emissions from various sources, primarily power plants. The oil and gas industry is a direct source of certain greenhouse gas emissions, namely carbon dioxide and methane, and future restrictions on such emissions could impact our future operations. Our operations are not adversely impacted by current state and local climate change initiatives and, at this time, it is not possible to accurately estimate how potential future laws or regulations addressing greenhouse gas emissions would impact our business.

16

Other Regulation of the Oil and Gas Industry

The oil and gas industry is extensively regulated by numerous federal, state and local authorities. Legislation affecting the oil and gas industry is under constant review for amendment or expansion, which frequently increases the regulatory burden. In addition, numerous departments and agencies, both federal and state, are authorized by statute to issue rules and regulations binding on the oil and gas industry and its individual members, some of which carry substantial penalties for failure to comply. Although the regulatory burden on the oil and gas industry increases our cost of doing business and, consequently, affects our profitability, these burdens do not affect us any differently or to any greater or lesser extent than they affect other companies in the industry with similar types, quantities and locations of production.

Legislation continues to be introduced in Congress, and development of regulations continues in the Department of Homeland Security and other agencies concerning the security of industrial facilities, including oil and gas facilities. Our operations may be subject to such laws and regulations. Presently, it is not possible to accurately estimate the costs we would incur to comply with any such facility security laws or regulations, but such expenditures could be substantial.

Drilling and Production. Our operations are subject to various types of regulation at the federal, state and local levels. These types of regulation include requiring permits for the drilling of wells, drilling bonds and reports concerning operations. Most states, and some counties and municipalities, in which we operate regulate one or more of the following:

• the location of wells;

• the method of drilling and casing wells;

• rates of production from wells;

• the surface use and restoration of properties upon which wells are drilled;

• the plugging and abandoning of wells; and

• notice to surface owners and other third parties.

State laws regulate the size and shape of drilling and spacing of units or proportion of units governing the pooling of oil and gas properties. Some states allow forced pooling or integration of tracts to facilitate development while other states rely on voluntary pooling of lands and leases. In some instances, forced pooling or unitization may be implemented by third parties and may reduce our interest in the unitized properties. In addition, state conservation laws establish maximum rates of production from oil and gas wells, prohibit the venting or flaring of gas and impose requirements regarding the ratability of production. These laws and regulations may limit the amount of oil and gas we can produce from our wells or limit the number of wells or the locations at which we can drill. Moreover, each state typically imposes a production or severance tax with respect to the production and sale of oil, gas and natural gas liquids within its jurisdiction.

17

Oil and Gas Transportation and Pricing. The availability, terms and cost of transportation significantly affect sales of oil and gas. The interstate transportation and sale of oil and gas are subject to federal regulation, primarily by the FERC, including regulation of the terms, conditions and rates for interstate transportation, storage and various other matters. Federal and state regulations govern the price and terms for access to oil and gas pipeline transportation. The FERC’s regulations for interstate oil and gas transmission in some circumstances may also affect the intrastate transportation of oil and gas.

Although oil and gas prices are currently unregulated, Congress historically has been active in the area of oil and gas regulation. We cannot predict whether new legislation to regulate oil and gas operations might be proposed, what proposals, if any, might actually be enacted by Congress or the various state legislatures, and what effect, if any, the proposals might have on the operations of the underlying properties.

Rio Vista Employees

Rio Vista has no employees. At December 31, 2007, Rio Vista’s subsidiaries employed personnel in connection with the operation of their businesses as described above. The business of Rio Vista is managed by the General Partner. Penn Octane employs all persons, other than Rio Vista’s employees referred to herein, including executive officers, necessary for the operation of Rio Vista’s business.

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Item 1A. Risk Factors

Limited partner interests are inherently different from capital stock of a corporation, although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business. The following are some of the important factors that could affect our business, financial condition or results of operations and our actual results could differ materially from estimates contained in our forward-looking statements. We may encounter risks in addition to those described below. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, may also adversely impair or offset our business results of operation, financial condition and prospects.

Risks Related to Our Business

We may not have sufficient cash flow from operations to make the quarterly distribution on our common units following establishment of cash reserves and payment of fees and expenses, including reimbursement of expenses to our General Partner.

We may not have sufficient available cash each quarter to make the quarterly distribution of $0.25 per unit or any other amount. Under the terms of our partnership agreement, the amount of cash otherwise available for distribution will be reduced by our operating expenses and the amount of any cash reserve our General Partner establishes to provide for the proper conduct of our business, meet any of our obligations arising from any of our debt instruments, or other agreements, comply with applicable law, and provide funds for distributions to our unitholders and to our General Partner for any one or more of the next four quarters.

The amount of cash we actually generate will depend upon numerous factors related to our business that may be beyond our control, including, among other things, the risks described in these Risk Factors. In addition, the actual amount of cash that we will have available for distribution will depend on other factors, including:

• the level of our capital expenditures;

• our ability to make borrowings under our revolving credit facilities, if any, to make distributions;

• limitations on our subsidiaries’ ability to make distributions to us under the TCW credit facility, as discussed under Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

• sources of cash used to fund acquisitions;

• debt service requirements and restrictions on distributions contained in our existing and future debt agreements;

• interest payments;

• fluctuations in our working capital needs;

• general and administrative expenses, including expenses we will incur as a result of being a public company;

• cash settlement of commodity derivative contracts;

• timing and collectibility of receivables; and

• the amount of cash reserves, which we expect to be substantial, established by our General Partner for the proper conduct of our business.

19

Our estimate of the minimum EBITDA necessary for us to make a distribution on all units at the target distribution rate for each of the four quarters ending December 31, 2008 is based on assumptions that are inherently uncertain and are subject to significant business, economic, financial, legal, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those estimated.

Our estimate of the minimum EBITDA necessary for us to make a distribution on all units at the target distribution rate for each of the four quarters ending December 31, 2008 is based on our management’s calculations, and we have not received an opinion or report on it from any independent accountants. This estimate is based on assumptions about development, production, oil and natural gas prices, settlements under commodity derivative contracts, capital expenditures, expenses, borrowings and other matters that are inherently uncertain and are subject to significant business, economic, financial, legal, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those estimated. If any of these assumptions prove to have been inaccurate, our actual results may differ materially from those set forth in our estimates, and we may be unable to make all or part of the initial quarterly distribution on our units.

Our oil and natural gas reserves naturally decline, and we will be unable to sustain distributions at the level of our estimated initial quarterly distribution without making accretive acquisitions or substantial capital expenditures that maintain or grow our asset base.

Our future oil and natural gas reserves, production volumes, cash flow and ability to make distributions depend on our success in developing and exploiting our current reserves efficiently and finding or acquiring additional recoverable reserves economically. We may not be able to develop, find or acquire additional reserves to replace our current and future production at acceptable costs, which would adversely affect our business, financial condition and results of operations and reduce cash available for distribution.

Because our oil and natural gas properties are a depleting asset, we will need to make substantial capital expenditures to maintain and grow our asset base, which will reduce our cash available for distribution. Because the timing and amount of these capital expenditures fluctuate each quarter, we expect to reserve substantial amounts of cash each quarter to finance these expenditures over time. We may use the reserved cash to reduce indebtedness until we make the capital expenditures. Over a longer period of time, if we do not set aside sufficient cash reserves or make sufficient expenditures to maintain our asset base, we will be unable to make distributions at the current level from cash generated from operations and would therefore expect to reduce our distributions.

If our reserves decrease and we do not reduce our distribution, then a portion of the distribution may be considered a return of part of a unitholder’s investment in us as opposed to a return on investment. Also, if we do not make sufficient growth capital expenditures, we will be unable to expand our business operations and will therefore be unable to raise the level of future distributions.

To fund our substantial capital expenditures, we will be required to use cash generated from our operations, additional borrowings or the issuance of additional equity or debt securities, or some combination thereof, which may limit our ability to make distributions at the then-current distribution rate.

The use of cash generated from operations to fund capital expenditures will reduce cash available for distribution to our unitholders. Our ability to obtain bank financing or to access the capital markets for future equity or debt offerings may be limited by our financial condition at the time of any such financing or offering and the covenants in our existing debt agreements, as well as by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond our control. Our failure to obtain the funds for necessary future capital expenditures could have a material adverse effect on our business, results of operations, financial condition and ability to make distributions.

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Even if we are successful in obtaining the necessary funds, the terms of such financings could limit our ability to make distributions to our unitholders, either directly or indirectly. For example, our existing credit facility with TCW prohibits our Oklahoma subsidiaries from making any distributions to us until December 2008 and thereafter, limits those distributions to 75% of defined available cash flow. If we are not able to receive sufficient operating cash from our subsidiaries, our ability to make distributions to our unitholders at the then-current distribution rate could be adversely affected.

In addition, incurring additional debt may significantly increase our interest expense and financial leverage. Issuing additional common units may result in significant unitholder dilution thereby increasing the aggregate amount of cash required to maintain the then-current distribution rate. Any of these events could limit our ability to make distributions at the then-current distribution rate.

We may not make cash distributions during periods when we record net income.

The amount of cash we have available for distribution depends primarily on our cash flow, including cash from financial reserves, working capital or other borrowings, and not solely on profitability, which will be affected by non-cash items. As a result, we may make cash distributions during periods when we record losses and may not make cash distributions during periods when we record net income.

Oil and natural gas prices are very volatile. A decline in commodity prices will cause a decline in our cash flow from operations, which may force us to reduce our distributions or cease paying distributions altogether.

The oil and natural gas markets are very volatile, and we cannot predict future oil and natural gas prices. Prices for oil and natural gas may fluctuate widely in response to relatively minor changes in the supply of and demand for oil and natural gas, market uncertainty and a variety of additional factors that are beyond our control, such as:

• our ability to make borrowings under our revolving credit facilities, if any, to make distributions;

• domestic and foreign supply of and demand for oil and natural gas;

• weather conditions;

• overall domestic and global economic conditions;

• political and economic conditions in oil and natural gas producing countries, including those in the Middle East and South America;

• actions of the Organization of Petroleum Exporting Countries, or OPEC, and other state-controlled oil companies relating to oil price and production controls;

• impact of the U.S. dollar exchange rates on oil and natural gas prices;

• technological advances affecting energy consumption and energy supply;

• domestic and foreign governmental regulations and taxation;

• the impact of energy conservation efforts;

• the proximity, capacity, cost and availability of oil and natural gas pipelines and other transportation facilities;

• the availability of refining capacity; and

• the price and availability of alternative fuels.

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Our revenue, profitability and cash flow depend upon the prices of and demand for oil and natural gas, and a drop in prices can significantly affect our financial results and impede our growth. In particular, declines in commodity prices will:

• negatively impact the value of our reserves, because declines in oil and natural gas prices would reduce the amount of oil and natural gas that we can produce economically;

• reduce the amount of cash flow available for capital expenditures;

• limit our ability to borrow money or raise additional capital; and

• impair our ability to make distributions.

If we raise our distribution levels in response to increased cash flow during periods of relatively high commodity prices, we may not be able to sustain those distribution levels during subsequent periods of lower commodity prices.

An increase in the differential between the NYMEX or other benchmark prices of oil and natural gas and the wellhead price we receive could significantly reduce our cash available for distribution and adversely affect our financial condition.

The prices that we receive for our oil and natural gas production sometimes trade at a discount to the relevant benchmark prices, such as NYMEX, that are used for calculating commodity derivative positions. The difference between the benchmark price and the price we receive is called a differential. We cannot accurately predict oil and natural gas differentials. Increases in the differential between the benchmark price for oil and natural gas and the wellhead price we receive could significantly reduce our cash available for distribution and adversely affect our financial condition.

Future price declines may result in a write-down of our asset carrying values, which could have a material adverse effect on our results of operations and limit our ability to borrow and make distributions.

Declines in oil and natural gas prices may result in our having to make substantial downward adjustments to our estimated proved reserves. If this occurs, or if our estimates of development costs increase, production data factors change or development results deteriorate, accounting rules may require us to write down, as a non-cash charge to earnings, the carrying value of our oil and natural gas properties for impairments. If we incur impairment charges in the future, it could have a material adverse effect on our results of operations in the period incurred and on our ability to borrow funds under our revolving credit facility, which in turn may adversely affect our ability to make cash distributions to our unitholders.

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• a counterparty may not perform its obligation under the applicable derivative instrument; and

• there may be a change in the expected differential between the underlying commodity price in the derivative instrument and the actual price received, which may result in payments to our derivative counterparty that are not accompanied by our receipt of higher prices from our production in the field.

Our commodity derivative contract activities could result in financial losses or could reduce our income, which may adversely affect our ability to make distributions to our unitholders.

To achieve more predictable cash flow and to reduce our exposure to adverse fluctuations in the prices of oil and natural gas, we may in the future enter into derivative arrangements for a significant portion of our oil and natural gas production that could result in both realized and unrealized commodity derivative losses. The extent of our commodity price exposure is related largely to the effectiveness and scope of our derivative activities. For example, the derivative instruments we utilize are based on posted market prices, which may differ significantly from the actual crude oil, natural gas and NGL prices we realize in our operations.

Our actual future production may be significantly higher or lower than we estimate at the time we enter into derivative transactions for such period. If the actual amount is higher than we estimate, we will have greater commodity price exposure than we intended. If the actual amount is lower than the nominal amount that is subject to our derivative financial instruments, we might be forced to satisfy all or a portion of our derivative transactions without the benefit of the cash flow from our sale or purchase of the underlying physical commodity, resulting in a substantial diminution of our liquidity. As a result of these factors, our derivative activities may not be as effective as we intend in reducing the volatility of our cash flows, and in certain circumstances may actually increase the volatility of our cash flows. In addition, our derivative activities are subject to the following risks:

• a counterparty may not perform its obligation under the applicable derivative instrument; and

• there may be a change in the expected differential between the underlying commodity price in the derivative instrument and the actual price received, which may result in payments to our derivative counterparty that are not accompanied by our receipt of higher prices from our production in the field.

Our estimated proved reserves are based on many assumptions that may prove to be inaccurate. Any material inaccuracies in these reserve estimates or underlying assumptions will materially affect the quantities and present value of our reserves.

It is not possible to measure underground accumulations of oil or natural gas in an exact way. Oil and natural gas reserve engineering requires subjective estimates of underground accumulations of oil and natural gas and assumptions concerning future oil and natural gas prices, future production levels and operating and development costs. In estimating our level of oil and natural gas reserves, we and our independent reserve engineers make certain assumptions that may prove to be incorrect, including assumptions relating to the level of oil and natural gas prices, future production levels, capital expenditures, operating and development costs, the effects of regulation and availability of funds. If these assumptions prove to be incorrect, our estimates of reserves, the economically recoverable quantities of oil and natural gas attributable to any particular group of properties, the classifications of reserves based on risk of recovery and our estimates of the future net cash flows from our reserves could change significantly.

Our Standardized Measure is calculated using prices and costs in effect as of the date of estimation, less future development, production and income tax expenses, and discounted to reflect the timing of future net revenue in accordance with the rules and regulations of the SEC. Over time, we may make material changes to reserve estimates to take into account changes in our assumptions and the results of actual development and production.

The reserve estimates we make for fields that do not have a lengthy production history are less reliable than estimates for fields with lengthy production histories. A lack of production history may contribute to inaccuracy in our estimates of proved reserves, future production rates and the timing of development expenditures.

The Standardized Measure of our estimated proved reserves is not necessarily the same as the current market value of our estimated proved oil and natural gas reserves. We base the estimated discounted future net cash flows from our estimated proved reserves on prices and costs in effect on the day of estimate.

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The timing of both our production and our incurrence of expenses in connection with the development and production of oil and natural gas properties will affect the timing of actual future net cash flows from proved reserves, and thus their actual present value. In addition, the 10% discount factor we use when calculating discounted future net cash flows in compliance with SFAS No. 69, “Disclosures about Oil and Gas Producing Activities,” may not be the most appropriate discount factor based on interest rates in effect from time to time and risks associated with us or the oil and natural gas industry in general.

Developing and producing oil and natural gas are costly and high-risk activities with many uncertainties that could adversely affect our financial condition or results of operations and, as a result, our ability to make distributions to our unitholders.

The cost of developing, completing and operating a well is often uncertain, and cost factors can adversely affect the economics of a well. Our efforts will be uneconomical if we drill dry holes or wells that are productive but do not produce as much oil and natural gas as we had estimated. Furthermore, our development and producing operations may be curtailed, delayed or canceled as a result of other factors, including:

• high costs, shortages or delivery delays of rigs, equipment, labor or other services;

• unexpected operational events and/or conditions;

• reductions in oil and natural gas prices;

• increases in severance taxes;

• limitations in the market for oil and natural gas;

• adverse weather conditions and natural disasters;

• facility or equipment malfunctions, and equipment failures or accidents;

• title problems;

• pipe or cement failures and casing collapses;

• compliance with environmental and other governmental requirements;

• environmental hazards, such as natural gas leaks, oil spills, pipeline ruptures and discharges of toxic gases;

• lost or damaged oilfield development and service tools;

• unusual or unexpected geological formations, and pressure or irregularities in formations;

• loss of drilling fluid circulation;

• fires, blowouts, surface craterings and explosions;

• uncontrollable flows of oil, natural gas or well fluids; and

• loss of leases due to incorrect payment of royalties.

If any of these factors were to occur with respect to a particular field, we could lose all or a part of our investment in the field, or we could fail to realize the expected benefits from the field, either of which could materially and adversely affect our revenue and profitability.

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Shortages of rigs, equipment and crews could delay our operations and reduce our cash available for distribution.

Higher oil and natural gas prices generally increase the demand for rigs, equipment and crews and can lead to shortages of, and increasing costs for, development equipment, services and personnel. Shortages of, or increasing costs for, experienced development crews and oil field equipment and services could restrict our ability to drill the wells and conduct the operations that we currently have planned. Any delay in the development of new wells or a significant increase in development costs could reduce our revenues.

If we do not make acquisitions on economically acceptable terms, our future growth and ability to make or increase distributions will be limited.

Our ability to grow and to increase distributions to unitholders depends in part on our ability to make acquisitions that result in an increase in pro forma available cash per unit. We may be unable to make such acquisitions because we are:

• unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts with them;

• unable to obtain financing for these acquisitions on economically acceptable terms; or

• outbid by competitors.

If we are unable to acquire properties containing proved reserves, our total level of proved reserves will decline as a result of our production, and we will be limited in our ability to increase or possibly even to maintain our level of cash distributions.

Any acquisitions we complete are subject to substantial risks that could reduce our ability to make distributions to unitholders.

Even if we do make acquisitions that we believe will increase pro forma available cash per unit, these acquisitions may nevertheless result in a decrease in pro forma available cash per unit. Any acquisition involves potential risks, including, among other things:

• the validity of our assumptions about reserves, future production, revenues, capital expenditures, operating expenses and costs, including synergies;

• an inability to integrate the businesses we acquire successfully;

• a decrease in our liquidity by using a significant portion of our available cash or borrowing capacity to finance acquisitions;

• a significant increase in our interest expense or financial leverage if we incur additional debt to finance acquisitions;

• the assumption of unknown liabilities, losses or costs for which we are not indemnified or for which our indemnity is inadequate;

• the diversion of management’s attention from other business concerns;

• an inability to hire, train or retain qualified personnel to manage and operate our growing business and assets;

• natural disasters;

• the incurrences of other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges;

• unforeseen difficulties encountered in operating in new geographic areas; and

• customer or key employee losses at the acquired businesses.

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Our decision to acquire a property will depend in part on the evaluation of data obtained from production reports and engineering studies, geophysical and geological analyses and seismic and other information, the results of which are often inconclusive and subject to various interpretations.

In addition, our reviews of acquired properties are inherently incomplete because it generally is not feasible to perform an in-depth review of the individual properties involved in each acquisition given time constraints imposed by sellers. Even a detailed review of records and properties may not necessarily reveal existing or potential problems, nor will it permit a buyer to become sufficiently familiar with the properties to assess fully their deficiencies and potential. Inspections may not always be performed on every well, and environmental problems, such as groundwater contamination, are not necessarily observable even when an inspection is undertaken.

Due to our lack of geographic diversification, adverse developments in our operating areas would reduce our ability to make distributions to our unitholders.

Currently, our only oil and natural gas properties and related assets are located in Oklahoma and the greatest part of Regional’s operations are conducted within a 150-mile radius of its principal facility in southeastern Virginia. Due to our lack of diversification in location, an adverse development in the relevant businesses within our geographic areas would have a significantly greater impact on our results of operations and cash available for distribution to our unitholders than if we maintained more diverse locations.

We may be unable to compete effectively with larger companies, which may adversely affect our ability to generate sufficient revenue to allow us to make distributions to our unitholders.

The oil and natural gas industry is intensely competitive with respect to acquiring prospects and productive properties, marketing oil and natural gas and securing equipment and trained personnel, and we compete with other companies that have greater resources. Many of our competitors are major and large independent oil and natural gas companies, and possess and employ financial, technical and personnel resources substantially greater than ours. Those companies may be able to develop and acquire more prospects and productive properties than our financial or personnel resources permit. Our ability to acquire additional properties and to discover reserves in the future will depend on our ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. Many of our larger competitors not only drill for and produce oil and natural gas but also carry on refining operations and market petroleum and other products on a regional, national or worldwide basis. These companies may be able to pay more for oil and natural gas properties and evaluate, bid for and purchase a greater number of properties than our financial or human resources permit. In addition, there is substantial competition for investment capital in the oil and natural gas industry. These larger companies may have a greater ability to continue development activities during periods of low oil and natural gas prices and to absorb the burden of present and future federal, state, local and other laws and regulations. Our inability to compete effectively with larger companies could have a material adverse impact on our business activities, financial condition and results of operations.

We may incur substantial additional debt to enable us to make our quarterly distributions, which may negatively affect our ability to execute our business plan and make future distributions.

We may be unable to make a distribution at the initial distribution rate or the then-current distribution rate without incurring indebtedness. When we borrow to make distributions, we are distributing more cash than we are generating from our operations on a current basis. This means that we are using a portion of our borrowing capacity under our revolving credit facility to make distributions rather than to maintain or expand our operations. If we use borrowings under our revolving credit facility to make distributions for an extended period of time rather than toward funding capital expenditures and other matters relating to our operations, we may be unable to support or grow our business. Such a curtailment of our business activities, combined with our payment of principal and interest on our future indebtedness to make these distributions, will reduce our cash available for distribution on our units and will have a material adverse effect on our business, financial condition and results of operations. If we borrow to make distributions during periods of low commodity prices and commodity prices remain low, we may have to reduce our distribution in order to avoid excessive leverage.

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Our future debt levels may limit our flexibility to obtain additional financing and pursue other business opportunities and may affect our ability to make future distributions.

As of December 31, 2007, we had approximately $30.2 million of debt. We may incur additional debt in the future. Our future indebtedness could have important consequences to us, including:

• our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms;

• covenants contained in our future debt arrangements may require us to meet financial tests that may affect our flexibility in planning for and reacting to changes in our business, including possible acquisition opportunities;

• we may need a substantial portion of our cash flow to make principal and interest payments on our indebtedness, reducing the funds that would otherwise be available for operations, future business opportunities and distributions to unitholders; and

• our debt level may make us more vulnerable than our competitors with less debt to competitive pressures or a downturn in our business or the economy generally.

Our ability to service our indebtedness will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not sufficient to service our current or future indebtedness, we will be forced to take actions such as reducing distributions, reducing or delaying business activities, acquisitions, investments and/or capital expenditures, selling assets, restructuring or refinancing our indebtedness or seeking additional equity capital or bankruptcy protection. We may not be able to effect any of these remedies on satisfactory terms or at all.

Our operations are subject to operational hazards and unforeseen interruptions for which we may not be adequately insured.

There are a variety of operating risks inherent in our wells, gathering systems, pipelines, transportation, storage, transloading and other facilities, such as leaks, accidents, fires, explosions, mechanical problems, hurricanes, adverse weather conditions, hazardous materials releases, mechanical failures and other events beyond our control, all of which could cause substantial financial losses. Any of these or other similar occurrences could result in the disruption of our operations, substantial repair costs, personal injury or loss of human life, significant damage to property, fines, environmental pollution, impairment of our operations and substantial revenue losses. The location of our facilities near populated areas, including residential areas, commercial business centers and industrial sites, could significantly increase the level of damages resulting from these risks. As a result of the foregoing, we are, and are likely to continue to be, a defendant in various legal proceedings and litigation arising in the ordinary course of business.

We are not fully insured against all risks, including development and completion risks that are generally not recoverable from third parties or insurance. In addition, pollution and environmental risks generally are not fully insurable. We may also elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the perceived risks presented. Losses could, therefore, occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. Moreover, insurance may not be available in the future at commercially reasonable costs and on commercially reasonable terms. Changes in the insurance markets due to terrorist attacks and hurricanes have made it more difficult for us to obtain certain types of coverage. We may not be able to obtain the levels or types of insurance we would otherwise have obtained prior to these market changes, and our insurance may contain large deductibles or fail to cover certain hazards or cover all potential losses. Losses and liabilities from uninsured and underinsured events and delay in the payment of insurance proceeds could have a material adverse effect on our business, financial condition, results of operations and ability to make distributions to our unitholders.

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Our business depends in part on gathering and transportation facilities owned by others. Any limitation in the availability of those facilities could interfere with our ability to market our oil and natural gas production and could harm our business.

The marketability of our oil and natural gas production depends in part on the availability, proximity and capacity of pipelines, oil and natural gas gathering systems and processing facilities. The amount of oil and natural gas that can be produced and sold is subject to curtailment in certain circumstances, such as pipeline interruptions due to scheduled and unscheduled maintenance, excessive pressure, physical damage or lack of available capacity on such systems. The curtailments arising from these and similar circumstances may last from a few days to several months. In many cases, we are provided only with limited, if any, notice as to when these circumstances will arise and their duration. Any significant curtailment in gathering system or pipeline capacity could reduce our ability to market our oil and natural gas production and harm our business.

We have limited control over the activities on properties we do not operate.

Other companies operated approximately 15% of our wells on a pro forma basis as of December 31, 2007. We have limited ability to influence or control the operation or future development of these non-operated properties or the amount of capital expenditures that we are required to fund with respect to them. Our dependence on the operator and other working interest owners for these projects and our limited ability to influence or control the operation and future development of these properties could materially adversely affect the realization of our targeted returns on capital in drilling or acquisition activities and lead to unexpected future costs.

We are subject to complex federal, state, local and other laws and regulations that could adversely affect the cost, manner or feasibility of conducting our operations.

Our oil and natural gas exploration and production operations are subject to complex and stringent laws and regulations. Environmental and other governmental laws and regulations have increased the costs to plan, design, drill, install, operate and abandon oil and natural gas wells and related pipeline and processing facilities. In order to conduct our operations in compliance with these laws and regulations, we must obtain and maintain numerous permits, approvals and certificates from various federal, state and local governmental authorities. We may incur substantial costs in order to maintain compliance with these existing laws and regulations. In addition, our costs of compliance may increase if existing laws and regulations are revised or reinterpreted, or if new laws and regulations become applicable to our operations.

Our business is subject to federal, state and local laws and regulations as interpreted and enforced by governmental authorities possessing jurisdiction over various aspects of the exploration for, and production of, oil and natural gas. Failure to comply with such laws and regulations, as interpreted and enforced, could have a material adverse effect on our business, financial condition, results of operations and ability to make distributions to our unitholders.

Our pipeline integrity program may subject us to significant costs and liabilities.

As a result of pipeline integrity testing under the Pipeline Safety Improvement Act of 2002, we may incur significant and unanticipated operating and capital expenditures for repairs or upgrades deemed necessary to ensure the continued safe and reliable operation of our pipelines. Furthermore, the Act or an increase in public expectations for pipeline safety may require additional reporting, the replacement of our pipeline segments, additional monitoring equipment and more frequent inspection or testing of our pipeline facilities. Any repair, remediation, preventative or mitigating actions may require significant capital and operating expenditures. Should we fail to comply with the U.S. Department of Transportation rules and related regulations and orders, we could be subject to penalties and fines, which could have a material adverse effect on our ability to make distributions to our unitholders.

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Our business would be adversely affected if operations at our terminalling, transportation and distribution facilities experienced significant interruptions. Our business would also be adversely affected if the operations of our customers and suppliers experienced significant interruptions.

Our operations are dependent upon our terminalling and storage facilities and various means of transportation. We are also dependent upon the uninterrupted operations of certain facilities owned or operated by our suppliers and customers. Any significant interruption at these facilities or inability to transport products to or from these facilities or to or from our customers for any reason would adversely affect our results of operations, cash flow and ability to make distributions to our unitholders or to make principal and interest payments on our debt securities. Operations at our facilities and at the facilities owned or operated by our suppliers and customers could be partially or completely shut down, temporarily or permanently, as the result of any number of circumstances that are not within our control, such as:

• weather conditions;

• environmental remediations;

• labor difficulties; and

• disruptions in the supply of our products to our facilities or means of transportation.

In addition, terrorist attacks and acts of sabotage could target oil and gas production facilities, refineries, processing plants, terminals and other infrastructure facilities. Any significant interruptions at our facilities, facilities owned or operated by our suppliers or customers, or in the oil and gas industry as a whole caused by such attacks or acts could have a material adverse affect on our results of operations, cash flow and ability to make distributions to our unitholders or to make principal and interest payments on our debt securities.

The occurrence or threat of extraordinary events, including domestic and international terrorist attacks, and laws and regulations related thereto may disrupt our operations and decrease demand for our products and services.

Chemical-related assets may be at greater risk of future terrorist attacks than other possible targets in the United States. Federal legislation is under consideration that could impose new site security requirements, specifically on chemical facilities, which may increase our overhead expenses. Our business or our customers’ businesses could be adversely affected because of the cost of complying with new security regulations.

New federal regulations have already been adopted to increase the security of the transportation of hazardous chemicals in the United States. We believe we have met these requirements but additional federal and local regulations that limit the distribution of hazardous materials are being considered. We store, ship and receive materials that are classified as hazardous. Bans on movement of hazardous materials through certain cities could affect the efficiency of our logistical operations. Broader restrictions on hazardous material movements could lead to additional investment to produce hazardous raw materials and change where and what products we provide and transport.

The occurrence of extraordinary events, including future terrorist attacks and the outbreak or escalation of hostilities, cannot be predicted, and their occurrence can be expected to continue to affect negatively the economy in general, and specifically the markets for our products. The resulting damage from a direct attack on our assets, or assets used by us, could include loss of life and property damage. In addition, available insurance coverage may not be sufficient to cover all of the damage incurred or, if available, may be prohibitively expensive.

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We are subject to many environmental and safety regulations that may result in significant unanticipated costs or liabilities or cause interruptions in our operations.

Our operations involve the handling, production, transportation, treatment and disposal of materials that are classified as hazardous or toxic and that are extensively regulated by environmental and health and safety laws, regulations and permit requirements. We may incur substantial costs, including fines, damages and criminal or civil sanctions, or experience interruptions in our operations for actual or alleged violations or compliance requirements arising under environmental laws, any of which could have a material adverse effect on our business, financial condition, results of operations or cash flows. Our operations could result in violations of environmental laws, including spills or other releases of hazardous substances to the environment. In the event of a catastrophic incident, we could incur material costs. Furthermore, we may be liable for the costs of investigating and cleaning up environmental contamination on or from our properties or at off-site locations where we disposed of or arranged for the disposal or treatment of hazardous materials. We own or lease a number of properties that have been used to store or distribute refined products for many years. Many of these properties, such as the assets acquired from Regional Enterprises, Inc. in 2007 and the Oklahoma assets, were operated by third parties whose handling, disposal, or release of hydrocarbons and other wastes was not under our control. If significant previously unknown contamination is discovered, or if existing laws or their enforcement change, then the resulting expenditures could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Environmental, health and safety laws, regulations and permit requirements, and the potential for further expanded laws, regulations and permit requirements may increase our costs or reduce demand for our products and thereby negatively affect our business. Environmental permits required for our operations are subject to periodic renewal and may be revoked or modified for cause or when new or revised environmental requirements are implemented. Changing and increasingly strict environmental requirements and the potential for further expanded regulation may increase our costs and can affect the manufacturing, handling, processing, distribution and use of our products. If so affected, our business and operations may be materially and adversely affected. In addition, changes in these requirements may cause us to incur substantial costs in upgrading or redesigning our facilities and processes, including our waste treatment, storage, disposal and other waste handling practices and equipment. For these reasons, we may need to make capital expenditures beyond those currently anticipated to comply with existing or future environmental or safety laws.

We store and transport hazardous or volatile chemicals at some of our facilities. If our safety procedures are not effective, an accident involving these other hazardous or volatile chemicals could result in serious injuries or death, or result in the shutdown of our facilities.

We store and transport hazardous chemicals such as aqua ammonia, phosphoric acid, hydrochloric acid and sulfuric acid. An accident involving any of these chemicals could result in serious injuries or death, or evacuation of areas near an accident. An accident could also result in third-party property damage or shutdown of our terminalling facilities, or cause us to expend significant amounts to remediate safety issues or to repair damaged facilities. As a result, an accident involving any of these chemicals could have a material adverse effect on our results of operations, liquidity or financial condition.

Risks Inherent in an Investment in Us

The amount of cash distributions that we will be able to distribute to unitholders will be reduced by the costs associated with general and administrative expenses and reserves that our General Partner believes prudent to maintain for the proper conduct of our business and for future distributions.

Before we can pay distributions to our unitholders, we must first pay or reserve cash for our expenses, including capital expenditures and the costs of being a public company and other operating expenses, and we may reserve cash for future distributions during periods of limited cash flows. The amount of cash we have available for distribution to our unitholders will be affected by our level of reserves and expenses.

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Our General Partner and its affiliates own a controlling interest in us and may have conflicts of interest with us and limited fiduciary duties to us, which may permit them to favor their own interests to the detriment of our unitholders.

Penn Octane Corporation controls our General Partner, which controls us. The managers and officers of our General Partner have a fiduciary duty to manage our General Partner in a manner beneficial to Penn Octane. Furthermore, certain managers and officers of our General Partner may be directors or officers of affiliates of our General Partner, including Penn Octane. Conflicts of interest may arise between Penn Octane and its affiliates, including our General Partner, on the one hand, and us and our unitholders, on the other hand. As a result of these conflicts, our General Partner may favor its own interests and the interests of its affiliates over the interests of our unitholders. These potential conflicts include, among others, the following situations:

• neither our partnership agreement nor any other agreement requires Penn Octane or its affiliates (other than our General Partner) to pursue a business strategy that favors us. Penn Octane’s directors and officers have a fiduciary duty to make these decisions in the best interests of its unitholders, which may be contrary to our interests;

• our General Partner is allowed to take into account the interests of parties other than us, such as Penn Octane, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders;

• Penn Octane is not limited in its ability to compete with us and is only obligated to provide us with the services and personnel required by the Omnibus Agreement;

• under the terms of our partnership agreement, the doctrine of corporate opportunity, or any analogous doctrine, does not apply to our General Partner or its affiliates (including Penn Octane) and no such person who acquires knowledge of a potential transaction, agreement, arrangement or other matter that may be an opportunity for our partnership will have any duty to communicate or offer such opportunity to us;

• some officers of our General Partner who will provide services to us will devote time to affiliates of our General Partner and may be compensated for services rendered to such affiliates;

• our General Partner has limited its liability and reduced its fiduciary duties, and has also restricted the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty. By purchasing common units, unitholders will be deemed to have consented to some actions and conflicts of interest that might otherwise constitute a breach of fiduciary or other duties under applicable law;

• our General Partner determines the amount and timing of asset purchases and sales, borrowings, issuance of additional partnership securities and reserves, each of which can affect the amount of cash that is distributed to unitholders;

• our General Partner may cause us to borrow funds in order to permit the payment of cash distributions;

• our General Partner intends to limit its liability regarding our contractual and other obligations and, in some circumstances, is entitled to be indemnified by us;

• our General Partner may cause us to purchase common units;

• our General Partner controls the enforcement of obligations owed to us by our General Partner and its affiliates; and

• our General Partner decides whether to retain separate counsel, accountants or others to perform services for us.

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Penn Octane is not limited in its ability to compete with us, which could limit our ability to acquire additional assets or businesses.

Our partnership agreement does not prohibit Penn Octane from owning assets or engaging in businesses that compete directly or indirectly with us. In addition, Penn Octane may acquire, develop or dispose of additional oil and natural gas properties or other assets in the future, without any obligation to offer us the opportunity to purchase or develop any of those assets.

Penn Octane, which controls our General Partner, has the power to appoint and remove the members of the board of managers of our General Partner.

Because Penn Octane controls our General Partner, it has the ability to elect all of the members of the board of managers of our General Partner. Our General Partner has control over all decisions related to our operations. Furthermore, the goals and objectives of Penn Octane and our General Partner relating to us may not be consistent with those of a majority of the public unitholders.

We are primarily dependent on officers of our General Partner to manage our operations. Failure of such officers to devote sufficient attention to the management and operation of our business may adversely affect our financial results and our ability to make distributions to our unitholders.

The officers of our General Partner are primarily responsible for managing our business and operations. We do not maintain key person life insurance policies on any personnel. Although our General Partner has arrangements relating to compensation and benefits, our General Partner does not have any employment contracts or other agreements with such officers binding them to provide services for any particular term. The loss of the services of any of these individuals, including Messrs. Bothwell and Manner could have a material adverse effect on our business and our ability to make distributions to our unitholders.

Our partnership agreement limits our General Partner’s fiduciary duties to unitholders and restricts the remedies available to unitholders for actions taken by our General Partner that might otherwise constitute breaches of fiduciary duty.

Our partnership agreement contains provisions that reduce the fiduciary standards to which our General Partner would otherwise be held by state fiduciary duty laws. For example, our partnership agreement:

• permits our General Partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our General Partner. This entitles our General Partner to consider only the interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or any limited partner. Examples include the exercise of its rights to transfer or vote the units it owns, the exercise of its registration rights and its determination whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreement;

• provides that our General Partner will not have any liability to us or our unitholders for decisions made in its capacity as a General Partner so long as it acted in good faith;

• generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts committee of the board of managers of our General Partner acting in good faith and not involving a vote of unitholders must be “fair and reasonable” to us, as provided by the partnership agreement. In determining whether a transaction or resolution is “fair and reasonable,” our General Partner may consider the totality of the relationships between the parties involved, including other transactions that may be particularly advantageous or beneficial to us;

• provides that our General Partner and its officers and managers will not be liable for monetary damages to us, our limited partners or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that the General Partner or its officers and managers acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and

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• provides that in resolving conflicts of interest, it will be presumed that in making its decision the General Partner or its conflict committee acted in good faith, and in any proceeding brought by or on behalf of any limited partner or us, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption.

By purchasing a common unit, a unitholder will become bound by the provisions in the partnership agreement, including the provisions discussed above.

Unitholders have limited voting rights and are not entitled to elect our General Partner or its managers.

Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management’s decisions regarding our business. Unitholders will not elect our General Partner or its board of managers on an annual or other continuing basis. The board of managers of our General Partner will be chosen by Penn Octane. Furthermore, if the unitholders are dissatisfied with the performance of our General Partner, they will have little ability to remove our General Partner. As a result of these limitations, the price at which the common units will trade could be diminished because of the absence or reduction of a takeover premium in the trading price.

Even if unitholders are dissatisfied, it would be difficult to remove our General Partner.

The vote of the holders of at least 80% of all outstanding units voting together as a single class is required to remove the General Partner. Therefore, even if the unitholders are dissatisfied it would be difficult to remove our General Partner.

Control of our General Partner may be transferred to a third party without unitholder consent.

Our General Partner may transfer its General Partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of the unitholders. After October 31, 2008, our General Partner may transfer its General Partner interest to a third party for any reason without the consent of the unitholders. Furthermore, our partnership agreement does not restrict the ability of Penn Octane, the owner of our General Partner, from transferring all or a portion of its ownership interest in our General Partner to a third party. The new owner of our General Partner would then be in a position to replace the board of managers and officers of our General Partner with its own choices and thereby influence the decisions made by the board of managers and officers.

We may issue additional units, including units that are senior to the common units, without unitholder approval, which would dilute the ownership interests of our existing unitholders.

Our partnership agreement does not limit the number of additional partner interests that we may issue. In addition, we may issue an unlimited number of units that are senior to the common units in right of distribution, liquidation and voting. The issuance by us of additional common units or other equity securities of equal or senior rank will have the following effects:

• our unitholders’ proportionate ownership interest in us will decrease;

• the amount of cash available for distribution on each unit may decrease;

• the ratio of taxable income to distributions may increase;

• the relative voting strength of each previously outstanding unit may be diminished; and

• the market price of the common units may decline.

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Our partnership agreement restricts the voting rights of unitholders, other than our General Partner and its affiliates, owning 20% or more of our common units, which may limit the ability of significant unitholders to influence the manner or direction of management.

Our partnership agreement restricts unitholders’ voting rights by providing that any common units held by a person, entity or group that owns 20% or more of any class of common units then outstanding, other than our General Partner, its affiliates, their transferees and persons who acquired such common units with the prior approval of the board of managers of our General Partner, cannot vote on any matter. Our partnership agreement also contains provisions limiting the ability of unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting unitholders’ ability to influence the manner or direction of management.

The liability of our unitholders may not be limited if a court finds that unitholder action constitutes control of our business.

A General Partner of a partnership generally has unlimited liability for the obligations of the partnership, except for those contractual obligations of the partnership that are expressly made without recourse to the General Partner. Our partnership is organized under Delaware law and we conduct business in a number of other states. The limitations on the liability of holders of limited partner interests for the obligations of a limited partnership have not been clearly established in some of the other states in which we do business. Unitholders could be liable for our obligations as if they were a General Partner if:

• a court or government agency determined that we were conducting business in a state but had not complied with that particular state’s partnership statute; or

• their right to act with other unitholders to remove or replace the General Partner, to approve some amendments to our partnership agreement or to take other actions under our partnership agreement constitute “control” of our business.

Unitholders may have liability to repay distributions.

Under certain circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, we may not make a distribution to unitholders if the distribution would cause our liabilities to exceed the fair value of our assets. Liabilities to partners on account of their partnership interests and liabilities that are non-recourse to the partnership are not counted for purposes of determining whether a distribution is permitted. Delaware law provides that for a period of three years from the date of an impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the distribution amount. A purchaser of common units who becomes a limited partner is liable for the obligations of the transferring limited partner to make contributions to the partnership that are known to such purchaser of common units at the time it became a limited partner and for unknown obligations if the liabilities could be determined from our partnership agreement.

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Unitholders who are not Eligible Holders will not be entitled to receive distributions on or allocations of income or loss on their common units and their common units will be subject to redemption.

In order to comply with U.S. laws with respect to the ownership of interests in oil and natural gas leases on federal lands, we have adopted certain requirements regarding those investors who may own our common units. As used herein, an Eligible Holder means a person or entity qualified to hold an interest in oil and natural gas leases on federal lands. As of the date hereof, Eligible Holder means:

• a citizen of the United States;

• a corporation organized under the laws of the United States or of any state thereof;

• a public body, including a municipality; or

• an association of United States citizens, such as a partnership or limited liability company, organized under the laws of the United States or of any state thereof, but only if such association does not have any direct or indirect foreign ownership, other than foreign ownership of stock in a parent corporation organized under the laws of the United States or of any state thereof.

For the avoidance of doubt, onshore mineral leases or any direct or indirect interest therein may be acquired and held by aliens only through stock ownership, holding or control in a corporation organized under the laws of the United States or of any state thereof. Unitholders who are not persons or entities who meet the requirements to be an Eligible Holder, will not receive distributions or allocations of income and loss on their common units and they run the risk of having their common units redeemed by us at the then-current market price. The redemption price will be paid in cash or by delivery of a promissory note, as determined by our General Partner.

An increase in interest rates may cause the market price of our common units to decline.

Like all equity investments, an investment in our common units is subject to certain risks. In exchange for accepting these risks, investors may expect to receive a higher rate of return than would otherwise be obtainable from lower-risk investments. Accordingly, as interest rates rise, the ability of investors to obtain higher risk-adjusted rates of return by purchasing government-backed debt securities may cause a corresponding decline in demand for riskier investments generally, including yield-based equity investments such as publicly traded limited partner interests. Reduced demand for our common units resulting from investors seeking other more favorable investment opportunities may cause the trading price of our common units to decline.

Risks Related to Tax Matters

Our tax treatment depends on our status as a partnership for federal income tax purposes, as well as our not being subject to a material amount of entity-level taxation by individual states. If the Internal Revenue Service were to treat us as a corporation for federal income tax purposes or we were to become subject to additional entity-level taxation for state tax purposes, then our cash available for distribution would be substantially reduced.

The anticipated after-tax economic benefit of an investment in the common units depends largely on our being treated as a partnership for federal income tax purposes. We have not requested, and do not plan to request, a ruling from the Internal Revenue Service, which we refer to as the IRS, on this or any other tax matter affecting us.

Despite the fact that we are a limited partnership under Delaware law, it is possible in certain circumstances for a partnership such as ours to be treated as a corporation for federal income tax purposes. Although we do not believe based upon our current operations that we will be treated as a corporation for federal income tax purposes, a change in our business (or a change in current law) could cause us to be treated as a corporation for federal income tax purposes or otherwise subject us to taxation as an entity.

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If we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our taxable income at the corporate tax rate, which is currently a maximum of 35% and would likely pay state income tax at varying rates. Distributions to our unitholders would generally be taxed again as corporate distributions, and no income, gains, losses or deductions would flow through to our unitholders. Because a tax would be imposed upon us as a corporation, our cash available for distribution to our unitholders would be substantially reduced. Therefore, treatment of us as a corporation would result in a material reduction in the anticipated cash flow and after-tax return to the unitholders, likely causing a substantial reduction in the value of our common units.

Current law may change so as to cause us to be treated as a corporation for federal income tax purposes or otherwise subject us to entity-level taxation. For example, legislation has been proposed that would eliminate partnership tax treatment for certain publicly traded partnerships. Although such legislation would not apply to us as currently proposed, it could be amended prior to enactment in a manner that does apply to us. We are unable to predict whether any of these changes or other proposals will ultimately be enacted. Any such changes could negatively impact the value of an investment in our units.

In addition, because of widespread state budget deficits and other reasons, several states, including Texas, are evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise, margin and other forms of taxation. For example, beginning in 2008, we have become subject to a new entity level tax on any portion of our income that is generated in Texas. Specifically, the Texas margin tax is imposed at a maximum effective rate of 0.7% of our gross income that is apportioned to Texas. Imposition of such a tax on us by Texas, or any other state, will reduce the cash available for distribution to our unitholders.

Our partnership agreement provides that if a law is enacted or existing law is modified or interpreted in a manner that subjects us to additional amounts of entity-level taxation, the minimum quarterly distribution amount and the target distribution amounts may be adjusted to reflect the impact of that law on us.

We prorate our items of income, gain, loss and deduction between transferors and transferees of our units each month based upon the ownership of our units on the first business day of each month, instead of on the basis of the date a particular unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders.

We prorate our items of income, gain, loss and deduction between transferors and transferees of our units each month based upon the ownership of our units on the first business day of each month, instead of on the basis of the date a particular unit is transferred. The use of this method may not be permitted under existing Treasury regulations, and, accordingly, our counsel is unable to opine as to the validity of this method. If the IRS were to challenge this method or new Treasury regulations were issued, we may be required to change the allocation of items of income, gain, loss and deduction among our unitholders.

An IRS contest of our federal income tax positions may adversely affect the market for our common units, and the cost of any IRS contest will reduce our cash available for distribution to our unitholders.

We have not requested a ruling from the IRS with respect to our treatment as a partnership for federal income tax purposes or any other matter affecting us. The IRS may adopt positions that differ from the conclusions of our counsel expressed in this prospectus or from the positions we take. It may be necessary to resort to administrative or court proceedings to sustain some or all of our counsel’s conclusions or the positions we take. A court may not agree with all of our counsel’s conclusions or positions we take. Any contest with the IRS may materially and adversely impact the market for our common units and the price at which they trade. In addition, our costs of any contest with the IRS will be borne indirectly by our unitholders and our General Partner because the costs will reduce our cash available for distribution.

Our unitholders may be required to pay taxes on income from us even though their cash distributions from us are less than their share of income.

Because our unitholders will be treated as partners to whom we will allocate taxable income which could be different in amount than the cash we distribute, our unitholders may be required to pay any federal income taxes and, in some cases, state and local income taxes, on their share of our taxable income even if they receive no cash distributions from us. Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the tax liability that results from that income.

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Tax gain or loss on disposition of common units could be more or less than expected.

If unitholders sell their common units, they will recognize a gain or loss equal to the difference between the amount realized and their tax basis in those common units. Because distributions in excess of unitholders’ allocable share of our net taxable income decrease their tax basis in their common units, the amount, if any, of such prior excess distributions with respect to the common units they sell will, in effect, become taxable income to them if they sell such units at a price greater than their tax basis in those units, even if the price they receive is less than their original cost. Furthermore, a substantial portion of the amount realized, whether or not representing gain, may be taxed as ordinary income due to potential recapture items, including depletion, intangible drilling costs and depreciation recapture. In addition, because the amount realized includes a unitholder’s share of our nonrecourse liabilities, if our unitholders sell their common units, they may incur a tax liability in excess of the amount of cash they receive from the sale.

Tax-exempt entities and non-U.S. persons face unique tax issues from owning common units that may result in adverse tax consequences to them.

Investment in common units by tax-exempt entities, such as individual retirement accounts (known as IRAs), other retirement plans and non-U.S. persons raises issues unique to them. For example, virtually all of our income allocated to organizations that are exempt from federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them. Distributions to non-U.S. persons will be reduced by withholding taxes at the highest applicable effective tax rate, and non-U.S. persons will be required to file United States federal tax returns and pay tax on their share of our taxable income.

We will treat each purchaser of our common units as having the same tax benefits without regard to the actual common units purchased. The IRS may challenge this treatment, which could adversely affect the value of the common units.

Because we cannot match transferors and transferees of common units and because of other reasons, we will take depletion, depreciation and amortization positions that may not conform to all aspects of existing Treasury Regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to our unitholders. It also could affect the timing of these tax benefits or the amount of gain from the sale of common units and could have a negative impact on the value of our common units or result in audit adjustments to our unitholders tax returns.

The sale or exchange of 50% or more of our capital and profits interests during any twelve-month period will result in the termination of our partnership for federal income tax purposes.

We will be considered to have terminated our partnership for federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a twelve-month period. For example, an exchange of 50% of our capital and profits could occur if, in any twelve-month period, holders of our subordinated and common units sell at least 50% of the interests in our capital and profits. Our termination would, among other things, result in the closing of our taxable year for all unitholders, which would result in us filing two tax returns (and unitholders receiving two Schedule K-1s for one fiscal year). Our termination could also result in a deferral of depreciation deductions allowable in computing our taxable income. In the case of a unitholder reporting on a taxable year other than a fiscal year ending December 31, the closing of our taxable year may also result in more than twelve months of our taxable income or loss being includable in his taxable income for the year of termination. Our termination currently would not affect our classification as a partnership for federal income tax purposes, but instead, we would be treated as a new partnership for tax purposes. If treated as a new partnership, we must make new tax elections and could be subject to penalties if we are unable to determine that a termination occurred.

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Unitholders may be subject to state and local taxes and tax return filing requirements in states where they do not live as a result of investing in our common units.

In addition to federal income taxes, our unitholders will likely be subject to other taxes, including state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we do business or own property now or in the future, even if they do not live in any of those jurisdictions. Our unitholders will likely be required to file foreign, state and local income tax returns and pay state and local income taxes in some or all of these jurisdictions. Furthermore, our unitholders may be subject to penalties for failure to comply with those requirements. We currently own assets and do business in Oklahoma. Oklahoma currently imposes a personal income tax. As we make acquisitions or expand our business, we may own assets or do business in additional states that impose a personal income tax or that impose entity level taxes to which we could be subject. It is our unitholders’ responsibility to file all United States federal, foreign, state and local tax returns.

A unitholder whose units are loaned to a “short seller” to cover a short sale of units may be considered as having disposed of those units. If so, he would no longer be treated for tax purposes as a partner with respect to those units during the period of the loan and may recognize gain or loss from the disposition.

Because a unitholder whose units are loaned to a “short seller” to cover a short sale of units may be considered as having disposed of the loaned units, he may no longer be treated for tax purposes as a partner with respect to those units during the period of the loan to the short seller and the unitholder may recognize gain or loss from such disposition. Moreover, during the period of the loan to the short seller, any of our income, gain, loss or deduction with respect to those units may not be reportable by the unitholder and any cash distributions received by the unitholder as to those units could be fully taxable as ordinary income. Strasburger & Price, LLP has not rendered an opinion regarding the treatment of a unitholder where common units are loaned to a short seller to cover a short sale of common units; therefore, unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a loan to a short seller are urged to modify any applicable brokerage account agreements to prohibit their brokers from loaning their units.

We may adopt certain valuation methodologies that may result in a shift of income, gain, loss and deduction between the General Partner and the unitholders. The IRS may successfully challenge this treatment, which could adversely affect the value of our common units.

When we issue additional units or engage in certain other transactions, we will determine the fair market value of our assets and allocate any unrealized gain or loss attributable to our assets to the capital accounts of our unitholders and the holders of the incentive distribution rights. Our methodology may be viewed as understating the value of our assets. In that case, there may be a shift of income, gain, loss and deduction between certain unitholders and the General Partner, which may be unfavorable to such unitholders. Moreover, subsequent purchasers of common units may have a greater portion of their Internal Revenue Code Section 743(b) adjustment allocated to our tangible assets and a lesser portion allocated to our intangible assets. The IRS may challenge our methods, or our allocation of the Section 743(b) adjustment attributable to our tangible and intangible assets, and allocations of income, gain, loss and deduction between the General Partner and certain of our unitholders.

A successful IRS challenge to these methods or allocations could adversely affect the amount of taxable income or loss being allocated to our unitholders. It also could affect the amount of gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions.

Item 1B. Unresolved Staff Comments.

Inapplicable.

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Item 3. Legal Proceedings.

Penn Octane, Rio Vista and/or Rio Vista’s subsidiaries were named as defendants in two lawsuits filed in connection with an accident in the town of Lucio Blanco, Mexico on August 11, 2005, involving a tanker truck carrying LPG which was struck by a train resulting in an explosion. None of Penn Octane, Rio Vista or any of Rio Vista’s subsidiaries owned or operated the tanker truck or employed or controlled the driver of the tanker truck. Furthermore, none of Penn Octane, Rio Vista or any of Rio Vista’s subsidiaries owned or had custody of the LPG on the tanker truck at the time and location of the accident.

The tanker truck reportedly took delivery of LPG at the Matamoros Terminal Facility operated under agreement with Rio Vista’s Mexican subsidiaries. According to the lawsuits, after leaving the Matamoros Terminal Facility, the tanker truck was involved in a collision with a train in Lucio Blanco, Mexico, resulting in a tragic explosion that killed and injured several persons and caused significant property damage. Published reports indicate that the truck used a road not approved for large trucks and failed to stop at an unprotected rail crossing, resulting in the collision and explosion. The insurance carrier for the owner of the tanker truck has settled certain claims in Mexico with victims of the accident.

Even though the accident took place in Mexico, these lawsuits were filed in Texas. The first case is captioned Lesly Camacho by Her Mother Dora Adame as Next Friend, et al. vs. Penn Octane International LLC, et al and was filed in the 404^th Judicial District Court for Cameron County, Texas on September 26, 2005. The plaintiffs seek unspecified monetary damages. On August 16, 2006 with the consent of the parties, the Court issued an amended order for temporary injunction for the purpose of preserving relevant evidence. The amended injunction required a subsidiary of Rio Vista to make available for inspection by plaintiffs Rio Vista’s terminal facilities in Brownsville, Texas and Matamoros, Mexico and associated equipment and records. The order also required Rio Vista to give 30 days advance notice to plaintiffs before conducting any alteration, repair, service, work or changes to the facilities or equipment. In addition, the order required Rio Vista to make available its employees for deposition by the plaintiffs and to secure and preserve certain physical evidence believed to be located in Mexico. The Brownsville, Texas terminal facility was sold to TransMontaigne Product Services Inc. on August 22, 2006. In January 2007, this case was removed to the U.S. District Court for the Southern District of Texas, Brownsville Division. In July 2007, the case was remanded to the state court in Cameron County, Texas. In August 2007, plaintiffs filed an amended petition alleging that defendants delivered the LPG to an unqualified driver and that defendants failed to properly odorize the LPG before delivery. Discovery is being conducted and it is anticipated that a trial on a limited number of the Plaintiffs will take place during September 2008 or October 2008.

The second case is captioned Faustino Izaguirre Gonzalez, et al. vs. Penn Octane Corporation, et al. and was filed in the 107^th Judicial District Court for Cameron County, Texas, on November 14, 2005. The plaintiffs sought unspecified monetary damages. In March 2007, the Company entered into a settlement agreement with the plaintiffs on terms deemed favorable to the Company. Pursuant to the settlement agreement this case was dismissed in April 2007. The Company’s legal fees and settlement costs were covered by insurance.

Management believes the remaining lawsuit against Penn Octane, Rio Vista and/or Rio Vista’s subsidiaries relating to the accident in Lucio Blanco is without merit and, based on the advice of counsel, does not anticipate liability for damages. The Company’s insurance carrier is expected to bear the legal fees and expenses in connection with defending this case. If, however, a court found liability on the part of Penn Octane, Rio Vista or their subsidiaries, a judgment or settlement in excess of insurance coverage could have a material adverse effect on Penn Octane’s and Rio Vista’s business, financial condition and results of operations.

On November 3, 2004, there was an accident between a Regional truck driver and another motorist who allegedly sustained injuries as a result of the accident. The other motorist filed suit against Regional. The case was filed on February 26, 2007 as Nolte v. Regional Enterprizes, Inc. in the United States District Court for the District of Maryland (Case No. 07 CV-0478-PJM). This case was settled within the limits of insurance coverage on or about January 28, 2008 and the case was dismissed accordingly on or about January 30, 2008.

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On December 13, 2007, Lexington Insurance Company filed a declaratory action complaint against Penn Octane Corporation, Rio Vista Energy Partners, LP and their related entities in the United States District Court in the Southern District of Texas (Brownsville) requesting the US Federal Court to rule that the plaintiff has no obligation to defend Penn Octane and the Rio Vista related entities in the Camacho and Gonzalez litigation based on alleged coverage exceptions. Federal jurisdiction was contested and the case moved to state court. A trial date is currently set for September 2008. According to local counsel, Gonzalez was referenced in the original complaint only because the plaintiff’s lawyers were unaware that Gonzalez had been settled prior to filing. It is unclear, however, to the extent Lexington is successful in its action, whether the plaintiff will request repayment of all settlement and litigation expenses paid by the insurance carrier in Gonzalez. Furthermore, if there is a determination that there is no insurance coverage resulting in Penn Octane and Rio Vista having to fund all defense costs as well as any material settlement or judgment amount in the Camacho suit, this could have a material adverse effect on Penn Octane’s and Rio Vista’s business, financial condition and results of operations.

On November 20, 2007 Rio Vista Energy Partners, LP, Rio Vista Penny, LLC, Gary Moores, Bill Wood and GM Oil Properties, Inc. jointly filed an action for declaratory relief against Energy Spectrum Advisors, Inc. in the District Court in McIntosh County, Oklahoma. This action was filed in response to Energy Spectrum’s assertion that Rio Vista Energy Partners, LP, Rio Vista Penny, LLC, as well as GM Oil Properties, Inc. owed Energy Spectrum a commission allegedly due and owing based on Rio Vista Penny, LLC’s November, 2007 purchase of certain assets from GM Oil Properties, Inc. The foundation for the Energy Spectrum claim is a January 22, 2007 written agreement signed by Energy Spectrum and GM Properties, Inc. Neither Rio Vista Energy Partners, LP nor Rio Vista Penny were parties to this agreement, nor were they named in the Energy Spectrum’s counter claim. Based in part on the fact that the GM Oil Properties acquisition was an asset purchase, rather than a stock sale, management believes that the Rio Vista entities should have no liability for any obligation that GM Oil Properties, Inc. may have to Energy Spectrum. Discovery is currently pending.

Rio Vista and its subsidiaries are involved with other proceedings, lawsuits and claims. Rio Vista believes that the liabilities, if any, ultimately resulting from such proceedings, lawsuits and claims should not materially affect its consolidated financial results.

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

None.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities.

Rio Vista’s common units began trading on the NASDAQ National Market under the symbol “RVEP” on October 1, 2004.

The following table sets forth the reported high ask and low bid quotations of the common units for the periods indicated. Such quotations reflect inter-dealer prices, without retail mark-ups, mark-downs or commissions and may not necessarily represent actual transactions.

	LOW		HIGH
The year ended December 31, 2007:
First Quarter	$	5.34	$	9.54
Second Quarter		7.80		12.37
Third Quarter		10.50		23.00
Fourth Quarter		10.05		17.50

	LOW		HIGH
The year ended December 31, 2006:
First Quarter	$	4.43	$	5.74
Second Quarter		4.28		5.43
Third Quarter		3.72		5.03
Fourth Quarter		3.88		5.01

On March 28, 2008, the closing bid price of the common units as reported on the NASDAQ National Market was $13.50 per common unit. On March 28, 2008, Rio Vista had 2,515,518 common units outstanding and approximately 1,250 holders of record of the common units.

Rio Vista made the following distributions during the years ended December 31, 2006 and 2007:

					Amounts Paid
Quarter	Payment		Distribution		Common		General
Ended	Date		Per Unit		Units		Partner
Sep 2006		10/26/06	$	0.25	$	478,000	$	10,000
Dec 2006		01/18/07	$	0.25	$	478,000	$	10,000
Mar 2007		05/04/07	$	0.25	$	478,000	$	10,000
Jun 2007		07/31/07	$	0.25	$	484,000	$	10,000
Sep 2007		11/14/07	$	0.25	$	484,000	$	10,000
June 30, 2005 - June 30, 2006 Arrearages		12/10/07	$	1.25	$	2,420,000	$	49,000

The amount of the distributions paid represents the minimum quarterly distribution required to be made by Rio Vista pursuant to the partnership agreement. As of December 31, 2007, Rio Vista had made all of the required minimum distributions to its common unitholders. A distribution of $607,000 and $13,000 for the quarter ended December 31, 2007 was made on February 14, 2008 to the common unitholders and General Partner, respectively.

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Recent Sales of Unregistered Securities

On February 15, 2007, the board of managers of our General Partner approved the grant of options to purchase a total of 21,250 common units under Rio Vista’s 2005 Equity Incentive Plan (2005 Plan). Of the total number of options granted, 5,000 were issued to an executive officer of our General Partner and 16,250 were issued to outside managers of our General Partner. The exercise price for the options is $8.38 per unit, which was the average of the high and low sale prices for Rio Vista common units as reported by the NASDAQ Stock Market on February 15, 2007. Options granted to the executive officer vest in equal monthly installments over a period of 36 months from the date of grant, become fully vested and exercisable upon a change in control event, and expire five years from the date of grant. Options granted to outside managers are fully vested on the date of grant and expire five years from the date of grant.

On March 21, 2007, the board of managers of our General Partner approved the grant of an option to purchase 20,000 common units of Rio Vista under the 2005 Plan to an executive officer of our General Partner. The exercise price for the options is $7.36 per unit, which was the average of the high and low sale prices for Rio Vista common units as reported by the NASDAQ Stock Market on March 21, 2007. The options vest in equal monthly installments over a period of 36 months from the date of grant, become fully vested and exercisable upon a change in control event, and expire five years from the date of grant.

On June 29, 2007, the board of managers of our General Partner approved the grant of an option to purchase 75,000 common units of Rio Vista under the 2005 Plan to an executive officer of our General Partner. The exercise price for the options is $11.21 per unit, which was the average of the high and low sale prices for Rio Vista common units as reported by the NASDAQ Stock Market on June 29, 2007. The options vest in equal monthly installments over a period of 36 months beginning January 1, 2007, become fully vested and exercisable upon a change in control event, and expires five years from the date of grant.

On June 29, 2007, the Board of Managers of our General Partner approved the grant of a restricted unit bonus of 25,000 common units under the 2005 Plan to an executive officer of our General Partner. The restricted unit bonus vested as to 8,334 units on July 1, 2007 and an additional 8,333 units on January 1, 2008, and the remaining units vest on July 1, 2008, and become fully vested upon a change in control event. In connection with the grant of restricted units, the Board of Managers also approved the payment to the executive officer of one or more cash bonuses in amounts sufficient, on an after-tax basis, to cover all taxes payable by the executive officer with respect the award of restricted units to him.

On July 27, 2007, in connection with the employment agreement with an executive of Regional, Rio Vista agreed to the grant of options to purchase a total of 25,000 common units under the 2005 Plan to the executive. The options will vest over a two year period.

On August 23, 2007, the board of managers of our General Partner approved the grant of options to purchase a total of 8,125 common units under the 2005 Plan to outside managers of our General Partner. The exercise price for the options is $15.15 per unit, which was the average of the high and low sale prices for Rio Vista common units as reported by the NASDAQ Stock Market on August 23, 2007. Options granted to outside managers are fully vested on the date of grant and expire five years from the date of grant.

On November 19, 2007, in connection with the acquisition of the Oklahoma assets, Rio Vista issued a total of 137,994 common units to the sellers of GO LLC and Penny Petroleum Corp. In addition, on November 19, 2007, Rio Vista issued the TCW Warrant to TCW see note I to the consolidated financial statements.

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On November 29, 2007, in connection with a private placement, Rio Vista issued a total of 355,556 common units at a price of $11.25 per share to Standard General Fund L.P., Credit Suisse Management LLC and Structured Finance Americas LLC. The total purchase price of the common units was $4,000,000.

On January 23, 2008, the Board of Managers of our General Partner approved the grant of options to purchase a total of 16,250 common units under the 2005 Plan to certain outside members of the Board of Managers of our General Partner. The exercise price for the options is $14.42 per unit, which was the average of the high and low sale prices for Rio Vista common units as reported by the NASDAQ Stock Market on January 23, 2008. Options granted to outside managers are fully vested on the date of grant and expire five years from the date of grant.

On March 7, 2008, the Board of Managers of our General Partner approved the grant of a unit bonus of 8,812 common units under the 2005 Plan to an executive officer of our General Partner. The amount of units granted was based on the average of the high and low sale prices for Rio Vista common units as reported by the NASDAQ Stock Market on March 7, 2008.

The above issuances were exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) thereof because the issuances did not involve any public offering of securities.

Equity Compensation Plans

The following table provides information concerning Rio Vista’s equity compensation plans as of December 31, 2007.

					Number of securities
			Weighted-average		remaining available for
	Number of securities to		exercise price of		future issuance under
	be issued upon exercise		outstanding options,		equity compensation
	of outstanding options,		warrants and rights		plans (excluding securities
	warrants and rights		(per unit)		reflected in column (a))
Plan category	(a)		(b)		(c)
Equity compensation plans approved by security holders		—		—		—
Equity compensation plans not approved by security holders (1)		349,094	$	10.90		466,875
Total		349,094				466,875

(1) Under the terms of the partnership agreement and applicable rules of the NASDAQ Stock Market, no approval by the unitholders of Rio Vista was required.

Item 6. Selected Financial Data.

Not applicable.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of Rio Vista’s liquidity and capital resources should be read in conjunction with the consolidated financial statements of Rio Vista and related notes thereto appearing elsewhere herein. References to specific years preceeded by “fiscal” (e.g. fiscal 2007) refer to Rio Vista’s fiscal year ending December 31.

Overview

Historical Assets and Operations

From inception until 2007, Rio Vista was focused on the operation of the assets acquired from Penn Octane, including an LPG terminal facility in Matamoros, Mexico and approximately 23 miles of pipelines connecting the Matamoros Terminal Facility to an LPG terminal facility in Brownsville, Texas.

In August 2006, Rio Vista completed the disposition of substantially all of its U.S. LPG assets to TransMontaigne, including the Brownsville, Texas terminal facility and refined products tank farm, together with associated improvements, leases, easements, licenses and permits; an LPG sales agreement; and all of LPG inventory. In December 2007, Rio Vista completed the disposition of its remaining LPG assets to TransMontaigne, including the U.S. portion of the two pipelines from a Brownsville, Texas terminal owned by TransMontaigne to the U.S. border, along with all associated rights-of-way and easements; all of the outstanding equity interests in entities owning interests in the portion of the two pipelines that extend from the U.S. border to Matamoros, Mexico; and all of the rights for indirect control of an entity that owns a terminal site in Matamoros, Mexico. As a result, effective January 1, 2008, Rio Vista no longer operates the assets acquired from Penn Octane or conducts the businesses it had historically conducted.

Current Assets and Operations

In July 2007, Rio Vista acquired Regional and in November 2007, Rio Vista acquired certain oil and natural gas producing properties and related assets in the State of Oklahoma formerly owned by GM Oil Properties, Inc., Penny Petroleum Corporation and GO LLC. As a result of these acquisitions in 2007, Rio Vista is now focused on the acquisition, development and production of oil and natural gas properties and related midstream assets, and the operation and development of Regional’s business.

The above acquisitions were funded by a combination of debt (new and assumed), private placements of Rio Vista common units and proceeds from the sale of Rio Vista’s LPG related assets. During November 2007, Rio Vista completed a private placement of common units raising gross proceeds of $4,000,000.

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Results of Operations

Because of our rapid growth through acquisitions during this past year, our historical results of operations and period-to-period comparisons of these results and certain financial data may not be meaningful or indicative of future results. The following discussion of Rio Vista’s results of operations from continuing operations for all periods presented excludes the results of operations related to the Sold Assets, including revenues, direct costs, associated interest expenses, minority interest and income taxes, which have been reclassified as discontinued operations (see below). The results of operations from continuing operations reflects only the results associated with the Transportation and Terminaling Business associated with bulk and petroleum products associated with Regional operations and LPG (sold December 31, 2007) including all costs associated with operation of the US-Mexico Pipelines and Matamoros Terminal Facility, and the acquisition of the Oklahoma assets during November 2007 and all indirect income and expenses of Rio Vista. Revenues from Rio Vista’s Transportation and Terminaling Business commenced on August 22, 2006 although expenses associated with operation of the US-Mexico Pipelines and Matamoros Terminal Facility were incurred during the entire period for each period presented.

Continuing Operations

Year Ended December 31, 2007 Compared With Year Ended December 31, 2006

YEAR ENDED DECEMBER 31, 2007
	Oklahoma			Regional			LPG			Corporate/
	Assets (a)			Enterprises (b)			Transportation (c)			Other			Total
Revenues		527,000			3,038,000			2,341,000			—			5,906,000
Cost Of Goods Sold		390,000			2,399,000			1,971,000			—			4,760,000
Gross Profit		137,000			639,000			370,000			—			1,146,000
Selling, General And Administrative Expenses		41,000			363,000			258,000			4,023,000			4,685,000
Loss on sale of remaining LPG assets		—			—			406,000			—			406,000
Operating Income		96,000			276,000			(294,000	)		(4,023,000	)		(3,945,000	)
Other Income (Expense)
Interest Expense		(275,000	)		(431,000	)		(281,000	)		(7,000	)		(994,000	)
Interest Income		—			14,000			1,000			2,000			17,000
Income From Continuing Operations Before Taxes		(179,000	)		(141,000	)		(574,000	)		(4,028,000	)		(4,922,000	)
Provision For Income Taxes		(4,000	)		(51,000	)		34,000			—			(21,000	)
Income (loss) From Continuing Operations		(175,000	)		(90,000	)		(608,000	)		(4,028,000	)		(4,901,000	)

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YEAR ENDED DECEMBER 31, 2006
	Oklahoma		Regional		LPG			Corporate/
	Assets (a)		Enterprises (b)		Transportation (c)			Other			Total
Revenues		—		—		908,000			—			908,000
Cost Of Goods Sold		—		—		1,814,000			—			1,814,000
Gross Profit		—		—		(906,000	)		—			(906,000	)
Selling, General And Administrative Expenses		—		—		183,000			2,666,000			2,849,000
Loss on sale of remaining LPG assets		—		—		—			—			—
Operating Income		—		—		(1,089,000	)		(2,666,000	)		(3,755,000	)
Other Income (Expense)
Interest Expense		—		—		(354,000	)		217,000			(137,000	)
Interest Income		—		—		—			1,000			1,000
Minority Interest		—		—		—			—			—
Income From Continuing Operations Before Taxes		—		—		(1,443,000	)		(2,448,000	)		(3,891,000	)
Provision For Income Taxes		—		—		37,000			—			37,000
Income (loss) From Continuing Operations		—		—		(1,480,000	)		(2,448,000	)		(3,928,000	)

(a)	Acquired during November 2007
(b)	Acquired during July 2007
(c)	Business commenced in August 2006 and sold December 31, 2007

Year Ended December 31, 2006 Compared With Year Ended December 31, 2005

Revenues. Revenues for the year ended December 31, 2006, were $0.9 million. There were no revenues during the year ended December 31, 2005 since the LPG transportation business did not commence until August 22, 2006. All revenues prior to August 22, 2006 were derived from Rio Vista’s LPG sales business and have been reclassified as discontinued operations (see below).

Cost of goods sold. Cost of goods sold for the year ended December 31, 2006 was $1.8 million compared with $2.1 million for the year ended December 31, 2005. The cost of goods sold consists of those costs associated with operation of the US — Mexico Pipelines and Matamoros Terminal Facility. All costs associated with Rio Vista’s LPG sales business prior to its sale, except for costs associated with the US — Mexico Pipelines and Matamoros Terminal Facility, which were used for Rio Vista’s LPG transportation business, have been reclassified as discontinued operations (see below).

Selling, general and administrative expenses. Selling, general and administrative expenses were $2.8 million for the year ended December 31, 2006 compared with $3.9 million for the year ended December 31, 2005, a decrease of $1.1 million or 28.2%. These costs were comprised of indirect selling, general and administrative expenses directly incurred by Rio Vista or allocated by Penn Octane to Rio Vista in accordance with the Omnibus Agreement. Salary related costs allocated by Penn Octane were based on the percentage of time spent by those employees (including executive officers) in performing Rio Vista related matters compared with the overall time spent working by those employees. The decrease was principally attributable to reduced professional fees and payroll related costs during the year ended December 31, 2006.

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Other income (expense). Other expense was approximately $(0.1) million for the year ended December 31, 2006 and consisted of interest expense on debt then in effect. Other expense was approximately $(0.4) million for the year ended December 31, 2005 and primarily consisted of amortization of loan discount related to detachable warrants.

Discontinued Operations

The following discussion of Rio Vista’s results of operations from discontinued operations of its LPG sales business for the periods January 1, 2005 through August 21, 2006, the date the business was sold, and includes all related revenues, direct costs and associated interest expenses.

Year Ended December 31, 2006 Compared With Year Ended December 31, 2005

Revenues. Revenues for the year ended December 31, 2006, were $71.5 million compared with $120.9 million for the comparative period one year earlier, a decrease of $49.4 million or 40.8%. Of this decrease, $57.4 million was attributable to decreased volumes of LPG sold to PMI during the year ended December 31, 2006 (LPG sales business terminated on August 21, 2006), partially offset by $8.0 million attributable to increases in average sales prices of LPG sold to PMI during the year ended December 31, 2006.

Cost of goods sold. Cost of goods sold for the year ended December 31, 2006 was $69.5 million compared with $116.5 million for the year ended December 31, 2005, a decrease of $47.0 million or 40.3%. The cost of goods sold for LPG purchased from Penn Octane was determined in accordance with the LPG Supply Agreement. Of this decrease, $55.2 million was attributable to decreased volumes of LPG sold to PMI during the year ended December 31, 2006 (LPG sales business terminated on August 21, 2006), partially offset by $8.6 million attributable to increases in the average costs of LPG sold to PMI during the year ended December 31, 2006.

Liquidity and Capital Resources

General

As a result of the disposition of the LPG-related businesses in 2006 and 2007 and the acquisition of Regional’s business and the Oklahoma assets, Rio Vista’s sources of operating cash flows are expected to be derived from the operations of Regional and from the revenues received from the Oklahoma assets. Although the operations of Regional are expected to be profitable, the cash flows of Regional are subject to payments required under the RZB Loan Agreement described below under “Debt Obligations” and income taxes payable on Regional’s stand-alone taxable income. Based on the current production levels from the Oklahoma assets and current prices for oil and gas, there is not expected to be sufficient cash from operations to meet debt service requirements under the TCW Credit Facility described below under “debt obligations” unless additional production can be realized. Rio Vista has minimal management experience in operating oil and gas properties and will be relying on the assistance of its Chairman of the Board and outside consultants to provide ongoing management expertise. Additional production will require additional capital expenditures to fund drilling expansion opportunities. Rio Vista has only secured funding for its planned development through April 2008, and such development is not expected to increase cash flow to the levels needed for payment of operating costs and debt service. In addition, Rio Vista projects that monthly cash flows received from the Oklahoma assets during the months of April through September will be less than during the months of October through March as a result of seasonality.

In addition, pursuant to the Omnibus Agreement, Penn Octane is entitled to reimbursement of costs incurred on behalf of Rio Vista, including an allocable share of overhead. However, the TCW Credit Facility prohibits distributions by Rio Vista’s Oklahoma subsidiaries until December 2008 and subsequent thereto, those distributions are limited to 75% of defined available cash flow. As a result, Rio Vista may not have sufficient available cash to pay its separate general and administrative and other operating expenses, debt service and/or minimum quarterly distributions to unitholders. In addition, Rio Vista may not distribute sufficient cash to meet the tax obligations of unitholders associated with the ownership of common units.

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Rio Vista may obtain additional sources of revenues through the completion of future transactions, including acquisitions and/or dispositions of assets. The ability of Rio Vista to complete future acquisitions may require the use of a portion or substantially all of Rio Vista’s liquid assets, the issuance of additional debt and/or the issuance of additional units. Currently, substantially all of Rio Vista’s assets are pledged or committed to be pledged as collateral on existing debt in connection with the RZB Credit Facility described below under “Debt Obligations”, the TCW Credit Facility and the RZB Loan Agreement. Accordingly Rio Vista may be unable to obtain additional financing collateralized by those assets.

At December 31, 2007, Rio Vista had a working capital deficit of approximately $8.1 million. Rio Vista cannot be certain that future cash flows from Regional’s business or the Oklahoma assets’ operations and future investments, if any, will be adequate to cover all of its future working capital requirements, including minimum distributions to unitholders.

Distributions of Available Cash.

All Rio Vista unitholders have the right to receive distributions from Rio Vista of “available cash” as defined in the partnership agreement in an amount equal to at least the minimum distribution of $0.25 per quarter per unit, plus any arrearages in the payment of the minimum quarterly distribution on the units from prior quarters subject to any reserves determined by our General Partner. Our General Partner has a right to receive a distribution corresponding to its 2% General Partner interest and the incentive distribution rights described below. The distributions are to be paid within 45 days after the end of each calendar quarter. However, Rio Vista is prohibited from making any distributions to unitholders if it would cause an event of default, or an event of default exists, under any obligation of Penn Octane which Rio Vista has guaranteed.

In addition to its 2% General Partner interest, our General Partner is currently the holder of incentive distribution rights which entitle the holder to an increasing portion of cash distributions as described in the partnership agreement. As a result, cash distributions from Rio Vista are shared by the holders of the common units and our General Partner based on a formula whereby our General Partner receives disproportionately more distributions per percentage interest than the holders of the common units as annual cash distributions exceed certain milestones.

Rio Vista made the following distributions during the years ended December 31, 2006 and 2007:

					Amounts Paid
Quarter	Payment		Distribution		Common		General
Ended	Date		Per Unit		Units		Partner
Sep 2006		10/26/06	$	0.25	$	478,000	$	10,000
Dec 2006		01/18/07	$	0.25	$	478,000	$	10,000
Mar 2007		05/04/07	$	0.25	$	478,000	$	10,000
Jun 2007		07/31/07	$	0.25	$	484,000	$	10,000
Sep 2007		11/14/07	$	0.25	$	484,000	$	10,000
June 30, 2005 - June 30, 2006 Arrearages		12/10/07	$	1.25	$	2,420,000	$	49,000

The amount of the distributions paid represents the minimum quarterly distribution required to be made by Rio Vista pursuant to the partnership agreement. As of December 31, 2007, Rio Vista had made all of the required minimum distributions to its common unitholders. A distribution of $607,000 and $13,000 for the quarter ended December 31, 2007 was made on February 14, 2008 to the common unitholders and our General Partner, respectively.

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Debt Obligations

RZB Loan Agreement

In July 2007, Rio Vista and Regional entered into a $5 million loan agreement (RZB Loan Agreement) with RZB Finance LLC (RZB) dated July 26, 2007. The loan is due on demand, with a one-year maturity. Any borrowings under the RZB Loan Agreement bear a variable annual rate of interest equal to the higher of (a) the rate of interest established from time to time by JPMorgan Chase Bank, N.A. as its “base rate” or its “prime rate,” or (b) the weighted average overnight funds rate of the Federal Reserve System plus 0.50%, in each case plus a margin of 4.75%. Under the RZB Loan Agreement, either Rio Vista or Penn Octane is required to maintain a minimum net worth of $10 million. In connection with the RZB Loan Agreement, Regional granted to RZB a security interest in all of Regional’s assets, and Rio Vista delivered to RZB a pledge of the outstanding capital stock of Regional. Penn Octane, Regional and RVOP have also provided a guaranty of Rio Vista’s obligations under the RZB Loan Agreement in favor of RZB. As of December 31, 2007, Rio Vista has $ 5 million outstanding under the RZB Loan Agreement and was in compliance with all of the covenants thereunder.

TCW Credit Facility

In connection with the acquisition of certain of the Oklahoma assets, Rio Vista Penny LLC, an indirect, wholly-owned subsidiary of Rio Vista, entered into a $30 million senior secured credit facility (TCW Credit Facility) with TCW Asset Management Company and certain TCW Energy Fund X investors (collectively, TCW) in November 2007. The TCW Credit Facility has a maturity date of August 29, 2010. However, at any time during the period from May 19, 2008 through November 19, 2009, TCW has the right to demand payment of $2,250,000 of the amount outstanding under the TCW Credit Facility. The TCW Credit Facility is secured by a first lien on all of the Oklahoma assets and associated production proceeds. The interest rate on borrowings under the TCW Credit Facility is 10.5%, increasing to 12.5% if there is an event of default. Payments under the TCW Credit Facility are interest-only until December 29, 2008. The TCW Credit Facility has no prepayment penalty. Certain Rio Vista subsidiaries have guaranteed payment of the obligations outstanding under the TCW Credit Facility. Rio Vista Penny and Rio Vista GO LLC, an indirect, wholly-owned subsidiary of Rio Vista, both of which hold all of the Oklahoma assets, are prohibited from making upstream distributions to Rio Vista before November 30, 2008. Thereafter, upstream distributions to Rio Vista not in excess of 75% of quarterly cash flow are permitted subject to certain conditions. As of December 31, 2007, Rio Vista had $23.7 million outstanding under the TCW Credit Facility and was in compliance with all of the covenants thereunder.

RZB Credit Facility Guarantee

As of December 31, 2007, Penn Octane had a $10,000,000 credit facility with RZB for demand loans and standby letters of credit (RZB Credit Facility). In connection with the spin-off of the LPG business by Penn Octane to Rio Vista, Rio Vista agreed to guarantee Penn Octane’s obligations with respect to the RZB Credit Facility. In connection with Rio Vista’s guaranty, Rio Vista granted RZB a security interest and assignment in any and all of Rio Vista’s accounts, real property, buildings, pipelines, fixtures and interests therein or relating thereto. In addition, Rio Vista may not permit to exist any subsequent 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. Rio Vista may also be prohibited from making any distributions to unitholders if it would cause an event of default, or if an event of default is existing, under the RZB Credit Facility.

Under the RZB Credit Facility, Penn Octane pays a fee with respect to each letter of credit thereunder in an amount equal to the greater of (i) $500, (ii) 2% of the maximum face amount of such letter of credit, or (iii) such higher amount as may be agreed to between Penn Octane and RZB. Any loan amounts outstanding under the RZB Credit Facility accrue interest at a rate equal to the rate announced by the JPMorgan Chase Bank as its prime rate (7.25% at December 31, 2007) plus 2.5%. Pursuant to the RZB Credit Facility, RZB has sole and absolute discretion to limit or terminate its participation in the RZB Credit Facility and to refrain from making any loans or issuing any letters 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.

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Moores Note

As partial consideration for the acquisition of certain of the Oklahoma assets by Rio Vista Penny, Rio Vista delivered a promissory note in November 2007 to Gary Moores in the aggregate principal amount of $500,000. The note bears interest at 7% per annum and matures on May 19, 2008. Beginning February 19, 2008, Gary Moores has the option to convert the outstanding principal and interest of the note into common units of Rio Vista at a conversion price equal to 90% of the 10-day average closing price of such common units as reported by the NASDAQ Stock market at the time of conversion. The conversion option may be exercised on only one occasion and expires on May 19, 2008. As of December 31, 2007, $493,000, net of $7,000 discount remained outstanding under the note.

Regional Note

In connection with the Regional Acquisition, Regional issued a promissory note in the amount of $1.0 million to be paid in four equal semiannual installments beginning six months from the date of the Regional Acquisition. Rio Vista has recorded a discount of $116,000, (10% effective rate) representing the portion of interest associated with the note, which shall be amortized over the term of the note. For the period of July 28, 2007 through December 31, 2007, $37,000 was amortized.

Leases

Norfolk Southern Leases.

On January 1, 2003, Regional (as lessee) entered into a lease agreement with Norfolk Southern Railway Company (as lessor) for approximately 3.1 acres of land which is utilized in connection with Regional’s existing operations at Regional’s facilities in Hopewell, Virginia. The lease includes the right to maintain existing warehouses, storage tanks for handling petroleum and chemical products, and necessary appurtenances. The lease term was January 1, 2003 through December 31, 2005. The lease has not been renewed and may be terminated by either party upon 30 days’ written notice. Rent is $1,500 per month subject to adjustment based on inflation.

On August 21, 2003, Regional (as lessee) entered into a siding lease agreement with Norfolk Southern Railway Company (as lessor) for approximately 750 feet of railroad sidings on land which is utilized in connection with Regional’s existing operations at Regional’s facilities in Hopewell, Virginia. The sidings may be used for handling various chemical products. The siding lease began on August 21, 2003 and continues until terminated by either party with 30 days’ written notice. Rent is $4,875 per year, payable in advance.

As replacement of the foregoing leases, Regional is currently negotiating with Norfolk Southern the purchase of approximately 3.5 acres of land and the lease of approximately 1.9 acres of land on a long-term basis. On June 1, 2007, Regional executed a letter of intent from Norfolk Southern dated May 29, 2007. Regional received a letter form Norfolk Southern dated July 26, 2007, approving the purchase of the land and the lease on the terms contained in the letter of intent. Regional is awaiting definitive documents from Norfolk Southern in order to complete the purchase and lease transactions.

Other. Regional has several leases for parking and other facilities which are short term in nature and can be terminated by the lessors or Regional upon giving 60 days notice of cancellation.

Agreements

Gas Service and Sales Agreements

During the period from November 19, 2007 through December 31, 2007, GO entered into an agreement with Clearwater Enterprises, LLC (Clearwater) to provide monthly services in relationship to the Brooken system pipeline. In accordance with terms of the agreement, Clearwater (i) receives pipeline nominations from the various shippers on the Brooken system, (ii) allocates volumes to the wellhead based upon the volumes delivered to the Brooken interconnect, (iii) prepares gathering and compression fee invoices on behalf of the Company, and (iv) prepares pipeline imbalance and cashout statements. The monthly gathering management fee that GO pays for these services is $3,000. The agreement is month-to-month unless and until terminated by either party upon 30 days notice.

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In addition, during the period from November 19, 2007 through December 31, 2007, substantially all of the gas sales associated with Rio Vista’s oil and gas properties were made to Clearwater. These gas sales were governed by an agreement that expires in 2009 and continues yearly thereafter, until canceled by either party 30 days notice.

During March 2008, certain of the Clearwater agreements were amended to name Rio Vista Operating LLC as the contracting party based on Rio Vista Operating LLC’s assumption of operations of the oil and gas properties.

Gas Compression Agreements

GO entered into a one-year lease agreement with Hanover Compression Limited Partnership for the use of a compressor. The lease continues monthly until cancelled by either party with 30 days notice. Minimum base lease payments of $10,500 plus taxes and are due monthly. The base amount is subject to semi-annual adjustments.

MV entered into a Gas Compression Master Service Agreement with USA Compression Partners, LP on November 1, 2007. The agreement provides for monthly payments of approximately $17,000 per month through August 31, 2009.

CEOcast Agreement

Effective July 2, 2007, Rio Vista entered into a consulting agreement with CEOcast, Inc. (CEOcast) pursuant to which CEOcast agrees to render investor relations services to Rio Vista. Under the terms of the CEOcast agreement, CEOcast receives cash fees of $7,500 per month, and Rio Vista has agreed to issue to CEOcast (i) 1,399 of Rio Vista’s fully-paid, non-assessable common units (Common Units) and (ii) $75,000 worth of common units on March 31, 2008 based on a calculation of units contained in the consulting agreement. The agreement is effective for a one-year period and can be terminated by either party by providing written notice to the other party on or before May 30, 2008; otherwise, the Agreement will automatically renew for additional one year periods (Additional Period) under the same terms and conditions except that either party may terminate the agreement at any time by providing 60 days written notice to the other party. As of December 31, 2007, Rio Vista was obligated to provide CEOcast a total of 4,610 common units. Based on the closing price of Rio Vista common units on December 31, 2007, the Company recorded additional expense of $78,275 associated with the agreement.

Asphalt Agreement. On November 30, 2000, Regional entered into a Storage and Product Handling Agreement with a customer with an effective date of December 1, 2000 (Asphalt Agreement). The Asphalt Agreement provides for the pricing, terms and conditions under which the customer will purchase terminal services and facility usage from Regional for the storage and handling of the customer’s asphalt products. The Asphalt Agreement was amended on October 15, 2002 with an effective date of December 1, 2002 (Amended Asphalt Agreement). The term of the Amended Asphalt Agreement is five years with an option by the customer for an additional five-year renewal term, which the customer exercised in July 2007. After the additional five-year term, the Amended Asphalt Agreement renews automatically for successive one-year terms unless terminated upon 120 days advance written notice by either party. The annual fee payable to Regional for the initial five-year term of the Amended Asphalt Agreement is approximately $500,000, payable in equal monthly installments, subject to adjustments for inflation and certain facility improvements. In exchange for the annual fee, Regional agrees to provide minimum annual throughput of 610,000 net barrels per contract year, with additional volume to be paid on a per barrel basis. During the term of the amended Asphalt Agreement, Regional agrees to provide three storage tanks and certain related equipment to the customer on an exclusive basis as well as access to Regional’s barge docking facility.

51

Fuel Oil Agreement. On November 16, 1998, Regional entered into a Terminal Agreement with a customer with an effective date of November 1, 1998, as amended on April 5, 2001, October 11, 2001 and August 1, 2003 (Fuel Oil Agreement). The Fuel Oil Agreement provides for the pricing, terms and conditions under which Regional will provide terminal facilities and services to the customers for the delivery of fuel oil. The agreement renews automatically for successive one-year terms unless terminated upon 365 days advance written notice by either party. Pursuant to the agreement, as amended, Regional agrees to provide three storage tanks, certain related pipelines and equipment, and at least two tractor tankers to the customer on an exclusive basis, as well as access to Regional’s barge docking facility. In exchange for use of Regional’s facilities and services, the customer pays an annual tank rental amount of approximately $300,000 plus a product transportation fee calculated on a per gallon basis, each subject to annual adjustment for inflation. Regional agrees to deliver a minimum daily quantity of fuel oil on behalf of the customer.

Realization of Assets

The accompanying consolidated balance sheet has been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of Rio Vista as a going concern. Rio Vista has a loss from continuing operations for each of the two years ended December 31, 2007 and has a deficit in working capital. Currently, all revenues generated from the Oklahoma assets are held as collateral against the TCW Credit Facility. The current portion of the TCW Credit Facility, the Moores Note, the RZB Note, and the Seller Note — Regional are all short-term in nature and amounts due in the current year are approximately $9,100,000 million.

The Oklahoma assets and/or the Regional operations currently do not generate sufficient cash flow to pay general and administrative and other operating expenses of Rio Vista (parent) and all debt service requirements. The TCW Credit Facility prohibits distributions by Rio Vista’s Oklahoma subsidiaries until December 2008 and subsequent thereto, those distributions are limited to 75% of defined available cash flow. In addition, Rio Vista requires additional funding in order to increase production levels for its Oklahoma assets.

Rio Vista has guaranteed certain of Penn Octane’s obligations. Substantially all of Rio Vista’s and Penn Octane’s assets are pledged or committed to be pledged as collateral on the TCW Credit Facility, and the RZB Note and RZB Credit Facility, and therefore, both Rio Vista and Penn Octane may be unable to obtain additional financing collateralized by those assets. Penn Octane’s Report of Independent Registered Public Accounting Firm on the consolidated financial statements of Penn Octane at December 31, 2007 contains an explanatory paragraph which describes an uncertainty about Penn Octane’s ability to continue as a going concern. If Penn Octane’s and Rio Vista’s cash flows are not adequate to pay their obligations, Penn Octane and/or Rio Vista may be required to raise additional funds to avoid foreclosure by creditors. There can be no assurance that such additional funding will be available on terms attractive to either Penn Octane or Rio Vista or available at all. If additional amounts cannot be raised and cash flow is inadequate, Penn Octane and/or Rio Vista would likely be required to seek other alternatives which could include the sale of assets, closure of operations and/or protection under the U.S. bankruptcy laws.

In view of the matters described in the preceding paragraphs, recoverability of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon the ability of Rio Vista to continue as a going concern. The consolidated 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 Rio Vista be unable to continue in existence.

To provide Rio Vista with the ability it believes necessary to continue in existence, management is taking steps to restructure its existing debt obligations and raise additional debt and/or equity financing.

Off-Balance Sheet Arrangements

Rio Vista does not have any off-balance sheet arrangements.

52

Recently Issued Financial Accounting Standards

FASB Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, issued in September 2006, establishes a formal framework for measuring fair value under GAAP. It defines and codifies the many definitions of fair value included among various other authoritative literature, clarifies and, in some instances, expands on the guidance for implementing fair value measurements, and increases the level of disclosure required for fair value measurements. Although SFAS No. 157 applies to and amends the provisions of existing FASB and AICPA pronouncements, it does not, of itself, require any new fair value measurements, nor does it establish valuation standards. SFAS No. 157 applies to all other accounting pronouncements requiring or permitting fair value measurements, except for: SFAS No. 123(R), share-based payment and related pronouncements, the practicability exceptions to fair value determinations allowed by various other authoritative pronouncements, and AICPA Statements of Position 97-2 and 98-9 that deal with software revenue recognition. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The adoption of SFAS No. 157 did not have a material impact on its consolidated results of operations, financial position, and cash flows.

In February 2007, SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FAS 115,” was issued, which allows entities to choose, at specified election dates, to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an eligible item, changes in that item’s fair value in subsequent reporting periods must be recognized in current earnings. SFAS No. 159 also establishes presentation and disclosure requirements designed to draw comparison between entities that elect different measurement attributes for similar assets and liabilities. SFAS No. 159 is effective for us on January 1, 2008. Rio Vista does not expect the adoption of SFAS No. 159 to have a material impact on its consolidated results of operations, cash flows or financial position.

In December 2007, the FASB released SFAS No. 141(R), “Business Combinations (revised 2007)”, which changes many well-established business combination accounting practices and significantly affects how acquisition transactions are reflected in the financial statements. In addition, SFAS No. 141(R) will affect how companies negotiate and structure transactions, model financial projections of acquisitions and communicate to stakeholders. SFAS No. 141(R) must be applied prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Rio Vista is currently evaluating the impact the adoption of this statement could have on its financial condition, results of operations and cash flows.

In December 2007, the FASB released SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51”, which establishes accounting and reporting standards for the noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interests and requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest. Previously, net income attributable to the noncontrolling interest was reported as an expense or other deduction in arriving at consolidated net income. SFAS No. 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008. Rio Vista believes the adoption of this statement will not have a material impact on its consolidated financial statements.

53

Critical Accounting Policies

The consolidated financial statements of Rio Vista reflect the selection and application of accounting policies which require management to make significant estimates and judgments. See note B to Rio Vista’s consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2007, “Summary of Significant Accounting Policies”. Rio Vista believes that the following reflect the more critical accounting policies that affect its financial position and results of operations.

Impairment of long-lived assets - The determination of whether impairment has occurred is based on an estimate of undiscounted cash flows attributable to assets in future periods. If impairment has occurred, the amount of the impairment loss recognized will be determined by estimating the fair value of the assets and recording a loss if the fair value is less than the carrying value. Assessments of impairment are subject to management’s judgments and based on estimates that management is required to make.

Depreciation and amortization expenses - Property, plant and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization rates are based on management’s estimate of the future utilization and useful lives of the assets. Should the nature of Rio Vista’s business change our future utilization and useful lives of depreciable and amortizable assets may also change. This could result in increases or decreases in depreciation and amortization expense compared with historical amounts.

Unit-based compensation - Rio Vista utilizes unit-based awards as a form of compensation for employees, officers and managers of our General Partner and to non-employees for goods and services and to acquire or extend debt. Effective January 1, 2006, Rio Vista adopted the provisions of SFAS No. 123(R), “Share-Based Payment” (SFAS 123R) using the modified prospective transition method. Under this method, previously reported amounts should not be restated to reflect the provisions of SFAS 123R. SFAS 123R requires Rio Vista to record compensation expense for all awards granted after the date of adoption, and for the unvested portion of previously granted awards that remain outstanding at the date of adoption. The fair value concepts have not changed significantly in SFAS 123R; however, in adopting this standard, companies must choose among alternative valuation models and amortization assumptions. After assessing alternative valuation models and amortization assumptions, Rio Vista will continue using both the Black-Scholes valuation model and straight-line amortization of compensation expense over the requisite service period for each separately vesting portion of the grant. Rio Vista will reconsider use of this model if additional information becomes available in the future that indicates another model would be more appropriate, or if grants issued in future periods have characteristics that cannot be reasonably estimated using this model.

Allowance for doubtful accounts - The carrying value of trade accounts receivable is based on estimated fair value. The determination of fair value is subject to management’s judgments and is based on estimates that management is required to make. Those estimates are made based on the creditworthiness of customers and payment history. Rio Vista has made no provisions for doubtful accounts since its inception.

We account for oil and gas properties by the successful efforts method. Leasehold acquisition costs are capitalized when incurred. If proved reserves are found on an undeveloped property, leasehold cost is transferred to proved properties. Under this method of accounting, costs relating to the development of proved areas are capitalized when incurred.

Depreciation and depletion of producing oil and gas properties is recorded based on units of production. Unit rates are computed for unamortized drilling and development costs using proved developed reserves and for acquisition costs using all proved reserves. SFAS No. 19, "Financial Accounting and Reporting for Oil and Gas Producing Companies “ (SFAS 19) requires that acquisition costs of proved properties be amortized on the basis of all proved reserves, developed and undeveloped, and that capitalized development costs (wells and related equipment and facilities) be amortized on the basis of proved developed reserves. As more fully described in the Supplementary Oil and Gas Data (Unaudited) in Item 8. “Financial Statements and Supplementary Data,” our proved reserves at December 31, 2007 were estimated by an independent petroleum engineering firm, Lee Keeling and Associates, Inc.

54

Geological, geophysical, annual lease rentals and dry hole costs on oil and gas properties relating to unsuccessful wells are charged to expense as incurred.

Upon sale or retirement of complete fields of depreciable or depleted property, the book value thereof, less proceeds or salvage value, is charged or credited to income. On sale or retirement of an individual well, the proceeds are credited to accumulated depreciation and depletion.

In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,” we assess proved oil and gas properties for possible impairment when events or circumstances indicate that the recorded carrying value of the properties may not be recoverable. We recognize an impairment loss as a result of a triggering event and when the estimated undiscounted future cash flows from a property are less than the carrying value. If an impairment is indicated, the cash flows are discounted at a rate approximate to our cost of capital and compared to the carrying value for determining the amount of the impairment loss to record. Estimated future cash flows are based on management’s expectations for the future and include estimates of oil and gas reserves and future commodity prices and operating costs. Downward revisions in estimates of reserve quantities or expectations of falling commodity prices or rising operating costs could result in a reduction in undiscounted future cash flows and could indicate property impairment.

Unproved properties that are individually insignificant are amortized and assessed for impairment on a property-by-property basis. If considered impaired, costs are charged to expense when such impairment is deemed to have occurred.

Rio Vista’s estimates of proved reserves are based on the quantities of oil and gas that engineering and geological analyses demonstrate, with reasonable certainty, to be recoverable from established reservoirs in the future under current operating and economic parameters. Lee Keeling and Associates, Inc. prepared a reserve and economic evaluation of all our properties on a well-by-well basis as of December 31, 2007.

Reserves and their relation to estimated future net cash flows impact our depletion and impairment calculations. As a result, adjustments to depletion and impairment are made concurrently with changes to reserve estimates. Our reserve estimates and the projected cash flows derived from those estimates are prepared in accordance with SEC guidelines. The accuracy of our reserve estimates is a function of many factors including the following: the quality and quantity of available data, the interpretation of that data, the accuracy of various mandated economic assumptions and the judgments of the individuals preparing the estimates.

Rio Vista’s proved reserve estimates are a function of many assumptions, all of which could deviate significantly from actual results. As such, reserve estimates may materially vary from the ultimate quantities of gas, natural gas liquids and oil eventually recovered.

Gas and oil production revenue and related natural gas liquids revenue are recognized based on actual volumes of gas, oil, and natural gas liquids sold to purchasers. Sales require delivery of the product to the purchaser, passage of title, and probability of collection of purchaser amounts owed. Gas and oil production revenue and related natural gas liquids revenue are reported net of royalties. Rio Vista uses the sales method of accounting for gas imbalances. Gas imbalances result from the gas volumes sold by Rio Vista from a property being different from its actual entitled volumes. Under the sales method, revenues are recognized based on actual volumes of gas sold. The volumes sold may differ from the entitled volumes. Direct operating expenses are recognized on an accrual basis and consist of costs required to operate gas and oil properties, product transportation expenses, and production and property taxes.

Gas revenues are recognized based on actual volumes of gas purchased from third-party producers and sold to customers. Sales are recorded only upon the delivery of the product to the purchaser, passage of title, and collectability is reasonably assured. Losses, if any, resulting from imbalances from such sales are recognized currently, and gains, if any, are recognized at final delivery.

55

Oil and gas is sold by Rio Vista on a monthly basis. Virtually all of the Company’s contracts’ pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, quality of oil and gas, and prevailing supply and demand conditions, so that the price of the oil and gas fluctuate to remain competitive with other available oil and gas suppliers.

We use hedging contracts to minimize the variability of cash flow from our oil and gas production by reducing our exposure to price fluctuations. Currently, these transactions consist of fixed price contracts. We account for these activities pursuant to SFAS 133. This statement establishes accounting and reporting standards requiring that derivative instruments (including certain derivative instruments embedded in other contracts) be recorded at fair market value and included in the balance sheet as assets or liabilities.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

56

Item 8. Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	PAGE NO.
Rio Vista Energy Partners L.P.
Report of Independent Registered Public Accounting Firm		58
Consolidated Balance Sheets as of December 31, 2006 and 2007		59
Consolidated Statements of Operations for the years ended December 31, 2006 and 2007		61
Consolidated Statements of Partners’ Capital for the years ended December 31, 2006 and 2007		62
Consolidated Statements of Cash flows for the years ended December 31, 2006 and 2007		63
Notes to Consolidated Financial Statements		64

57

Report of Independent Registered Public Accounting Firm

To the Board of Managers of Rio Vista GP LLC,

General Partner of Rio Vista Energy Partners L.P.

We have audited the accompanying consolidated balance sheets of Rio Vista Energy Partners L.P. and its subsidiaries (Rio Vista) as of December 31, 2006 and 2007, and the related consolidated statements of operations, Partners’ Capital, and cash flows for each of the two years in the period ended December 31, 2007. These financial statements are the responsibility of Rio Vista’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Rio Vista as of December 31, 2006 and 2007, and the consolidated results of their operations and their consolidated cash flows for each of the two years in the period ended December 31, 2007 in conformity with United States generally accepted accounting principles.

We have also audited Schedule II of Rio Vista for each of the two years in the period ended December 31, 2007. In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therein.

The accompanying consolidated financial statements have been prepared assuming that Rio Vista will continue as a going concern. As discussed in note O to the consolidated financial statements, conditions exist which raise substantial doubt about Rio Vista’s ability to continue as a going concern including 1) Rio Vista’s ability to generate sufficient cash flow to pay its expenses and its current debt obligations as they become due and 2) Rio Vista’s dependence on Penn Octane to continue as a going concern. Management’s plans in regard to these matters are also described in note O. The consolidated 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 Rio Vista be unable to continue in existence.

/s/ BURTON McCUMBER & CORTEZ, L.L.P.

Brownsville, Texas
April 4, 2008

58

Rio Vista Energy Partners L.P. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

December 31,

ASSETS

	2006		2007
Current Assets
Cash	$	3,896,000	$	3,450,000
Restricted cash		25,000		26,000
Trade accounts receivable (less allowance for doubtful accounts of $0 at 2006 and 2007)		523,000		1,446,000
Due from Penn Octane Corporation, net		1,751,000		—
Prepaid expenses and other current assets		246,000		453,000
Total current assets		6,441,000		5,375,000
Oil and gas properties and related equipment (successful efforts method) — net		—		26,197,000
Property, plant and equipment — net		10,704,000		12,762,000
Other non-current assets		11,000		—
Goodwill		—		5,121,000
Total assets	$	17,156,000	$	49,455,000

The accompanying notes are an integral part of these consolidated financial statements.

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Rio Vista Energy Partners L.P. and Subsidiaries

CONSOLIDATED BALANCE SHEETS – CONTINUED

December 31,

LIABILITIES AND PARTNERS’ CAPITAL

	2006		2007
Current Liabilities
Current maturities of long-term debt	$	1,000,000	$	3,361,000
Short-term debt		—		5,493,000
Due to Penn Octane Corporation, net		—		347,000
Accounts payable		397,000		2,101,000
Mexican taxes payable		17,000		—
Taxes payable		—		618,000
Accrued liabilities		702,000		1,585,000
Total current liabilities		2,116,000		13,505,000
Commitments and contingencies		—		—
Long-term debt, less current maturities, net of discount		—		21,250,000
Deferred income taxes		—		3,238,000
Partners’ Capital
Common units		14,739,000		11,233,000
General Partner’s equity		301,000		229,000
Total partners’ capital		15,040,000		11,462,000
Total liabilities and partners’ capital	$	17,156,000	$	49,455,000

The accompanying notes are an integral part of these consolidated financial statements.

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Rio Vista Energy Partners L.P. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year ended			Year ended
	December 31,			December 31,
	2006			2007
Revenues	$	908,000		$	5,906,000
Cost of goods sold		1,814,000			4,760,000
Gross (loss) profit		(906,000	)		1,146,000
Selling, general and administrative expenses and other
Legal and professional fees		669,000			1,531,000
Salaries and payroll related expenses		755,000			1,444,000
Other		1,425,000			1,710,000
Loss on sale of remaining LPG assets		—			406,000
		2,849,000			5,091,000
Operating loss from continuing operations		(3,755,000	)		(3,945,000	)
Other income (expense)
Interest expense		(137,000	)		(994,000	)
Interest income		1,000			17,000
Loss from continuing operations before taxes		(3,891,000	)		(4,922,000	)
(Provision) benefit for income taxes		(37,000	)		21,000
Net loss from continuing operations		(3,928,000	)		(4,901,000	)
Discontinued operations:
Net income from operations of the LPG assets sold		2,012,000			—
Net gain on sale of LPG assets		5,214,000			—
Net income from discontinued operations		7,226,000			—
Net (loss) income	$	3,298,000		$	(4,901,000	)
Net income (loss) allocable to the partners	$	3,298,000		$	(4,901,000	)
Less General Partner’s interest in net income (loss)		66,000			(97,000	)
Net income (loss) allocable to the common units	$	3,232,000		$	(4,804,000	)
Net loss from continuing operations per common unit	$	(2.01	)	$	(2.44	)
Net income from discontinued operations per common unit		3.70			—
Net (loss) income per common unit	$	1.69		$	(2.44	)
Weighted average common units outstanding		1,910,656			1,971,799

The accompanying notes are an integral part of these consolidated financial statements.

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Rio Vista Energy Partners L.P. and Subsidiaries

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

									Total
	Common Units					General			Partners’
	Units		Amount			Partner			Capital
Balance as of December 31, 2005		1,910,656	$	11,955,000		$	244,000		$	12,199,000
Net income		—		3,232,000			66,000			3,298,000
Cash distribution to partners		—		(477,000	)		(10,000	)		(487,000	)
Loan discount on Penn Octane Corporation’s debt related to detachable warrants issued		—		21,000			1,000			22,000
Unit based compensation		—		8,000			—			8,000
Balance as of December 31, 2006		1,910,656		14,739,000			301,000			15,040,000
Net loss		—		(4,804,000	)		(97,000	)		(4,901,000	)
Issuance of equity		493,550		5,390,000			110,000			5,500,000
Cost associated with issuance of equity		—		(294,000	)		(6,000	)		(300,000	)
Cash distribution to partners		—		(4,342,000	)		(89,000	)		(4,431,000	)
Beneficial conversion feature		—		25,000			—			25,000
Unit based compensation		25,000		519,000			10,000			529,000
Balance as of December 31, 2007		2,429,206	$	11,233,000		$	229,000		$	11,462,000

The accompanying notes are an integral part of these consolidated financial statements.

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Rio Vista Energy Partners L.P. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year ended			Year ended
	December 31,			December 31,
	2006			2007
Cash flows from operating activities:
Net income (loss)	$	3,298,000		$	(4,901,000	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation depletion and amortization		724,000			1,129,000
Unit-based payment expense		8,000			343,000
Amortization of loan discount related to detachable warrants issued		22,000			37,000
Beneficial conversion feature		—			7,000
Loss on sale of asset		75,000			—
Gain on sale of LPG Assets		(5,214,000	)		—
Loss on sale of remaining LPG-related assets		—			406,000
Changes in current assets and liabilities:
Trade accounts receivable		10,404,000			(169,000	)
Inventories		(6,000	)		—
Prepaid and other current assets		(23,000	)		65,000
Trade accounts payable		(273,000	)		2,098,000
Due to/from Penn Octane Corporation, net		(13,333,000	)		1,587,000
Accrued liabilities		(280,000	)		(128,000	)
U.S. and foreign taxes payable		(5,000	)		215,000
Net cash (used in) provided by operating activities		(4,603,000	)		689,000
Cash flows from investing activities:
Capital expenditures		(87,000	)		(137,000	)
Proceeds from the sale of land and other assets		131,000			—
Proceeds from the sale of LPG assets		7,330,000			—
Proceeds from the sale of the remaining LPG-related assets		—			9,187,000
Costs to acquire Regional Enterprises, Inc.		—			(8,399,000	)
Costs to acquire Oklahoma assets		—			(10,070,000	)
Other non-current assets		4,000			11,000
Net cash provided by (used in) by investing activities		7,378,000			(9,408,000	)
Cash flows from financing activities:
Decrease in restricted cash		1,882,000			—
Payment on TransMontaigne Note		(300,000	)		(1,000,000	)
Issuance of equity, net		—			3,704,000
Cash distributions to partners		(487,000	)		(4,431,000	)
Issuance of debt		—			10,000,000
Net cash provided by financing activities		1,095,000			8,273,000
Net increase (decrease) in cash		3,870,000			(446,000	)
Cash at beginning of period		26,000			3,896,000
Cash at end of period	$	3,896,000		$	3,450,000
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest	$	36,000		$	1,287,000
U.S. and foreign taxes	$	73,000		$	30,000
Supplemental disclosures of noncash transactions:
Notes issued in acquisition	$	—		$	1,500,000
Units issued in acquisition	$	—		$	1,500,000
TCW Credit Facility	$	—		$	18,700,000
Unit based compensation	$	8,000		$	250,000
Units issued for compensation	$	—		$	280,000
Beneficial conversion feature	$	—		$	25,000

The accompanying notes are an integral part of these consolidated financial statements.

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A — ORGANIZATION

Rio Vista Energy Partners L.P. (Rio Vista), a Delaware limited partnership, was formed by Penn Octane Corporation (Penn Octane) on July 10, 2003 and was a wholly owned subsidiary of Penn Octane until September 30, 2004, the date that Penn Octane completed a series of transactions that (i) transferred substantially all of its owned pipeline and terminal assets in Brownsville, Texas and Matamoros, Mexico and certain immaterial liabilities to Rio Vista Operating Partnership L.P. (RVOP) (ii) transferred Penn Octane’s 99.9% interest in RVOP to Rio Vista and (iii) distributed all of its limited partnership interests (Common Units) in Rio Vista to its common stockholders (Spin-Off), resulting in Rio Vista becoming a separate public company. The Common Units represented 98% of Rio Vista’s outstanding capital and 100% of Rio Vista’s limited partnership interests. The remaining 2% represented the General Partner interest. The General Partner is Rio Vista GP LLC (General Partner) (see note I — General Partner Interest). Common unitholders do not participate in the management of Rio Vista. The General Partner is entitled to receive distributions from Rio Vista on its General Partner interest and additional incentive distributions (see Liquidity and Capital Resources — Distributions of Available Cash) as provided in Rio Vista’s partnership agreement. The General Partner has sole responsibility for conducting Rio Vista’s business and for managing Rio Vista’s operations in accordance with the partnership agreement. The General Partner does not receive a management fee in connection with its management of Rio Vista’s business, but is entitled to be reimbursed for all direct and indirect expenses incurred on Rio Vista’s behalf.

Until 2007, Rio Vista was focused on the operation of the LPG terminal facility and pipelines. After August 2006, Rio Vista completed the disposition of substantially all of its U.S. LPG assets to TransMontaigne including the Brownsville, Texas terminal facility and refined products tank farm, together with associated improvements, leases, easements, licenses and permits; an LPG sales agreement; and all of LPG inventory. After August 2006, Rio Vista operated this system exclusively on behalf of TransMontaigne Partners L.P. and its affiliates, or TransMontaigne, to transport their LPG on a fee for services basis.

In December 2007, Rio Vista completed the disposition of its remaining LPG assets to TransMontaigne, including the U.S. portion of the two pipelines from the Brownsville, Texas terminal owned by TransMontaigne to the U.S. border, along with all associated rights-of-way and easements; all of the outstanding equity interests in Rio Vista’s subsidiaries owning interests in the portion of the two pipelines that extend from the U.S. border to Matamoros, Mexico and the terminal in Matamoros (see note D). As a result, effective January 1, 2008, Rio Vista no longer operates the assets acquired from Penn Octane or conduct the businesses it had historically conducted.

In July 2007, Rio Vista acquired Regional Enterprises, Inc. (Regional) and in November 2007, Rio Vista acquired certain oil and natural gas producing properties and related assets in the State of Oklahoma formerly owned by GM Oil Properties, Inc., Penny Petroleum Corporation and GO LLC (GO). The businesses and assets acquired in 2007 are described further in note E. As a result of these acquisitions in 2007, Rio Vista is now focused on the acquisition, development and production of oil and natural gas properties and related midstream assets, and the operation and development of Regional’s business.

The above acquisitions were funded by a combination of debt (new and assumed), private placements of Rio Vista common units and proceeds from the sale of Rio Vista’s LPG related assets. During November 2007, Rio Vista completed a private placement of common units raising gross proceeds of $4,000,000.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – ORGANIZATION – Continued

Basis of Presentation

The accompanying consolidated financial statements include Rio Vista and its United States subsidiaries including RVOP, Rio Vista Operating GP LLC, Rio Vista Penny LLC, GO, MV Pipeline Company (MV), Regional Enterprises Inc, and Penn Octane International, L.L.C., and its Mexican subsidiaries, Penn Octane de Mexico, S. de R.L. de C.V. (PennMex) and Termatsal, S. de R.L. de C.V. (Termatsal) and its consolidated affiliate, Tergas, S. de R.L. de C.V. (Tergas). All significant intercompany accounts and transactions are eliminated.

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements are as follows.

1. Inventories

Inventories were stated at the lower of cost or market. Cost was determined on the first-in, first-out method.

2. Oil and Gas Properties

Rio Vista accounts for oil and gas properties by the successful efforts method. Leasehold acquisition costs are capitalized. If proved reserves are found on an undeveloped property, leasehold costs are transferred to proved properties. Under this method of accounting, costs relating to the development of proved areas are capitalized when incurred.

Depreciation and depletion of producing oil and gas properties is recorded based on units of production. Unit rates are computed for unamortized drilling and development costs using proved developed reserves and for unamortized acquisition costs using all proved reserves. Statement of Financial Accounting Standards (SFAS) No. 19, as amended, “Financial Accounting and Reporting by Oil and Gas Producing Companies” (SFAS 19) requires that acquisition costs of proved properties be amortized on the basis of all proved reserves, developed and undeveloped, and that capitalized development costs (wells and related equipment and facilities) be amortized on the basis of proved developed reserves.

Proved reserves are estimated by an independent petroleum engineering firm and are subject to future revisions based on availability of additional information.

Geological, geophysical, annual lease rentals and exploratory dry hole costs on oil and gas properties relating to unsuccessful exploratory wells are charged to expense as incurred.

Upon sale or retirement of complete fields of depreciable or depleted property, the book value thereof, less proceeds or salvage value, is charged or credited to income. On sale or retirement of an individual well the proceeds are credited to accumulated depreciation and depletion.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

2. Oil and Gas Properties – Continued

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” Rio Vista assess proved oil and gas properties for possible impairment when events or circumstances indicate that the recorded carrying value of the properties may not be recoverable (see note B4).

Unproved properties are assessed for impairment on a property-by-property basis. If considered impaired, costs are charged to expense when such impairment is deemed to have occurred. Rio Vista has no unproved properties at December 31, 2007.

3. Hedging Activities and Derivative Instruments

Rio Vista seeks to enter into contracts for the future sale of a portions of its existing production based on favorable price levels. As of December 31, 2007, these transactions were in the form of contracts to sell a certain amount of production at a fixed price.

Based on the above, Rio Vista is not required to mark to market the value of those contracts.

Rio Vista has adopted SFAS 133, “Accounting for Derivative Instruments and Hedging Activities”, which requires that all derivative financial instruments be recognized in the financial statements and measured at fair value regardless of the purpose or intent for holding them. Changes in the fair value of derivative financial instruments are either recognized periodically in income or partner’s capital (as a component of comprehensive income), depending on whether the derivative is being used to hedge changes in fair value or cash flows. In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”. SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments and hedging activities. For each of the two years in the period ended December 31, 2007, Rio Vista had no derivative financial instruments.

4. Property, Plant and Equipment

Property, plant and equipment are recorded at historical cost. After being placed into service, assets are depreciated using the straight-line method over their estimated useful lives as follows:

Terminal Facility and improvements	5-30 years
Pipelines	30 years
Automotive equipment	5-20 years
Machinery and equipment	5-10 years
Office equipment	3-10 years

Maintenance and repair costs are charged to expense as incurred.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

4. Property, Plant and Equipment – Continued

In August 2001 Statement SFAS No. 144 was issued. SFAS No. 144 supersedes the provisions of Statement of Financial Accounting Standards No. 121 “Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of”. SFAS No. 144 requires Rio Vista to review long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an impairment has occurred, the amount of the impairment is charged to operations.

5. Income Taxes

Rio Vista is a public limited partnership and is not subject to federal or state income taxes. However, some of Rio Vista’s operating subsidiaries are subject to foreign and U.S. corporate income taxes as follows:

Rio Vista’s U.S. corporate subsidiaries account for deferred taxes in accordance with SFAS 109, “Accounting for Income Taxes”. Under the liability method specified therein, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities. The principal types of differences between assets and liabilities for financial statement and income tax purposes are asset cost basis differences and depreciation.

Mexican subsidiaries:

Rio Vista’s Mexican subsidiaries are taxed on their income directly by the Mexican government and file their own separate income tax returns in Mexico. Rio Vista’s Mexican subsidiaries have elected pass-through treatment for U.S. income tax purposes. Accordingly, the income/loss of Rio Vista’s Mexican subsidiaries is included in the U.S. partnership income tax return of Rio Vista. The holders of the common units and General Partner interest are entitled to their proportionate share of any tax credits resulting from any income taxes paid to the Mexican government.

Regional and MV:

Regional and MV are taxed as U.S. corporations. A valuation allowance is provided when it is determined that it is more likely than not that a portion of a deferred tax asset balance will not be realized. Prior to November 1, 2004, Regional used the cash basis of accounting for determining taxable income and MV uses the cash basis of accounting for determining taxable income.

6. (Loss) Income Per Common Unit

Net (loss) income per common unit is computed on the weighted average number of common units outstanding in accordance with SFAS 128, “Earnings Per Share”. During periods in which Rio Vista incurs losses from continuing operations, giving effect to common unit equivalents is not included in the computation as it would be antidilutive.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE B — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — Continued

7. Cash Equivalents

For purposes of the cash flow statement, Rio Vista considers cash in banks and securities purchased with a maturity of three months or less to be cash equivalents.

8. Use of Estimates

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

9. Fair Value of Financial Instruments

SFAS 107, “Disclosures about Fair Value of Financial Instruments”, requires the disclosure of fair value information about financial instruments, whether or not recognized on the balance sheet, for which it is practicable to estimate the value. SFAS 107 excludes certain financial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts are not intended to represent the underlying value of Rio Vista. The carrying amounts of cash and cash equivalents, current receivables and payables approximate fair value because of the short-term nature of these instruments. Notes payable bear market rates of interest.

10. Unit-Based Payment

Rio Vista may issue warrants to purchase common units to non-employees for goods and services and to acquire or extend debt. Rio Vista applies the provisions of Statement of Financial Accounting Standards No. 123R “Share-Based Payment” (SFAS 123R) and Accounting Principles Board Opinion No. 14 “Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants” (APB 14) to account for such transactions. SFAS 123R requires that such transactions be accounted for at fair value. If the fair value of the goods and services or debt related transactions are not readily measurable, the fair value of the warrants is used to account for such transactions.

Rio Vista utilizes unit-based awards as a form of compensation for employees, officers, manager and consultants of the General Partner. During the quarter ended March 31, 2006, Rio Vista adopted the provisions of SFAS 123R for unit-based payments to employees using the modified prospective application transition method. Under this method, previously reported amounts should not be restated to reflect the provisions of SFAS 123R. SFAS 123R requires measurement of all employee unit-based payment awards using a fair-value method and recording of such expense in the consolidated financial statements over the requisite service period. The fair value concepts have not changed significantly in SFAS 123R; however, in adopting this standard, companies must choose among alternative valuation models and amortization assumptions. After assessing alternative valuation models and amortization assumptions, Rio Vista will continue using both the Black-Scholes valuation model and straight-line amortization of compensation expense over the requisite service period for each separately vesting portion of the grant. Rio Vista will reconsider use of this model if additional information becomes available in the future that indicates another model would be more appropriate, or if grants issued in future periods have characteristics that cannot be reasonably estimated using this model. Previously, Rio Vista had applied the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25) and related interpretations and elected to utilize the disclosure option of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (SFAS 123). Rio Vista recorded unit-based payment expense for employees and non-employees of $8,000 ($0.00 per common unit) and $249,000 ($0.12 per common unit) for the years ended December 31, 2006 and 2007, respectively, under the fair-value provisions of SFAS 123R.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

11. Revenue Recognition

LPG Transportation Fees and Regional:

Rio Vista recorded revenue only upon the actual gallons of LPG delivered to its customer at either the Matamoros Terminal Facility or Brownsville Terminal Facility at the agreed upon price per gallon.

Rio Vista recorded revenue under its LPG Transportation Agreement (see note D) when gallons of LPG were delivered to customers designated by TransMontaigne at the Matamoros Terminal Facility.

Regional records revenue for storage, transportation and transloading as the services are performed and delivery occurs.

Revenues for LPG transportation fees and Regional were recorded based on the following criteria:

(1) Persuasive evidence of an arrangement existed and the price was determined

(2) Delivery occurred.

(3) Collectibility was reasonably assured

Oil & Gas Revenues:

Sales of Natural Gas

Gas and oil production revenue and related natural gas liquids revenue are recognized based on actual volumes of gas, oil, and natural gas liquids sold to purchasers. Sales require delivery of the product to the purchaser, passage of title, and probability of collection of purchaser amounts owed. Gas and oil production revenue and related natural gas liquids revenue are reported net of royalties. Rio Vista uses the sales method of accounting for gas imbalances. Gas imbalances result from the gas volumes sold by Rio Vista from a property being different from its actual entitled volumes. Under the sales method, revenues are recognized based on actual volumes of gas sold. The volumes sold may differ from the entitled volumes. Direct operating expenses are recognized on an accrual basis and consist of costs required to operate gas and oil properties, product transportation expenses, and production and property taxes.

Gas revenues are recognized based on actual volumes of gas purchased from third party producers and sold to customers. Sales are recorded only upon the delivery of the product to the purchaser, passage of title, and collectability is reasonably assured. Losses, if any, resulting from imbalances from such sales are recognized currently, and gains, if any, are recognized at final delivery.

Oil and gas is sold by Rio Vista on a monthly basis. Virtually all of the Company’s contracts’ pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, quality of oil and gas, and prevailing supply and demand conditions, so that the price of the oil and gas fluctuate to remain competitive with other available oil and gas suppliers.

Gathering fees

Gas gathering fees are recorded as the services are performed and delivery has occurred and collectibility is reasonably assured.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

12. Foreign Currency Translation

Rio Vista follows FASB No. 52 “Foreign Currency Translation” in consolidation of the Rio Vista’s Mexican subsidiaries, whose functional currency is the US dollar. Non monetary balance sheet items and related revenue and expense are remeasured using historical rates. Monetary balance sheet items and related revenue and expense are remeasured using exchange rates in effect at the balance sheet dates.

13. Reclassifications

Certain reclassifications have been made to prior year balances to conform to the current presentation.

14. Trade Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivable are accounted for at fair value. Trade accounts receivable do not bear interest and are short-term in nature. An allowance for doubtful accounts for trade accounts receivable is established when the fair value is less than the carrying value. Trade accounts receivable are charged to the allowance when it is determined that collection is remote.

15. Consolidation of Variable Interest Entities

During 2004, Rio Vista adopted Financial Accounting Standards Board Interpretation No. 46, “Consolidation of Variable Entities” (FIN 46), which was amended by FIN 46R. This interpretation of Accounting Research Bulletin No. 51, “Consolidated Financial Statements”, addresses consolidation by business enterprises of variable interest entities (VIE) that do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support. FIN 46R requires the beneficiary of a VIE to consolidate in its financial statements the assets, liabilities and results of operations of the VIE. Tergas, an affiliate of Rio Vista, is a VIE and therefore, its assets, liabilities and results of operations have been included in the accompanying consolidated financial statements of Rio Vista.

16. Guarantees

In November 2002, the Financial Accounting Standards board issued Financial Accounting Standards Board Interpretation No. 45 “Guarantor’s Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of Indebtedness of Others” (FIN 45). This interpretation requires guarantors to disclose certain information about guarantees of indebtedness of others (see note K). In addition, under certain circumstances, those guarantees may result in such debts being recorded in the guarantor’s financial statements.

17. Restricted Cash

Prior to the Restated LPG Asset Sale, under the terms of the RZB Credit Facility (see note K), all cash from Rio Vista’s LPG sales were deposited directly into a restricted cash account under the direction of RZB to pay down all obligations of Penn Octane arising under the RZB Credit Facility. Rio Vista initially classified the balance of restricted cash separate from cash in the accompanying balance sheet and classified changes in the restricted cash balances as financing activities in the statements of cash flows since the restriction was directly related to RZB’s Credit Facility. When all restrictions are removed, restricted cash is reclassified into cash.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

18. Environmental Matters

Rio Vista is subject to various federal, state and local laws and regulations relating to the protection of the environment. Rio Vista has established procedures for the ongoing evaluation of its operations, to identify potential environmental exposures and to comply with regulatory policies and procedures.

Rio Vista accounts for environmental contingencies in accordance with SFAS No. 5 “Accounting for Contingencies.” Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and do not contribute to current or future revenue generation, are expensed. Liabilities for environmental contingencies are recorded when environmental assessments and/or clean-ups are probable and the costs can be reasonably estimated. Rio Vista maintains insurance which may cover in whole or in part certain types of environmental contingencies. For the year ended December 31, 2007, Rio Vista had no environmental contingencies requiring specific disclosure or the recording of a liability.

19. Asset Retirement Obligations

Rio Vista accounts for asset retirement obligations in accordance with SFAS No. 143, “Accounting for Asset Retirement Obligations” (SFAS 143). In accordance with SFAS 143, estimated asset retirement costs are recognized when the obligation is incurred, and are amortized over proved developed reserves using the units of production method. Asset retirement costs are estimated by Rio Vista using existing regulatory requirements and anticipated future inflation rates. Rio Vista had no estimated asset retirement obligations at December 31, 2007.

20. Segment Information

Rio Vista reports segment information in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (SFAS 131). Under SFAS 131, all publicly traded companies are required to report certain information about the operating segments, products, services and geographical areas in which they operate and their major customers. Operating segments are components of Rio Vista for which separate financial information is available that is evaluated regularly by management in deciding how to allocate resources and assess performance. This information is reported on the basis that it is used internally for evaluating segment performance. Rio Vista operates as two business segments: Transportation and Terminalling business and the Oil and Gas business (see note Q).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C – LOSS PER COMMON UNIT

The following tables present reconciliations from net loss from continuing operations per common unit to loss from continuing operations per common unit assuming dilution (see note J for the warrants):

	For the year ended December 31, 2006
	Loss			Units		Per-Unit
	(Numerator)			(Denominator)		Amount
Net loss from continuing operations available to the common units	$	(3,849,000	)
Basic EPS
Net loss available to the common units		(3,849,000	)		1,910,656	$	(2.01	)
Effect of Dilutive Securities
Warrants
Diluted EPS
Net loss available to the common units		N/A			N/A		N/A

	For the year ended December 31, 2007
	Loss			Units		Per-Unit
	(Numerator)			(Denominator)		Amount
Net loss from continuing operations available to the common units	$	(4,804,000	)
Basic EPS
Net loss available to the common units		(4,804,000	)		1,971,799	$	(2.44	)
Effect of Dilutive Securities
Warrants		—			—
Diluted EPS
Net loss available to the common units		N/A			N/A		N/A

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE D – DISPOSITIONS

SALE OF LPG ASSETS / DISCONTINUED OPERATIONS

On August 22, 2006, Rio Vista completed the sale and assignment to TransMontaigne of certain LPG assets, including the Brownsville Terminal Facility, the refined products tank farm and associated leases, and LPG inventory, wherever located, (collectively, the Brownsville Terminal Assets) and assignment of the 2006 PMI agreement (Brownsville Terminal Assets and the 2006 PMI agreement collectively, the Rio Vista Sold Assets) pursuant to an amended and restated purchase and sale agreement (Rio Vista Restated PSA). The Rio Vista Restated PSA replaced the previous purchase and sale agreement entered into between Rio Vista and TransMontaigne on August 15, 2005. Rio Vista retained its owned pipelines located in the United States, including land, leases and rights of way and 100% of the outstanding stock of its Mexican subsidiaries. Rio Vista’s Mexican subsidiaries and consolidated affiliate own pipelines in Mexico and the Matamoros Terminal Facility, including land and rights of way (collectively, the Retained Assets). The purchase price for the Rio Vista Sold Assets was $8,300,000 less closing adjustments of $351,173 and escrow cleaning costs of $500,000 (see paragraph below).

Also on August 22, 2006, Penn Octane completed the sale and assignment to TransMontaigne of all of Penn Octane’s LPG assets, including assignment of the lease of its leased pipeline (Leased Pipeline) and the Exxon Supply Contract (Penn Octane Sold Assets) pursuant to an amended and restated purchase and sale agreement (Penn Octane Restated PSA). The terms of the Penn Octane Restated PSA were substantially similar to the original purchase and sale agreement entered into between Penn Octane and TransMontaigne on August 15, 2005. Penn Octane retained assets related to its Fuel Sales Business, and its interest in the General Partner. The purchase price was $10,100,000 for assets sold by Penn Octane less closing adjustments of $132,177.

The Rio Vista Restated PSA required Rio Vista to escrow $500,000 for disposal and cleaning costs of the refined products tank farm (Escrow Cleaning Costs) and the TransMontaigne Note (see note G) was amended whereby Rio Vista was required to pay $300,000 of principal at closing and was required to pay the remaining outstanding principal balance on August 22, 2007 (see Sale of Remaining LPG Assets below). In addition, any portion of the Escrow Cleaning Costs returned to Rio Vista is required to be paid on the outstanding principal balance of the TransMontaigne Note.

Under the Rio Vista Restated PSA and the related transportation agreement between Rio Vista and TransMontaigne dated August 22, 2006 (LPG Transportation Agreement), TransMontaigne agreed to exclusively use the services and Retained Assets of Rio Vista on a fee basis for purposes of transportation of LPG to be delivered into northeastern Mexico and/or LPG sold pursuant to the existing PMI agreement. Rio Vista has agreed not to transport LPG through Rio Vista’s Retained Assets in Mexico except on behalf of TransMontaigne, subject to certain conditions. TransMontaigne has agreed to use the Retained Assets pursuant to the LPG Transportation Agreement which began on August 22, 2006 and runs for the term of the existing PMI agreement between TransMontaigne and PMI, as extended from time to time thereafter. Rio Vista receives a fee for all LPG transported on behalf of TransMontaigne through the Retained Assets. In addition, under the Rio Vista Restated PSA and the related pipeline services agreement between Rio Vista and TransMontaigne dated August 22, 2006 (U.S. Pipeline Services Agreement), TransMontaigne agreed to provide routine and non-routine operation and maintenance services, as defined, for the U.S. portion only of Rio Vista’s pipelines between Brownsville, Texas and Matamoros, Mexico. TransMontaigne agreed to provide the routine services at its sole cost and expense. For the non-routine services, Rio Vista agreed to reimburse TransMontaigne for all costs actually incurred in performing the services and all materials and supplies provided in connection with such services, plus 15%.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE D – DISPOSITION – Continued

SALE OF LPG ASSETS / DISCONTINUED OPERATIONS – Continued

The sale of the Rio Vista Sold Assets constituted a disposal of a business in accordance with FAS 144. Accordingly, the financials statements reflect the results associated with the Sold Assets prior to the sale as discontinued operations in the accompanying financial statements. Costs related to the Retained Assets, consisting of depreciation expense and the expenses related to the US-Mexico Pipelines and Matamoros Terminal Facility have been included in costs of goods sold since these costs have continued to be incurred in connection with the LPG Transportation Agreement. Revenues reported in discontinued operations in the accompanying consolidated statement of operations for the year ended December 31, 2006 were $71,526,000.

SALE OF REMAINING LPG ASSETS

On December 27, 2007, RVOP and RVOP’s wholly-owned subsidiary, Penn Octane International, LLC, entered into a definitive Purchase and Sale Agreement (the Purchase and Sale Agreement) with a wholly-owned subsidiary (TMOC Corp.) and two affiliates (TLP MEX L.L.C. and RAZORBACK L.L.C.) of TransMontaigne Partners L.P. (collectively, TLP) regarding TLP’s acquisition of RVOP’s remaining liquefied petroleum gas (LPG) assets. The Purchase and Sale Agreement was effective as of December 26, 2007. The transaction closed on December 31, 2007. The Purchase and Sale Agreement was executed pursuant to the letter of intent between RVOP and TLP dated September 12, 2007 and amended December 4, 2007.

Pursuant to the Purchase and Sale Agreement, subject to its terms and conditions, TLP agreed purchase from RVOP: (a) the United States portion of the two pipelines from the Brownsville, Texas terminal owned by TLP to the United States border (the US Pipelines) with all associated rights-of-way and easements (the US Easements); (b) all of the outstanding equity interests of PennMex, which holds the Mexican energy regulatory commission (CRE) permit, and Termatsal, which owns the portion of the two pipelines that extend from the US border to Matamoros, Mexico (the Mexican Pipelines); and (c) all of RVOP’s rights for indirect control of Tergas, which owns the Matamoros, Mexico terminal site (the Mexican Terminal). PennMex and Termatsal are 100% owned subsidiaries of RVOP and Tergas is an affiliate of RVOP, and each of the three companies (collectively, the Included Subsidiaries) is organized under the laws of Mexico. The US Pipelines, the US Easements, the Included Subsidiaries, the Mexican Pipelines and the Mexican Terminal, are collectively referred to as the “LPG Assets.”

The total purchase price for the LPG Assets was $10,825,000, subject to adjustment as provided in the Purchase and Sale Agreement. TLP has previously paid to RVOP deposits totaling $8,000,000 (the Deposits) which was credited to the purchase price at closing. The remaining $2,825,000 was paid at closing, subject to adjustments and less a holdback of $500,000 as security for RVOP’s indemnification obligations under the Purchase and Sale Agreement. In addition, RVOP’s existing $1,000,000 promissory note (the Existing Loan) payable to TransMontaigne Product Services Inc. (TPSI), an affiliate of TLP, was paid from the proceeds at closing. Prior to the execution of the Purchase and Sale Agreement, and until the closing, RVOP provided LPG transportation services to TLP or its affiliates under the terms of an LPG Transportation Agreement with TPSI.

In connection with the sale of the LPG Assets to TLP, RVOP and TPSI agreed to terminate the LPG Transportation Agreement and the U.S. Pipeline Service Agreement as of such closing date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE E – ACQUISITIONS

REGIONAL

On July 27, 2007, Rio Vista entered into an Agreement and Plan of Merger (Merger Agreement) with Regional Enterprises, Inc., a Virginia corporation (New Regional), Regional Enterprizes, Inc., a Virginia corporation (Old Regional), the shareholders of Old Regional and W. Gary Farrar, Jr. The Merger Agreement provided for Rio Vista to acquire the business of Old Regional by means of a merger of Old Regional into New Regional, a newly-formed, wholly-owned subsidiary of Rio Vista (the Regional Acquisition). The principal business of Regional is storage, transportation and railcar transloading of bulk liquids, including chemical and petroleum products owned by its customers. The total consideration pursuant to the Merger Agreement was $9,000,000, of which Rio Vista paid $8,000,000 in cash, less certain working capital and other adjustments and subject to certain amounts held in escrow, with the remaining $1,000,000 to be paid in four equal semiannual installments beginning six months from the date of the Regional Acquisition (Seller’s Note-Regional). Under the terms of the Merger Agreement, Rio Vista was entitled to net working capital of Old Regional of $500,000, subject to adjustments. Under the terms of the Merger Agreement, a total of $1,500,000 was placed into escrow to secure certain indemnification obligations of the former shareholders of Old Regional. Rio Vista funded the Regional Acquisition through a loan of $5,000,000 (RZB Note) from RZB Finance LLC (RZB) and the remaining amounts due at closing were paid from available working capital. In connection with the Regional Acquisition, Rio Vista entered into a loan agreement (the Loan Agreement) with RZB dated July 26, 2007. The RZB Note is due on demand, with a one-year maturity. The RZB Note carries a variable annual rate of interest equal to the higher of (a) the rate of interest established from time to time by JPMorgan Chase Bank, N.A. as its “base rate” or its “prime rate” (7.25% at December 31, 2007), or (b) the weighted average overnight funds rate of the Federal Reserve System plus 0.50%, in each case plus a margin of 4.75%. In connection with the RZB Note, New Regional granted to RZB a security interest in all of New Regional’s assets, including a deed of trust on real property owned by New Regional, and Rio Vista delivered to RZB a pledge of the outstanding capital stock of New Regional. On July 26, 2007, as a further condition of the Loan Agreement, Penn Octane also entered into a Guaranty & Agreement (Guaranty) with RZB. Pursuant to the Guaranty, Penn Octane agreed to guaranty all of the indebtedness, liabilities and obligations of Rio Vista to RZB under the Loan Agreement and otherwise. The RZB Note is also guaranteed by New Regional and RVOP.

Regional’s principal facilities are located on the James River in Hopewell, Virginia, where it receives bulk chemicals and petroleum products from ships and barges into approximately 10,400,000 gallons of available storage. Regional also receives product from a rail spur which is capable of receiving 14 rail cars at any one time for transloading of chemical and petroleum liquids for delivery throughout the mid-Atlantic region.

Regional utilizes its fleet of 32 tractors and 50 trailers to distribute the various products it receives as well as to perform direct hauling operations on behalf of its customers.

The accompanying consolidated balance sheet includes goodwill in the amount of $5,121,000 resulting from the acquisition. Goodwill represents the excess of the purchase price over the estimated fair value of identifiable net assets associated with acquisition transactions. Rio Vista has adopted the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (FASB 142). Under FASB 142, goodwill is not amortized. Rio Vista is required to make at least an annual test of the fair value of the intangible to determine if impairment has occurred. Rio Vista performs an annual impairment test for goodwill in the fourth quarter of each calendar year.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE E – ACQUISITIONS – Continued

OKLAHOMA ASSETS

On November 19, 2007, Rio Vista Penny LLC (Rio Vista Penny), an indirect, wholly-owned subsidiary of Rio Vista, entered into a Note Purchase Agreement, Promissory Notes, Security Agreement, Common Unit Purchase Warrant and related agreements with TCW Asset Management Company (TAMCO) as agent and TCW Energy Fund X investors as holders (the TCW Noteholders) (TAMCO and the TCW Noteholders collectively, TCW) in connection with a first lien senior credit facility (the TCW Credit Facility) between TCW and Rio Vista Penny. The purpose of the TCW Credit Facility was to provide financing of the acquisition of certain of the assets of GM Oil Properties, Inc., an Oklahoma corporation (GM Oil) and assets of Penny Petroleum Corporation, an Oklahoma corporation (Penny Petroleum) by Rio Vista Penny and the acquisition of the membership interests of GO, by Rio Vista GO LLC (Rio Vista GO), an indirect, wholly-owned subsidiary of Rio Vista. The assets of GM Oil, Penny Petroleum and GO are collectively referred to as the “Oklahoma assets.”

GM Oil Properties Inc.

On November 19, 2007, Rio Vista Penny completed the purchase of assets from GM Oil pursuant to the Asset Purchase Agreement between Rio Vista Penny and GM Oil dated as of October 1, 2007, as amended on November 16, 2007 (the Amended GM Agreement). The assets acquired pursuant to the Amended GM Agreement consist of the real and personal property interests of GM Oil in certain oil and gas properties located in Haskell, McIntosh and Pittsburg counties in Oklahoma, including approximately 33.33% of the outstanding capital stock of MV (collectively, the GM Assets). The total purchase price for the GM Assets was paid by assumption of the TCW Credit Facility in the amount of $16,750,000 million (including $250,000 of unpaid interest included in the TCW Credit Facility plus payment of additional accrued but unpaid interest in the amount of $340,000). The TCW Credit Facility is payable to the TCW Noteholders and is administered by TAMCO as agent pursuant to the TCW Credit Facility. No cash or equity consideration was paid to GM Oil or its shareholders as part of the purchase price of the GM Assets.

Penny Petroleum Corporation

On November 19, 2007, Rio Vista Penny completed the purchase of assets from Penny Petroleum pursuant to the Asset Purchase Agreement between Rio Vista Penny, Penny Petroleum and Gary Moores (a shareholder of Penny Petroleum), dated as of October 1, 2007, as amended on October 25 and November 16, 2007 (the Amended Penny Agreement). The assets acquired pursuant to the Amended Penny Agreement consist of the real and personal property interests of Penny Petroleum in certain oil and gas properties located in McIntosh, Pittsburg and Haskell counties in Oklahoma, including approximately 66.66% of the outstanding capital stock of MV (collectively, the Penny Assets).

The total purchase price paid for the Penny Assets was $7,400,000, consisting of cash, a promissory note and equity interests in Rio Vista. The cash portion of the purchase price was $6,400,000, together with a promissory note with the principal amount of $500,000 bearing interest at 7% per annum (the Moores Note) payable to Gary Moores on May 19, 2008. Beginning February 19, 2008, Gary Moores has the option to convert the outstanding principal and interest of the Moores Note into common units of Rio Vista at a conversion price equal to 90% of the 10-day average closing price of such common units as reported by the NASDAQ Stock Market at the time of conversion. The conversion option may be exercised on only one occasion and expires on May 19, 2008. The equity portion of the purchase price was paid by delivery of 45,998 common units of Rio Vista (the Penny Units). Rio Vista agreed to file with the SEC a registration statement on Form S-3 covering the Penny Units within 90 days following November 19, 2007. On February 13, 2008, Rio Vista filed a Form S-3 with the SEC. The Form S-3 is expected to be declared effective upon the filing of this Annual Report on Form 10-K.

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE E – ACQUISITIONS – Continued

OKLAHOMA ASSETS — Continued

GO LLC

On November 19, 2007, Rio Vista GO completed the purchase of membership interests of GO pursuant to the Membership Interest Purchase and Sale Agreement between Rio Vista GO, GO, Outback Production Inc. (Outback) (the owner of all of the outstanding membership interests of GO), and Gary Moores and Bill Wood (each a shareholder of Outback), dated as of October 2, 2007, as amended on November 16, 2007 (the Amended GO Agreement). The total purchase price paid for the membership interests of GO was $4,000,000, consisting of cash and equity interests in Rio Vista. The cash portion of the purchase price was $3,000,000. The equity portion of the purchase price was paid by delivery of 91,996 common units of Rio Vista (the GO Units) to Gary Moores and Bill Wood. Rio Vista has agreed to file with the SEC a registration statement on Form S-3 (the GO Registration Statement) covering the GO Units within 90 days following November 19, 2007. On February 13, 2008, Rio Vista filed a Form S-3 with the SEC. The Form S-3 is expected to be declared effective upon the filing of this Annual Report on Form 10-K.

On the date the GO Registration Statement is declared effective by the SEC (the Registration Date), if the closing price of Rio Vista’s common units as reported by the NASDAQ Stock Market (the Registration Date Price) is less than 80% of $10.87 (the Minimum Price), Rio Vista GO will deliver to Outback either (i) additional common units of Rio Vista (the Additional GO Units) in such number as necessary so that the total value of the GO Units and the Additional GO Units, in each case based on the Registration Date Price, is at least 80% of the value of the Purchase Price Units based on the Minimum Price or (ii) additional cash (the Additional Cash) in such amount as necessary so that the total value of the GO Units, based on the Registration Date Price, together with the Additional Cash, is at least 80% of the value of the GO Units based on the Minimum Price. In lieu of delivery of Additional GO Units or Additional Cash to supplement the GO Units, Rio Vista GO has the alternate option to pay the entire value of the GO Units based on the Minimum Price in cash (the All Cash Payment). Upon delivery of the All Cash Payment to the Seller, all GO Units shall be returned to Rio Vista GO and/or cancelled by Rio Vista.

Summary of Assets Acquired and Pro forma Information

The total purchase price for the acquisition of the Oklahoma assets was approximately $33,007,000 consisting of a cash payment in the amount of $10,070,000, including $3,000,000 from the TCW Credit Facility, which included acquisition fees and other assumed liabilities of $1,890,000, the issuance of $1,500,000 of common units, the issuance of a $500,000 short-term convertible note, and the assumption the TCW Credit Facility with a balance of $21,700,000 including $2,000,000 payment to TCW to obtain the credit facility. In December 2008, the TCW Credit Facility will convert to an eight-year amortizing loan with a fixed interest rate of 10.5%.

The accompanying consolidated financial statements include the operations of Regional and the Oklahoma assets since the dates of acquisition. The assets acquired and liabilities assumed have been recorded at their estimated fair values at the date of acquisition.

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE E – ACQUISITIONS – Continued

Summary of Assets Acquired and Pro forma Information - Continued

The following table summarizes the initial estimated fair values of the assets acquired and liabilities assumed at the acquisition dates. Such estimates could change as a result of further refinement and the possible purchase price adjustment discussed above. The goodwill assigned to the Regional acquisition is not expected to be deductible for Federal or state income tax purposes.

			Oklahoma
	Regional		Acquisitions
Current assets	$	843,000	$	—
Oil and gas properties and related equipment		—		26,255,000
Property, plant and equipment, net		6,421,000		6,752,000
Goodwill		5,121,000		—
Total assets acquired		12,385,000		33,007,000
Current liabilities		1,122,000		4,615,000
Long-term liabilities		2,864,000		19,822,000
Total liabilities assumed		3,986,000		24,437,000
Net assets acquired	$	8,399,000	$	8,570,000

The following unaudited pro forma information assumes that the acquisitions occurred at the beginning of the periods presented:

	Year ended			Year ended
	December 31,			December 31,
	2006			2007
Revenues		13,561,000			14,202,000
Net loss		(2,239,000	)		(7,594,000	)
Net loss per common unit		(1.15	)		(3.77	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE F – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

	December 31,			December 31,
	2006			2007
Oklahoma:
Pipelines and equipment	$	—		$	6,756,000
Regional:
Land		—			237,000
Terminal and improvements		—			3,825,000
Automotive equipment		—			2,438,000
		—			6,500,000
US — Mexico Pipelines and Matamoros Terminal Facility: (a)
U.S. Pipelines and Rights of Way		6,852,000			—
Mexico Pipelines and Rights of Way		1,046,000			—
Matamoros Terminal Facility		5,564,000			—
Land		705,000			—
		14,167,000			—
		14,167,000			13,256,000
Less: accumulated depreciation and amortization		( 3,463,000	)		( 494,000	)
	$	10,704,000		$	12,762,000

(a) Sold December 27, 2007 (see note D).

Depreciation expense of property, plant and equipment from continuing operations totaled $591,000 and $1,071,000 for each of the two years in the period ended December 31, 2007, respectively.

Property, plant and equipment, net of accumulated depreciation, includes $4,704,000 of costs, located in Mexico at December 31, 2006.

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE G – DEBT OBLIGATIONS

Short-term debt obligations are as follows:

	December 31,		December 31,
	2006		2007
RZB Note (see note E)	$	—	$	5,000,000
Moores Note (net of discount of $7,000) (see note E)		—		493,000
Other		—		—
	$	—	$	5,493,000
Long-term debt obligations are as follows
TCW Credit Facility (net of discount of $11,000)	$	—	$	23,689,000
Seller’s Note – Regional (net of discount of $78,000)		—		922,000
TransMontaigne Note		1,000,000		—
		1,000,000		24,611,000
Less current portion		1,000,000		3,361,000
	$	—	$	21,250,000

Maturities of long-term debt are as follows:

2008	$	3,361,000
2009		3,109,000
2010		2,687,000
2011		15,454,000
2012		—
Thereafter		—
	$	24,611,000

TransMontaigne Note

In connection with the purchase and sale agreement entered into between Rio Vista and TransMontaigne on August 15, 2005 (see note D), TransMontaigne loaned Rio Vista $1,300,000 (TransMontaigne Note). The TransMontaigne Note was to be repaid, including interest, as a reduction of the total purchase price at the time of closing or 120 days following demand by TransMontaigne. The TransMontaigne Note was secured by the tank farm and certain LPG storage tanks located at the Brownsville Terminal Facility (Collateral). The TransMontaigne Note began to accrue interest on November 15, 2005 at the prime rate plus 2%. On August 22, 2006, in connection with the Rio Vista Restated PSA, the TransMontaigne Note was amended whereby Rio Vista paid $300,000 of principal and the TransMontaigne Note was extended. The TransMontaigne Note was also amended to substitute as collateral the US portion of the eight-inch pipeline owned by Rio Vista. As a result of the sale of the remaining LPG Assets (see note D), the TransMontaigne Note was paid December 31, 2007.

Sellers’ Note – Regional

In connection with the Regional Acquisition, Regional issued a promissory note in the amount of $1,000,000 to be paid in four equal semiannual installments beginning six months from the date of the Regional Acquisition. Rio Vista has recorded a discount of $116,000, (10% effective rate) representing the portion of interest associated with the note, which shall be amortized over the term of the note. For the period of July 28, 2007 through December 31, 2007, $37,000 was amortized.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE G – DEBT OBLIGATIONS – Continued

TCW Credit Facility

The TCW Credit Facility is a $30,000,000 senior secured credit facility available to Rio Vista Penny with a maturity date of August 29, 2010. The amount of the initial draw under the facility was $21,700,000, consisting of $16,750,000 in assumption of the existing indebtedness in the principal amount of $16,500,000  plus accrued but unpaid interest in the amount of $250,000 owed by GM Oil to TCW, $1,950,000 in consideration for TCW to enter into the TCW Credit Facility with Rio Vista Penny and for Rio Vista Penny to purchase an overriding royalty interest (ORRI) held by an affiliate of TCW, and $3,000,000 to fund the acquisition of the membership interests of GO by Rio Vista GO. TCW has also approved plan of development (APOD) for the Oklahoma assets totaling approximately $2,000,000 which was funded during December 2007. The TCW Credit Facility is secured by a first lien on all of the Oklahoma assets and associated production proceeds pursuant to the Note Purchase Agreement, Security Agreement and related agreements, including mortgages of the Oklahoma assets in favor of TCW. The interest rate is 10.5%, increasing to 12.5% if there is an event of default. Payments under the TCW Credit Facility are interest-only until December 29, 2008. The TCW Credit Facility carries no prepayment penalty. Rio Vista ECO LLC (an indirect, wholly-owned subsidiary of Rio Vista and the direct parent of Rio Vista Penny and Rio Vista GO), Rio Vista GO, GO and MV have each agreed to guarantee payment of the Notes payable to investors under the TCW Credit Facility.

Under the terms of the Note Purchase Agreement, at any time during the period from May 19, 2008 through November 19, 2009, TCW has the right to demand payment of $2,200,000 of debt (Demand Loan). Beginning May 19, 2008, TCW also has the right to convert the outstanding principal amount of the Demand Loan into common units of Rio Vista at a price equal to the lesser of $13.33 per unit or 90% of the 20-day average trading price of such units preceding the election to convert. Beginning November 19, 2008, TCW has the right to convert the balance of the debt under the TCW Credit Facility into common units of Rio Vista at a price equal to 90% of the 20-day average trading price of such units preceding the election to convert. Rio Vista has agreed to file with the Securities and Exchange Commission (SEC) a registration statement on Form S-3 covering the common units issued pursuant to the conversion feature within 90 days following the first exercise of the conversion feature.

Rio Vista Penny and Rio Vista GO, which hold the Oklahoma assets, are prohibited from making upstream distributions to Rio Vista until December 2008. Thereafter, upstream distributions to Rio Vista not in excess of 75% of quarterly cash flow are permitted subject to certain conditions. In addition, the TCW Credit Facility agreement requires semi-annual reserve reports by an independent engineer which is used in determining the allowable borrowing base. The initial report is due June 1, 2008.

Beneficial Conversion Features

In connection with the issuance of the Moores Note and TWC Credit Facility, Rio Vista recorded a beneficial conversion feature as interest expense and debt discount for the difference between carrying amount of the debt obligations and the estimated fair value of the common units to be issued upon conversion in the amount of $25,000.

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE H – INCOME TAXES

The tax effects of temporary differences and carryforwards that give rise to deferred tax assets and liabilities for Regional and MV were as follows at:

	December 31, 2007
	Assets		Liabilities
Depreciation	$	—	$	1,180,000
Asset basis differences		—		1,973,000
Deferred other cost		4,000		85,000
Net operating loss carryforward		87,000		—
		91,000		3,238,000
Less: valuation allowance		91,000		—
	$	—	$	3,238,000

For the year ended December 31, 2007, Rio Vista incurred U.S. income tax expense of $125,000, deferred U.S. and state income tax benefit of $203,000 state income tax expense of $23,000 and Mexican income tax expense of $34,000. U.S. and State income taxes were entirely associated with the taxable subsidiaries of Rio Vista, Regional and MV.

Rio Vista has established a valuation allowance on its deferred tax assets reducing them to the value management feels is more likely than not to be realized.

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an Interpretation of SFAS No. 109” (FIN 48). FIN 48 clarifies the accounting for uncertainty in tax positions recognized in a company’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of the tax position taken or expected to be taken in a tax return. Rio Vista adopted FIN 48 effective January 1, 2007. The adoption of FIN 48 did not have any impact on the accompanying financial statements.

The tax years that remain open to examination are 2002 – 2007 for foreign jurisdictions, and 2003-2007 for domestic entities.

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE H – INCOME TAXES – Continued

The tax effects of Mexican income tax temporary differences and carryforwards that give rise to Mexican deferred tax assets and liabilities were as follows at December 31,:

	2006				2007
	Assets		Liabilities		Assets		Liabilities
Accrued expenses	$	2,000	$	—	$	—	$	—
Net operating loss carryforward		—		—		—		—
		2,000		—		—		—
Less: valuation allowance		2,000		—		—		—
	$	—	$	—	$	—	$	—

Rio Vista’s Mexican subsidiaries incurred income tax expense in Mexico on their taxable income. Mexican income tax expense for the years ended December 31, 2006 and 2007 was approximately $37,000 and $34,000, respectively. No deferred Mexican income tax expense was recorded for the year ended December 31, 2006. The Mexican subsidiaries were sold in December 2007 (see note D).

Management believed that the valuation allowance reflected above was appropriate because of the uncertainty that sufficient taxable income will be generated in future taxable years by Rio Vista’s Mexican subsidiaries to utilize the deferred tax assets.

A reconciliation of the U.S. Federal statutory tax rate to Rio Vista’s effective tax rate is as follows:

	December 31,
	2007
Net loss from continuing operations	$	( 4,901,000	)
Financial statement income taxed at partner level		4,740,000
Loss from Regional and MV		( 161,000	)
Income tax benefit at statutory rate (38%)		( 61,000	)
Reconciling items:
Mexican taxes		34,000
Permanent differences and other		6,000
Benefit for income taxes	$	( 21,000	)

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE H – INCOME TAXES – Continued

Rio Vista is taxed as a Partnership under Code Section 701 of the Internal Revenue Code. All of Rio Vista’s subsidiaries except for Regional and MV are taxed at the partner level, therefore, Rio Vista has no U.S. income tax expense or liability. The Partnership’s significant basis differences between the tax bases and the financial statement bases of its assets and liabilities are the cost basis and depreciation differences of the depreciable assets and deferred interest and compensation costs on unexercised warrants. The net reversal of cost basis and depreciation differences vary considerably from limited partner to limited partner due to allocations under Section 734 and 743 of the Internal Revenue Code. The deferred interest and compensation cost for tax purposes is $975,000. Interest and compensation expense may or may not be recognized for tax purposes depending on the exercise of related warrants prior to their expiration.

NOTE I – PARTNERS’ CAPITAL

Common Units

On June 29, 2007, the Board of Managers of the General Partner Rio Vista approved the grant of a restricted unit bonus of 25,000 common units under Rio Vista’s 2005 Equity Incentive Plan to an executive officer of the General Partner. The restricted unit bonus vests as to 8,334 units on July 1, 2007, an additional 8,333 units on January 1, 2008, and an additional 8,333 units on July 1, 2008, and becomes fully vested upon a change in control event. In connection with the grant of restricted units, the Board of Managers also approved the payment to the executive officer of one or more cash bonuses in amounts sufficient, on an after-tax basis, to cover all taxes payable by the executive officer with respect the award of restricted units to him. Total compensation to be recorded under the aforementioned grant of units as they vest totals $280,000 of which $186,000 will be charged to operations in 2008.

On November 19, 2007, in connection with the acquisition of the Oklahoma assets, Rio Vista issued a total of 137,994 common units of Rio Vista to the sellers of GO and Penny Petroleum.

Private Placement of Common Units

On November 29, 2007, Rio Vista and Rio Vista GP LLC (Rio Vista GP), entered into a Unit Purchase Agreement with Standard General Fund L.P., Credit Suisse Management LLC and Structured Finance Americas LLC (collectively, Purchasers) dated effective as of November 29, 2007 (the Unit Purchase Agreement). Pursuant to the terms of the Unit Purchase Agreement, Rio Vista agreed to sell, and the Purchasers agreed to purchase, a total of 355,556 common units of Rio Vista (Common Units) at a price of $11.25 per share in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (Securities Act). The total purchase price of the Common Units is $4,000,000. Rio Vista agreed to pay expenses of counsel to the Purchasers in an amount not to exceed $100,000. Rio Vista used the net proceeds from the sale of the Common Units for general working capital purposes, including repayment of indebtedness. Rio Vista agreed not to offer or sell any of its equity securities (including equity securities of subsidiaries) for a period of 12 months following the closing date without first offering such securities to the Purchasers, which shall have the right to purchase up to 30% of such securities. The Unit Purchase Agreement contains customary representations, warranties and covenants of the parties and is subject to customary conditions to closing, including approval for listing of the Common Units on the Nasdaq Global Market.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE I – PARTNERS’ CAPITAL – Continued

Private Placement of Common Units – Continued

On December 3, 2007, Rio Vista and Standard General entered into a Registration Rights Agreement (Registration Rights Agreement) pursuant to which Rio Vista agreed to provide to the Purchasers registration rights with respect to the Common Units. Pursuant to the Registration Rights Agreement, Rio Vista agreed to file, within 90 days after the closing date for the sale of the Common Units, a shelf registration statement under the Securities Act to permit the public resale of the Common Units from time to time, including resale on a delayed or continuous basis as permitted by Rule 415 under the Securities Act. Rio Vista agreed to use its best efforts to cause the registration statement to become effective on or before the date of filing of Rio Vista’s Annual Report on Form 10-K for the year ending December 31, 2007 but no later than April 14, 2008. On February 13, 2008, Rio Vista filed a Form S-3 with the SEC. The form S-3 is expected to be declared effective upon the filing of this Annual Report on Form 10-K. Rio Vista must pay liquidated damages to Standard General if the registration statement is not declared effective by such date as to all of the Common Units. In general, the amount of such damages equals 1% of the purchase price of the unregistered Common Units for each period of 30 days for which such units remain unregistered. If payment of such damages in cash would result in a default under any credit agreement of Rio Vista, in lieu of a cash payment Rio Vista may issue additional common units at a discount of 5% to the closing price for such units as reported by the Nasdaq Global Market. Holders of at least $250,000 of the Common Units also have piggyback registration rights to include their Common Units in an underwritten offering by Rio Vista, subject to cutback as requested by the managing underwriter of such offering. No holder of Common Units is entitled to any demand rights that would require Rio Vista to effect an underwritten offering solely on behalf of such holder. Rio Vista is responsible for paying expenses of registration of the Common Units, excluding underwriting fees, discounts and selling commissions. Subject to certain exceptions, Rio Vista may not grant registration rights superior to those of the holders of the Common Units without the consent of such holders.

On March 7, 2008, the Board of Managers of the General Partner Rio Vista approved the grant of a unit bonus of 8,812 common units under Rio Vista’s 2005 Equity Incentive Plan to an executive officer of the General Partner. The amount of units granted was based on the average of the high and low sale prices for Rio Vista common units as reported by the NASDAQ Stock Market on March 7, 2008.

On March 7, 2008, a total of 61,875 options to acquire common units of Rio Vista were exercised by holders of such warrants. Total proceeds received from the exercises were $774,000. In addition, on March 7, 2008, 15,625 options to acquire common units of Rio Vista were exercised by a holder through the offset of a severance obligation in connection with that employees termination.

The common units represent limited partner interests in Rio Vista. The holders of common units are entitled to participate in Rio Vista’s distributions and exercise the rights or privileges available to limited partners under the partnership agreement. The holders of common units have only limited voting rights on matters affecting Rio Vista. Holders of common units have no right to elect the General Partner or its managers on an annual or other continuing basis. Penn Octane elects the managers of the General Partner. Although the General Partner has a fiduciary duty to manage Rio Vista in a manner beneficial to Rio Vista and its unitholders, the managers of the General Partner also have a fiduciary duty to manage the General Partner in a manner beneficial to Penn Octane and the other owners of the General Partners. The General Partner generally may not be removed except upon the vote of the holders of at least 80% of the outstanding common units; provided, however, if at any time any person or group, other than the General Partner and its affiliates, or a direct or subsequently approved transferee of the General Partner or its affiliates, acquires, in the aggregate, beneficial ownership of 20% or more of any class of units then outstanding, that person or group will lose voting rights on all of its units and the units may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes, determining the presence of a quorum or for other similar purposes. In addition, the partnership agreement contains provisions limiting the ability of holders of common units to call meetings or to acquire information about Rio Vista’s operations, as well as other provisions limiting the holders of common units ability to influence the manner or direction of management.

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE I – PARTNERS’ CAPITAL – Continued

General Partner Interest

The General Partner of Rio Vista owns a 2% General Partner interest in Rio Vista. On July 1, 2006, Penn Octane’s 100% interest in the General Partner was decreased to 50% as a result of the exercise by Shore Capital LLC (Shore Capital), an affiliate of Mr. Richard Shore Jr., former president of Penn Octane and former chief executive officer of Rio Vista, and by Mr. Jerome B. Richter, of options to each acquire 25% of the General Partner (General Partner Options). The exercise price for each option was approximately $82,000. Mr. Richter’s option was amended to permit payment of the exercise price by surrender of Penn Octane common stock having a fair market value equal to the exercise price. Mr. Richter paid the exercise price for his option by surrender of 136,558 shares of Penn Octane common stock. In connection with the exercise of the General Partner Options, Penn Octane retained voting control of the General Partner pursuant to a voting agreement with each of Shore Capital and Mr. Richter. In December 2006, Shore Capital transferred its interest in the General Partner to Shore Trading LLC, an affiliated entity (Shore Trading). Shore Trading is also a party to the voting agreement with Penn Octane.

On February 6, 2007, Penn Octane entered into a purchase option agreement with Shore Trading that provided Penn Octane with the option to purchase the 25% interest in the General Partner held by Shore Trading. Penn Octane exercised its option on July 19, 2007 and acquired the 25% interest for a total cost of $1,400,000.

The General Partner generally has unlimited liability for the obligations of Rio Vista, such as its debts and environmental liabilities, except for those contractual obligations of Rio Vista that are expressly made without recourse to the General Partner.

Distributions of Available Cash

All Rio Vista unitholders have the right to receive distributions from Rio Vista of “available cash” as defined in the partnership agreement in an amount equal to at least the minimum distribution of $0.25 per quarter per unit, plus any arrearages in the payment of the minimum quarterly distribution on the units from prior quarters subject to any reserves determined by the General Partner. The General Partner has a right to receive a distribution corresponding to its 2% General Partner interest and the incentive distribution rights described below. The distributions are to be paid within 45 days after the end of each calendar quarter. However, Rio Vista is prohibited from making any distributions to unitholders if it would cause an event of default, or an event of default exists, under any obligation of Penn Octane which Rio Vista has guaranteed.

In addition to its 2% General Partner interest, the General Partner is currently the holder of incentive distribution rights which entitled the holder to an increasing portion of cash distributions as described in the partnership agreement. As a result, cash distributions from Rio Vista are shared by the holders of the common units and the General Partner interest based on a formula whereby the General Partner receives disproportionately more distributions per percentage interest than the holders of the common units as annual cash distributions exceed certain milestones.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE I – PARTNERS’ CAPITAL – Continued

Distributions of Available Cash – Continued

Rio Vista made the following distributions during the years ended December 31, 2006 and 2007:

					Amounts Paid
Quarter	Payment		Distribution		Common		General
Ended	Date		Per Unit		Units		Partner
Sep 2006		10/26/06	$	0.25	$	478,000	$	10,000
Dec 2006		01/18/07	$	0.25	$	478,000	$	10,000
Mar 2007		05/04/07	$	0.25	$	478,000	$	10,000
Jun 2007		07/31/07	$	0.25	$	484,000	$	10,000
Sep 2007		11/14/07	$	0.25	$	484,000	$	10,000
June 30, 2005 – June 30, 2006 Arrearages		12/10/07	$	1.25	$	2,420,000	$	49,000

The amount of the distributions paid represents the minimum quarterly distribution required to be made by Rio Vista pursuant to the partnership agreement. As of December 31, 2007, Rio Vista has made all the required minimum distributions to its common unitholders. A distribution of $607,000 and $13,000 for the quarter ended December 31, 2007 was made on February 14, 2008 to the common units and General Partner, respectively.

NOTE J – UNIT WARRANTS

Options and Warrants

Rio Vista has no U.S. employees and is managed by its General Partner. Rio Vista applies SFAS 123R for warrants granted to employees and managers of the General Partner and for warrants issued to acquire goods and services from non-employees.

Equity Incentive Plan

On March 9, 2005, the board of managers of the General Partner approved the Rio Vista 2005 Equity Incentive Plan (2005 Plan). The 2005 Plan permits the grant of common unit options, common unit appreciation rights, restricted common units and phantom common units to any person who is an employee (including to any executive officer) or consultant of Rio Vista or the General Partner or any affiliate of Rio Vista or the General Partner. The 2005 Plan provides that each outside manager of the General Partner shall be granted a common unit option once each fiscal year for not more than 5,000 common units, in an equal amount as determined by the board of managers. The aggregate number of common units authorized for issuance as awards under the 2005 Plan is 750,000. The 2005 Plan shall remain available for the grant of awards until March 9, 2015, or such earlier date as the board of managers may determine. The 2005 Plan is administered by the compensation committee of the board of managers. In addition the board of managers may exercise any authority of the compensation committee under the 2005 Plan. Under the terms of the partnership agreement and applicable rules of the NASDAQ Stock Market, no approval of the 2005 Plan by the common unitholders of Rio Vista was required.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE J – UNIT WARRANTS – Continued

Equity Incentive Plan – Continued

On February 15, 2007, the board of managers of the General Partner approved the grant of options to purchase a total of 21,250 common units under the 2005 Plan. Of the total number of options granted, 5,000 were issued to an executive officer of the General Partner and 16,250 were issued to outside managers of the General Partner. The exercise price for the options is $8.38 per unit, which was the average of the high and low sale prices for Rio Vista common units as reported by the NASDAQ Stock Market on February 15, 2007. Options granted to the executive officer vest in equal monthly installments over a period of 36 months from the date of grant, become fully vested and exercisable upon a change in control event, and expire five years from the date of grant. Options granted to outside managers are fully vested on the date of grant and expire five years from the date of grant. Total compensation to be recorded under the aforementioned grant of option as they vest totals approximately $51,000.

On March 21, 2007, the board of managers of the General Partner approved the grant of an option to purchase 20,000 common units of Rio Vista under the 2005 Plan to an executive officer of the General Partner. The exercise price for the options is $7.36 per unit, which was the average of the high and low sale prices for Rio Vista common units as reported by the NASDAQ Stock Market on March 21, 2007. The options vest in equal monthly installments over a period of 36 months from the date of grant, become fully vested and exercisable upon a change in control event, and expire five years from the date of grant. Total compensation to be recorded under the aforementioned grant of options as they vest totals approximately $44,000.

On June 15, 2007, in connection with the Board Consulting Agreement with Mr. Richard R. Canney (see note K), Rio Vista granted Mr. Canney an option to purchase 26,963 common units of Rio Vista. The exercise price for the option is $11.14 per unit, which was the average of the high and low sale prices as reported by the NASDAQ Stock Market on June 15, 2007. The Board Consulting Agreement was terminated by Mr. Canney effective September 30, 2007 resulting in the termination of the options.

On June 29, 2007, the board of managers of the General Partner Rio Vista approved the grant of an option to purchase 75,000 common units of Rio Vista under the 2005 Plan to an executive officer of the General Partner. The exercise price for the options is $11.21 per unit, which was the average of the high and low sale prices for Rio Vista common units as reported by the NASDAQ Stock Market on June 29, 2007. The unit option vests in equal monthly installments over a period of 36 months beginning January 1, 2007, becomes fully vested and exercisable upon a change in control event, and expires five years from the date of grant. Total compensation to be recorded under the aforementioned grant of options as they vest totals $294,000.

In connection with the employment agreement with an executive of Regional, Rio Vista granted options to purchase a total of 25,000 common units under the 2005 Plan to the executive. The exercise price for the options is $16.66 per unit, which was the average of the high and low sale prices for Rio Vista common units as reported by the NASDAQ Stock Market on July 27, 2007. The options vest over a two year period.

On August 23, 2007, the board of managers of the General Partner approved the grant of options to purchase a total of 8,125 common units under the 2005 Plan to outside managers of the General Partner. The exercise price for the options is $15.15 per unit, which was the average of the high and low sale prices for Rio Vista common units as reported by the NASDAQ Stock Market on August 23, 2007. Options granted to outside managers are fully vested on the date of grant and expire five years form the date of grant. Total compensation to be recorded under the aforementioned grant of options as they vest totals approximately $58,000.

The amount of total compensation not yet recognized as of December 31, 2007 was $ 416,000. Such amounts will be recognized over the remaining life of the grants.

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE J – UNIT WARRANTS – Continued

Equity Incentive Plan – Continued

On January 23, 2008, the board of managers of the General Partner approved the grant of options to purchase a total of 16,250 common units under the 2005 Plan to certain outside members of the board of managers of the General Partner. The exercise price for the options is $14.42 per unit, which was the average of the high and low sale prices for Rio Vista common units as reported by the NASDAQ Stock Market on January 23, 2008. Options granted to outside managers are fully vested on the date of grant and expire five years from the date of grant. These issuances were exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) thereof because the issuances do not involve any public offering of securities.

For warrants granted to non-employees of the General Partner, Rio Vista applies the provisions of SFAS 123R to determine the fair value of the warrants issued. No warrants were granted to non-employees of the General Partner for each of the three years in the period ended December 31, 2007.

A summary of the status of Rio Vista’s warrants for each of the two years in the period ended December 31, 2007 and changes during the years ending on these dates are presented below:

	2006					2007
				Weighted					Weighted
				Average					Average
Warrants	Shares			Exercise Price		Shares			Exercise Price
Outstanding at beginning of year		383,290		$	9.50		209,719		$	10.64
Granted		—			—		149,375			11.42
Exercised		—			—		—			—
Expired		( 173,571	)		8.13		( 10,000	)		13.23
Outstanding at end of year		209,719			10.64		349,094			10.90
Warrants exercisable at end of year		209,719					254,663

The intrinsic value of warrants exercised during the year ended December 31, 2007 was $ 0.

The following table depicts the weighted-average exercise price and weighted average fair value of warrants granted during each of the two years in the period ended December 31, 2007, by the relationship of the exercise price of the warrants granted to the market price on the grant date:

	2006				2007
	For warrants granted				For warrants granted
	Weighted		Weighted		Weighted		Weighted
Exercise pricecompared to	Average		Average		Average		Average
market price on grant date	Fair Value		Exercise Price		Fair Value		Exercise Price
Equals market price	$	—	$	—	$	4.30	$	11.42
Exceeds market price		—		—		—		—
Less than market price		—		—		—		—

The fair value of each warrant grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in the year ended December 31, 2007, dividend yield of 12.5%, 13.0%, 9.3%, 6.1% and 6.5%; expected volatility of 81.9%, 82.2%, 80.8%, 84.1% and 84.4%; risk-free interest rate of 4.25%, 4.64%, 4.72%, 4.72% and 4.94%; and expected life of 5 years.

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE J – UNIT WARRANTS – Continued

Equity Incentive Plan – Continued

The following table summarizes information about the warrants outstanding at December 31, 2007:

	Warrants Outstanding						Warrants Exercisable
	Number		Weighted				Number
	Outstanding		Average		Weighted		Exercisable		Weighted
	at		Remaining		Average		at		Average
	December 31,		Contractual		Exercise		December 31,		Exercise
Range of Exercise Prices	2007		Life		Price		2006		Price
$5.00 to $11.21		173,000		4.66 years	$	8.45		98,361	$	7.04
$12.51 to $16.66		176,094		3.94		13.30		156,302		12.87
		349,094		4.29	$	10.90		254,663	$	10.62

The aggregate intrinsic value of options outstanding at December 31, 2007 and options exercisable at December 31, 2007 were $1,625,000 and $506,000, respectively.

A summary of the status of nonvested shares as of December 31, 2007 and changes during the year ended December 31, 2007 is presented below:

				Weighted
				Average Grant-
Nonvested shares	Shares			Date Fair Value
Nonvested at January 1, 2007		—			—
Granted		149,375			11.42
Vested		( 54,944	)		3.78
Forfeited		—			—
Nonvested at December 31, 2007		94,431			11.64

NOTE K – COMMITMENTS AND CONTINGENCIES

Legal Proceedings

Penn Octane, Rio Vista and/or Rio Vista’s subsidiaries were named as defendants in two lawsuits filed in connection with an accident in the town of Lucio Blanco, Mexico on August 11, 2005, involving a tanker truck carrying LPG which was struck by a train resulting in an explosion. None of Penn Octane, Rio Vista or any of Rio Vista’s subsidiaries owned or operated the tanker truck or employed or controlled the driver of the tanker truck. Further, none of Penn Octane, Rio Vista or any of Rio Vista’s subsidiaries owned or had custody of the LPG on the tanker truck at the time and location of the accident.

The tanker truck reportedly took delivery of LPG at the Matamoros Terminal Facility operated under agreement with Rio Vista’s Mexican subsidiaries. According to the lawsuits, after leaving the Matamoros Terminal Facility, the tanker truck was involved in a collision with a train in Lucio Blanco, Mexico, resulting in a tragic explosion that killed and injured several persons and caused significant property damage. Published reports indicate that the truck used a road not approved for large trucks and failed to stop at an unprotected rail crossing, resulting in the collision and explosion. The insurance carrier for the owner of the tanker truck has settled certain claims in Mexico with victims of the accident.

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE K – COMMITMENTS AND CONTINGENCIES – Continued

Legal Proceedings – Continued

Even though the accident took place in Mexico, these lawsuits were filed in Texas. The first case is captioned Lesly Camacho by Her Mother Dora Adame as Next Friend, et al. vs. Penn Octane International LLC, et al and was filed in the 404^th Judicial District Court for Cameron County, Texas on September 26, 2005. The plaintiffs seek unspecified monetary damages. On August 16, 2006 with the consent of the parties, the Court issued an amended order for temporary injunction for the purpose of preserving relevant evidence. The amended injunction required a subsidiary of Rio Vista to make available for inspection by plaintiffs Rio Vista’s terminal facilities in Brownsville, Texas and Matamoros, Mexico and associated equipment and records. The order also required Rio Vista to give 30 days advance notice to plaintiffs before conducting any alteration, repair, service, work or changes to the facilities or equipment. In addition, the order required Rio Vista to make available its employees for deposition by the plaintiffs and to secure and preserve certain physical evidence believed to be located in Mexico. The Brownsville, Texas terminal facility was sold to TransMontaigne Product Services Inc. on August 22, 2006. In January 2007, this case was removed to the U.S. District Court for the Southern District of Texas, Brownsville Division. In July 2007, the case was remanded to the state court in Cameron County, Texas. In August 2007, plaintiffs filed an amended petition alleging that defendants delivered the LPG to an unqualified driver and that defendants failed to properly odorize the LPG before delivery. Discovery is being conducted and it is anticipated that a trial on a limited number of the Plaintiffs will take place during September 2008 or October 2008.

The second case is captioned Faustino Izaguirre Gonzalez, et al. vs. Penn Octane Corporation, et al. and was filed in the 107^th Judicial District Court for Cameron County, Texas, on November 14, 2005. The plaintiffs sought unspecified monetary damages. In March 2007, the Company entered into a settlement agreement with the plaintiffs on terms deemed favorable to the Company. Pursuant to the settlement agreement this case was dismissed in April 2007. The Company’s legal fees and settlement costs were covered by insurance.

Management believes the remaining lawsuit against Penn Octane, Rio Vista and/or Rio Vista’s subsidiaries relating to the accident in Lucio Blanco is without merit and, based on the advice of counsel, does not anticipate liability for damages. The Company’s insurance carrier is expected to bear the legal fees and expenses in connection with defending this case. If, however, a court found liability on the part of Penn Octane, Rio Vista or their subsidiaries, a judgment or settlement in excess of insurance coverage could have a material adverse effect on Penn Octane’s and Rio Vista’s business, financial condition and results of operations.

On November 3, 2004, there was an accident between a Regional truck driver and another motorist who allegedly sustained injuries as a result of the accident. The other motorist filed suit against Regional. The case was filed on February 26, 2007 as Nolte v. Regional Enterprises, Inc. in the United States District Court for the District of Maryland (Case No. 07 CV 0478 PJM). This case was settled within the limits of insurance coverage on or about January 28, 2008 and the case was dismissed accordingly on or about January 30, 2008.

On December 13, 2007, Lexington Insurance Company filed a declaratory action complaint against Penn Octane Corporation, Rio Vista Energy Partners, LP and their related entities in the United States District Court in the Southern District of Texas (Brownsville) requesting the US Federal Court to rule that the plaintiff has no obligation to defend Penn Octane and the Rio Vista related entities in the Camacho and Gonzalez litigation based on alleged coverage exceptions. Federal jurisdiction was contested and the case moved to state court. A trial date is currently set for September 2008. According to local counsel, Gonzalez was referenced in the original complaint only because the plaintiff’s lawyers were unaware that Gonzalez had been settled prior to filing. It is unclear, however, to the extent Lexington is successful in its action, whether the plaintiff will request repayment of all settlement and litigation expenses paid by the insurance carrier in Gonzalez.  Furthermore, if there is a determination that there is no insurance coverage resulting in Penn Octane and Rio Vista having to fund all defense costs as well as any material settlement or judgment amount in the Camacho suit, this could have a material adverse effect on Penn Octane’s and Rio Vista’s business, financial condition and results of operations.

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE K – COMMITMENTS AND CONTINGENCIES – Continued

Legal Proceedings – Continued

On November 20, 2007 Rio Vista Energy Partners, LP, Rio Vista Penny, LLC, Gary Moores, Bill Wood and GM Oil Properties, Inc. jointly filed an action for declaratory relief against Energy Spectrum Advisors, Inc. in the District Court in McIntosh County, Oklahoma.  This action was filed in response to Energy Spectrum’s assertion that Rio Vista Energy Partners, LP, Rio Vista Penny, LLC, as well as GM Oil Properties, Inc. owed  Energy Spectrum a commission allegedly due and owing based on Rio Vista Penny, LLC’s November, 2007 purchase of certain assets from GM Oil Properties, Inc. The foundation for the Energy Spectrum claim is a January 22, 2007 written agreement signed by Energy Spectrum and GM Properties, Inc.  Neither Rio Vista Energy Partners, LP nor Rio Vista Penny were parties to this agreement, nor were they named in the Energy Spectrum’s counter claim. Based in part on the fact that the GM Oil Properties acquisition was an asset purchase, rather than a stock sale, management believes that the Rio Vista entities should have no liability for any obligation that GM Oil Properties, Inc. may have to Energy Spectrum. Discovery is currently pending.

Rio Vista and its subsidiaries are involved with other proceedings, lawsuits and claims. Rio Vista believes that the liabilities, if any, ultimately resulting from such proceedings, lawsuits and claims should not materially affect its consolidated financial results.

Credit Facility, Letters of Credit and Other

Rio Vista’s LPG purchases before the Restated LPG Asset Sale were financed entirely by Penn Octane. Penn Octane previously financed its purchases of LPG and continues to finance its purchases of Fuel Products through its credit facility with RZB.

As of December 31, 2007, Penn Octane has a $10,000,000 credit facility available with RZB for demand loans and standby letters of credit (RZB Credit Facility). The RZB Credit facility is an uncommitted facility under which the letters of credit have an expiration date of no more than 90 days and the facility is reviewed annually. In connection with the Spin-Off, Rio Vista agreed to guarantee Penn Octane’s obligations with respect to the RZB Credit Facility. In connection with Rio Vista’s guaranty, Rio Vista granted RZB a security interest and assignment in any and all of Rio Vista’s accounts, real property, buildings, pipelines, fixtures and interests therein or relating thereto. Rio Vista’s guarantee and asset pledge continue under the existing RZB Credit Facility. In addition, Rio Vista may not permit to exist any subsequent 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.

Under the RZB Credit Facility, Penn Octane pays a fee with respect to each letter of credit thereunder in an amount equal to the greater of (i) $500, (ii) 2% of the maximum face amount of such letter of credit, or (iii) such higher amount as may be agreed to between Penn Octane and RZB. Any loan amounts outstanding under the RZB Credit Facility accrue interest at a rate equal to the rate announced by the JPMorgan Chase Bank as its prime rate (7.25% at December 31, 2007) plus 2.5%. Pursuant to the RZB Credit Facility, RZB has sole and absolute discretion to limit or terminate its participation in the RZB Credit Facility and to refrain from making any loans or issuing any letters 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.

On July 26, 2007, as a condition of the Loan Agreement (see note E), Penn Octane entered into a First Amendment to Line Letter (First Amendment) with RZB. The First Amendment amends the Amended and Restated Line Letter dated as of September 14, 2004 between Penn Octane and RZB. The First Amendment reduces the amount of the RZB Credit Facility from $15,000,000 to $10,000,000. Subject to RZB’s discretion, the amount of the RZB Credit Facility will be increased dollar for dollar by Rio Vista’s principal repayments under the Loan Agreement.

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE K – COMMITMENTS AND CONTINGENCIES – Continued

Credit Facility, Letters of Credit and Other – Continued

Under the terms of the RZB Credit Facility, either Penn Octane or Rio Vista is required to maintain net worth of a minimum of $10,000,000.

LPG financing expense allocated to Rio Vista from Penn Octane associated with the RZB Credit Facility totaled $239,000 and $0.00 for each of the two years in the period ended December 31, 2007, respectively and is included in the consolidated statement of operations in discontinued operations.

Guarantees and Assets Pledged on Certain of Penn Octane’s Obligations

The dollar amounts of Penn Octane’s obligations which Rio Vista guarantees and/or for which Rio Vista’s assets are pledged total $8,277,000 at December 31, 2007 based on Penn Octane’s most recently filed Annual Report on Form 10-K and the amounts were as follows:

Fuel Products trade accounts payable	$	4,526,000
Lines of credit	$	—
Letters of credit in excess of Fuel Products trade accounts payable	$	3,751,000

Consolidated current assets of Penn Octane, which includes assets of Rio Vista, pledged in favor of Penn Octane’s credit facility totals $48,504,000 at December 31, 2007 and the amounts were as follows:

Accounts receivable	$	4,261,000
Restricted cash	$	2,500,000
Inventory	$	2,563,000
Oil and gas properties and related equipment, net	$	26,197,000
Property, plant and equipment, net	$	12,983,000

Rio Vista’s assets that are included in the above amounts are as follows:

Accounts receivable	$	1,446,000
Oil and gas properties and related equipment, net	$	26,197,000
Property, plant and equipment, net	$	12,762,000

Leases

Norfolk Southern Leases

On January 1, 2003, Regional (as lessee) entered into a lease agreement with Norfolk Southern Railway Company (as lessor) for approximately 3.1 acres of land which is utilized in connection with Regional’s existing operations at Regional’s facilities in Hopewell, Virginia. The lease includes the right to maintain existing warehouses, storage tanks for handling petroleum and chemical products, and necessary appurtenances. The lease term was January 1, 2003 through December 31, 2005. The lease has not been renewed and may be terminated by either party upon 30 days’ written notice. Rent is $1,500 per month subject to adjustment based on inflation.

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE K – COMMITMENTS AND CONTINGENCIES – Continued

Leases – Continued

Norfolk Southern Leases – Continued

On August 21, 2003, Regional (as lessee) entered into a siding lease agreement with Norfolk Southern Railway Company (as lessor) for approximately 750 feet of railroad sidings on land which is utilized in connection with Regional’s existing operations at Regional’s facilities in Hopewell, Virginia. The sidings may be used for handling various chemical products. The siding lease began on August 21, 2003 and continues until terminated by either party with 30 days’ written notice. Rent is $4,875 per year, payable in advance.

As replacement of the foregoing leases, Regional is currently negotiating with Norfolk Southern the purchase of approximately 3.5 acres of land and the lease of approximately 1.9 acres of land on a long-term basis. On June 1, 2007, Regional executed a letter of intent from Norfolk Southern dated May 29, 2007. Regional received a letter from Norfolk Southern dated July 26, 2007, approving the purchase of the land and the lease on the terms contained in the letter of intent. Regional is awaiting definitive documents from Norfolk Southern in order to complete the purchase and lease transactions.

Other

Regional has several leases for parking and other facilities which are short term in nature and can be terminated by the lessors or Regional upon giving sixty days notice of cancellation. Rent expense for all operation leases was $51,000 and $83,000 for the years ended December 31, 2006 and 2007, respectively.

Agreements

Asphalt Agreement

On November 30, 2000, Regional entered into a Storage and Product Handling Agreement with a customer with an effective date of December 1, 2000 (Asphalt Agreement). The Asphalt Agreement provides for the pricing, terms and conditions under which the customer will purchase terminal services and facility usage from Regional for the storage and handling of the customer’s asphalt products. The Asphalt Agreement was amended on October 15, 2002 with an effective date of December 1, 2002 (Amended Asphalt Agreement). The term of the Amended Asphalt Agreement is five years with an option by the customer for an additional five-year renewal term, which the customer exercised in July 2007. After the additional five-year term, the Amended Asphalt Agreement renews automatically for successive one-year terms unless terminated upon 120 days advance written notice by either party. The annual fee payable to Regional for the initial five-year term of the Amended Asphalt Agreement is approximately $500,000, payable in equal monthly installments, subject to adjustments for inflation and certain facility improvements. In exchange for the annual fee, Regional agrees to provide minimum annual throughput of 610,000 net barrels per contract year, with additional volume to be paid on a per barrel basis. During the term of the amended Asphalt Agreement, Regional agrees to provide three storage tanks and certain related equipment to the customer on an exclusive basis as well as access to Regional’s barge docking facility.

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE K – COMMITMENTS AND CONTINGENCIES – Continued

Agreements – Continued

Fuel Oil Agreement

On November 16, 1998, Regional entered into a Terminal Agreement with a customer with an effective date of November 1, 1998, as amended on April 5, 2001, October 11, 2001 and August 1, 2003 (Fuel Oil Agreement). The Fuel Oil Agreement provides for the pricing, terms and conditions under which Regional will provide terminal facilities and services to the customers for the delivery of fuel oil. The agreement renews automatically for successive one-year terms unless terminated upon 365 days advance written notice by either party. Pursuant to the agreement, as amended, Regional agrees to provide three storage tanks, certain related pipelines and equipment, and at least two tractor tankers to the customer on an exclusive basis, as well as access to Regional’s barge docking facility. In exchange for use of Regional’s facilities and services, the customer pays an annual tank rental amount of approximately $300,000 plus a product transportation fee calculated on a per gallon basis, each subject to annual adjustment for inflation. Regional agrees to deliver a minimum daily quantity of fuel oil on behalf of the customer.

Gas Service and Sales Agreements

GO entered into an agreement with Clearwater Enterprises, LLC (Clearwater) to provide monthly services in relationship to the Brooken system pipeline. In accordance with terms of the agreement, Clearwater would 1) receive pipeline nominations from the various shippers on the Brooken system. 2) allocate volumes to the wellhead based upon the volumes delivered to the Brooken interconnect 3) prepare gathering and compression fee invoices on behalf of the Company 4) prepare pipeline imbalance and cashout statements. The monthly gathering management fee for these services is $3,000. The agreement is month to month unless and until terminated by either party upon 30 days notice.

Substantially all of the gas sales are made to Clearwater. These gas sales are governed by an agreement that expires in 2009 and continues yearly thereafter, until canceled by either party within thirty day notice.

Gas Compression Agreements

GO entered into a one year lease agreement with Hanover Compression Limited Partnership for the use of a compressor. The lease is dated October 11, 2006 and is guaranteed for a minimum of twelve months and continues monthly until cancelled by either party with 30 day notice. Minimum base lease payments of $10,500 plus taxes and are due monthly. The base amount is subject to semi-annual adjustments.

MV entered into a Gas Compression Master Service Agreement with USA Compression Partners, LP on November 1, 2007. This agreement replaces an earlier agreement for gas compression services. The agreement provides for monthly payments of approximately $17,000 per month through August 31, 2009.

Consulting Agreement

During November 2005, Penn Octane, Rio Vista and Mr. Richter entered into a consulting agreement whereby Mr. Richter shall served as a special advisor to the board of directors of Penn Octane and the board of managers of the General Partner and provided the following services (Services) to both Penn Octane and Rio Vista: assistance with the sale of all or part of their LPG assets, assistance with other transactions (including restructurings) involving the companies as mutually agreed by the parties and such other services that the companies may reasonably request.

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE K – COMMITMENTS AND CONTINGENCIES – Continued

Consulting Agreements – Continued

In consideration of the Services rendered by Mr. Richter to the companies, Penn Octane and Rio Vista paid the following fees (Fees) to Mr. Richter: an amount equal to two percent (2%) of (i) the net proceeds, as defined, to the companies resulting from a sale of assets to a third party, and (ii) the net proceeds, as defined, to the companies from sales of LPG to PMI for any calendar month in which such sales exceed the volumes pursuant to the previous agreement with PMI. Amounts expensed pursuant to (i) above (see note D) were $138,000 and have been paid to Mr. Richter. Amounts expensed pursuant to (ii) above for the year ended December 31, 2006 totaled approximately $3,000.

Mr. Richter’s consulting agreement expired on November 14, 2006.

Rio Vista entered into a consulting agreement (Consulting Agreement) with JBR Capital Resources, Inc. (JBR Capital) regarding consulting services to be rendered by JBR Capital to Rio Vista and to Penn Octane. JBR Capital is controlled by Mr. Richter. The provisions of the Consulting Agreement are effective as of November 15, 2006 (Effective Date).

Pursuant to the Consulting Agreement, JBR Capital has agreed to assist Rio Vista and Penn Octane with the potential acquisition and disposition of assets and with other transactions involving Rio Vista or Penn Octane. In exchange for these services, Rio Vista has agreed to pay JBR Capital a fee based on approved services rendered by JBR Capital plus a fee based on the net proceeds to Rio Vista resulting from a sale of assets to a third party introduced to Rio Vista by JBR Capital. In addition, in connection with the Regional transaction, JBR Capital earned a fee of $180,000 which fee was expensed. The term of the Consulting Agreement is six months following the Effective Date. The Consulting Agreement renews for additional six-month terms unless terminated by either party at least 30 days before the end of each term.

Richard R. Canney

On June 15, 2007, Penn Octane and Rio Vista entered into the Board Consulting Agreement regarding consulting services to be rendered by Mr. Canney to Penn Octane and to Rio Vista. Pursuant to the Board Consulting Agreement, Mr. Canney has agreed to assist Penn Octane and Rio Vista with the potential acquisition and disposition of assets, obtaining financing, other transactions, and recommending candidates for management and board service. In exchange for these services, Penn Octane and Rio Vista paid Mr. Canney a combined total monthly fee of $12,500, inclusive of all fees payable in connection with Mr. Canney’s services as a director and chairman of the board of Penn Octane and Rio Vista, retroactive to November 1, 2006. The monthly fee was paid equally by Penn Octane and Rio Vista. During August 2007, Mr. Canney provided notice to Rio Vista of the termination of the Board Consulting Agreement effective September 30, 2007.

96

RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE K – COMMITMENTS AND CONTINGENCIES – Continued

CEOcast

Effective July 2, 2007, Rio Vista entered into a consulting agreement with CEOcast, Inc. (CEOcast) whereby CEOcast agreed to render investor relations services to Rio Vista. Under the terms of the CEOcast agreement, CEOcast will receive cash fees of $7,500 per month and Rio Vista shall also issue to CEOcast (a) 1,399 of Rio Vista’s fully-paid, non-assessable common units (Common Units) and (b) $75,000 worth of Common units on March 31, 2008 based on a calculation of units contained in the consulting agreement. The delivery of any Common Units provided for herein shall be made at the soonest practical date after March 31, 2008, based on the best efforts of Rio Vista. This Agreement shall be effective for a one-year period and can be terminated by either party by providing written notice to the other party on or before May 30, 2008, otherwise the Agreement will automatically renew for additional one year periods (Additional Period) under the same terms and conditions except that either party may terminate the Agreement at any time during any Additional Period by providing 60 days written notice to the other party. As of December 31, 2007, Rio Vista is obligated to provide CEO cast a total of 4,610 common units. Based on the closing price of Rio Vista common units on December 31, 2007, the Company recorded additional expense of $78,275 associated with the agreement.

Concentrations of Credit Risk

Financial instruments that potentially subject Rio Vista to credit risk include cash balances at banks which at times exceed the federal deposit insurance.

Tax obligations of Penn Octane resulting from the Spin-Off

Rio Vista has agreed to indemnify Penn Octane for a period of three years from the fiscal year end that includes the date of the Spin-Off for any federal income tax liabilities resulting from the Spin-Off in excess of $2,500,000. Penn Octane has filed its federal income tax return for the year of the Spin-Off and it did not incur a federal income tax liability in excess of $2,500,000. However, the Internal Revenue Service (IRS) may review Penn Octane’s federal income tax returns and challenge positions that Penn Octane has taken with respect to the Spin-Off.

Further, if Penn Octane is determined to have a federal income tax liability in excess of the amounts which were included in the federal income tax return related to the Spin-Off and if Penn Octane is unable to pay such liabilities or Rio Vista is unable to pay, then the Internal Revenue Service may assert that the Penn Octane stockholders who received common units in the Spin-Off are liable for unpaid federal income taxes of Penn Octane, including interest and any penalties, up to the value of the Rio Vista Common Units received by each stockholder.

Partnership Tax Treatment and Mexican Subsidiaries, Regional and MV Income Taxes

Rio Vista, excluding Regional and MV, is not a taxable entity for U.S. tax purposes (see below) and incurs no U.S. Federal income tax liability. Regional and MV are corporations and as such are subject to U.S. Federal and State corporate income tax. Rio Vista’s Mexican subsidiaries are taxed on their income directly by the Mexican government. The income/loss of Rio Vista’s Mexican subsidiaries is included in the U.S. partnership income tax return of Rio Vista. The holders of the common units and General Partner interest will be entitled to their proportionate share of any tax credits resulting from any income taxes paid to the Mexican government. Each unitholder of Rio Vista is required to take into account that unitholder’s share of items of income, gain, loss and deduction of Rio Vista in computing that unitholder’s federal income tax liability, even if no cash distributions are made to the unitholder by Rio Vista. Distributions by Rio Vista to a unitholder are generally not taxable unless the amount of cash distributed is in excess of the unitholder’s adjusted basis in Rio Vista.

97

RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE K – COMMITMENTS AND CONTINGENCIES – Continued

Partnership Tax Treatment and Mexican Subsidiaries, Regional and MV Income Taxes – Continued

Section 7704 of the Internal Revenue Code (Code) provides that publicly traded partnerships shall, as a general rule, be taxed as corporations despite the fact that they are not classified as corporations under Section 7701 of the Code. Section 7704 of the Code provides an exception to this general rule for a publicly traded partnership if 90% or more of its gross income for every taxable year consists of “qualifying income” (Qualifying Income Exception). For purposes of this exception, “qualifying income” includes income and gains derived from the exploration, development, mining or production, processing, refining, transportation (including pipelines) or marketing of any mineral or natural resource. Other types of “qualifying income” include interest (other than from a financial business or interest based on profits of the borrower), dividends, real property rents, gains from the sale of real property, including real property held by one considered to be a “dealer” in such property, and gains from the sale or other disposition of capital assets held for the production of income that otherwise constitutes “qualifying income”.

Rio Vista estimates that more than 90% of its gross income is “qualifying income”. No ruling has been or will be sought from the IRS and the IRS has made no determination as to Rio Vista’s classification as a partnership for federal income tax purposes or whether Rio Vista’s operations generate a minimum of 90% of “qualifying income” under Section 7704 of the Code.

If Rio Vista was classified as a corporation in any taxable year, either as a result of a failure to meet the Qualifying Income Exception or otherwise, Rio Vista’s items of income, gain, loss and deduction would be reflected only on Rio Vista’s tax return rather than being passed through to Rio Vista’s unitholders, and Rio Vista’s net income would be taxed at corporate rates.

If Rio Vista was treated as a corporation for federal income tax purposes, Rio Vista would pay tax on income at corporate rates, which is currently a maximum of 35%. Distributions to unitholders would generally be taxed again as corporate distributions, and no income, gains, losses, or deductions would flow through to the unitholders. Because a tax would be imposed upon Rio Vista as a corporation, the cash available for distribution to unitholders would be substantially reduced and Rio Vista’s ability to make minimum quarterly distributions would be impaired. Consequently, treatment of Rio Vista as a corporation would result in a material reduction in the anticipated cash flow and after-tax return to unitholders and therefore would likely result in a substantial reduction in the value of Rio Vista’s common units.

Current law may change so as to cause Rio Vista to be taxable as a corporation for federal income tax purposes or otherwise subject Rio Vista to entity-level taxation. The partnership agreement provides that, if a law is enacted or existing law is modified or interpreted in a manner that subject Rio Vista to taxation as a corporation or otherwise subjects Rio Vista to entity-level taxation for federal, state or local income tax purposes, then the minimum quarterly distribution amount and the target distribution amount will be adjusted to reflect the impact of that law on Rio Vista.

98

RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE L – OIL AND GAS HEDGING ACTIVITIES

Rio Vista sells oil and gas in the normal course of its business and utilizes hedging contracts in the form of guaranteed fixed prices to minimize the variability in forecasted cash flows due to price movements in oil and gas. 

At December 31, 2007, Rio Vista has one contract for the period November 2007 – March 2008 for 0.8 MMcf/d @ $6.70/Mcf. Subsequent to December 31, 2007, Rio Vista entered into the following contracts:

Date	Terms
- April 2008 — October 2008:	1.0 MMcf/d @ $6.35/Mcf (MV Pipeline production)
- April 2008 — October 2008:	0.5 MMcf/d @ $7.97/Mcf (Brooken Pipeline production)
- November 2008 — March 2009:	1.0 MMcf/d @ $8.61/Mcf (MV Pipeline production)
- November 2008 — March 2009:	0.5 MMcf/d @ $8.61/Mcf (Brooken Pipeline production)

The hedges currently in place cover substantially all of Rio Vista’s current production.

NOTE M – RELATED PARTY TRANSACTIONS

The General Partner has a legal duty to manage Rio Vista in a manner beneficial to Rio Vista’s unitholders. This legal duty originates in statutes and judicial decisions and is commonly referred to as a “fiduciary” duty. Because of Penn Octane’s ownership and control of the General Partner, Penn Octane’s officers and managers of the General Partner also have fiduciary duties to manage the business of the General Partner in a manner beneficial to Penn Octane and its stockholders.

The partnership agreement limits the liability and reduces the fiduciary duties of the General Partner to the unitholders. The partnership agreement also restricts the remedies available to unitholders for actions that might otherwise constitute breaches of the General Partner’s fiduciary duty.

Omnibus Agreement

In connection with the Spin-Off, Penn Octane entered into an Omnibus Agreement with Rio Vista that governs, among other things, indemnification obligations among the parties to the agreement, related party transactions and the provision of general administration and support services by Penn Octane.

The Omnibus Agreement prohibits Rio Vista from entering into any material agreement with Penn Octane without the prior approval of the conflicts committee of the board of managers of the General Partner. For purposes of the Omnibus Agreement, a material agreement is any agreement between Rio Vista and Penn Octane that requires aggregate annual payments in excess of $100,000.

The Omnibus Agreement may be amended by written agreement of the parties; provided, however that it may not be amended without the approval of the conflicts committee of the General Partner if the amendment would adversely affect the unitholders of Rio Vista. The Omnibus Agreement has an initial term of five years that automatically renews for successive five-year terms and, other than the indemnification provisions, will terminate if Rio Vista is no longer an affiliate of Penn Octane.

Under the terms of the Omnibus Agreement, Penn Octane charged Rio Vista $70,051,000 and $686,000 for the two years in the period ended December 31, 2007, respectively.

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE N – 401K

Regional sponsors a defined contribution retirement plan (401(k) Plan) covering all eligible employees effective November 1, 1988. The 401(k) Plan allows eligible employees to contribute, subject to Internal Revenue Service limitations on total annual contributions, up to 60% of their compensation as defined in the 401(k) plan, to various investment funds. Regional matches, on a discretionary basis, 50% of the first 6% of employee compensation. Furthermore, Regional may make additional contributions on a discretionary basis at the end of the Plan year for all eligible employees. Regional made no discretionary contributions from the acquisition of Regional to December 31, 2007.

NOTE O – REALIZATION OF ASSETS

The accompanying consolidated balance sheet has been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of Rio Vista as a going concern. Rio Vista has a loss from continuing operations for each of the two years ended December 31, 2007 and has a deficit in working capital. Currently, all revenues generated from the Oklahoma assets are held as collateral against the TCW Credit Facility. The current portion of the TCW Credit Facility, the Moores Note, the RZB Note, and the Seller Note — Regional are all short-term in nature and amounts due in the current year are approximately $9,100,000.

The Oklahoma assets and/or the Regional operations currently do not generate sufficient cash flow to pay general and administrative and other operating expenses of Rio Vista (parent) and all debt service requirements. The TCW Credit Facility prohibits distributions by Rio Vista’s Oklahoma subsidiaries until December 2008 and subsequent thereto, those distributions are limited to 75% of defined available cash flow. In addition, Rio Vista requires additional funding in order to increase production levels for its Oklahoma assets.

Rio Vista has guaranteed certain of Penn Octane’s obligations. Substantially all of Rio Vista’s and Penn Octane’s assets are pledged or committed to be pledged as collateral on the TCW Credit Facility, and the RZB Note and RZB Credit Facility, and therefore, both Rio Vista and Penn Octane may be unable to obtain additional financing collateralized by those assets. Penn Octane’s Report of Independent Registered Public Accounting Firm on the consolidated financial statements of Penn Octane at December 31, 2007 contains an explanatory paragraph which describes an uncertainty about Penn Octane’s ability to continue as a going concern. If Penn Octane’s and Rio Vista’s cash flows are not adequate to pay their obligations, Penn Octane and/or Rio Vista may be required to raise additional funds to avoid foreclosure by creditors. There can be no assurance that such additional funding will be available on terms attractive to either Penn Octane or Rio Vista or available at all. If additional amounts cannot be raised and cash flow is inadequate, Penn Octane and/or Rio Vista would likely be required to seek other alternatives which could include the sale of assets, closure of operations and/or protection under the U.S. bankruptcy laws.

In view of the matters described in the preceding paragraphs, recoverability of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon the ability of Rio Vista to continue as a going concern. The consolidated 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 Rio Vista be unable to continue in existence.

To provide Rio Vista with the ability it believes necessary to continue in existence, management is taking steps to restructure its existing debt obligations and raise additional debt and/or equity financing.

100

RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE P – SUPPLEMENTARY OIL AND GAS DATA (Unaudited)

(A) Costs Incurred in Oil and Gas Property Acquisition, Exploration and Development Activities

Costs incurred in oil and gas property acquisition and development are presented below:

	Year Ended
	December
	31, 2007
	(in thousands)
Property acquisition costs:
Proved	$	26,255
Unproved		—
Development costs		—
Total costs incurred	$	26,255

Property acquisition costs include costs incurred to purchase, lease, or otherwise acquire a property. Development costs include costs incurred to gain access to and prepare development well locations for drilling, to drill and equip development wells and to provide facilities to extract, treat and gather oil and gas.

Rio Vista capitalizes costs related to drilling and development of oil and gas properties for specific activities related to drilling its wells, which included site preparation, drilling labor, meter installation, pipeline connection and site reclamation. There were no drilling and development costs during the year ended December 31, 2007.

(B) Oil and Gas Capitalized Costs

Aggregate capitalized costs related to oil and gas production activities with applicable accumulated depreciation, depletion and amortization are presented below:

	December
	31, 2007
	(in thousands)
Proved properties:
Leasehold, equipment and drilling	$	26,255
Less accumulated depreciation, depletion and amortization		(58	)
Net capitalized costs	$	26,197

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE P – SUPPLEMENTARY OIL AND GAS DATA (Unaudited) – Continued

(C) Results of Oil and Gas Producing Activities

The results of operations for oil and gas producing activities (excluding corporate overhead and interest costs) are presented below:

	Year
	Ended December
	31, 2007
	(in thousands)
Revenues:
Oil and gas sales	$	396
Gain (loss) on oil and gas derivatives		—
Net oil and gas sales		396
Expenses:
Production costs		212
Depreciation, depletion and amortization		58
Total expenses		270
Results of operations for oil and gas producing activities (excluding corporate overhead and interest costs)	$	126

Production costs include those costs incurred to operate and maintain productive wells and related equipment, including such costs as labor, repairs, maintenance, materials, supplies, fuel consumed, insurance and other production taxes. In addition, production costs include administrative expenses applicable to support equipment associated with these activities.

(D) Net Proved Oil and Gas Reserves

The proved reserves of oil and gas of Rio Vista have been estimated by an independent petroleum engineering firm, Lee Keeling and Associates, Inc., at December 31, 2007. These reserve estimates have been prepared in compliance with the SEC rules based on year-end prices. An analysis of the change in estimated quantities of oil and gas reserves, all of which are located within the United States, is shown below:

	Year Ended December 31, 2007
	Gas (Bcf)			Oil (MMbls)		Total (Bcfe)
Proved developed and undeveloped reserves:
Beginning of year		—			—		—
Purchase of Oklahoma assets		35.668			—		35.668
Production		(.080	)		—		(.080	)
End of year		35.588			—		35.588
Proved developed reserves:
Beginning of year		—			—		—
End of year		12.766			—		12.766

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RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE P – SUPPLEMENTARY OIL AND GAS DATA (Unaudited) – Continued

(E) Standardized Measure of Discounted Future Net Cash Flows and Changes Therein Relating to Proved Reserves — Continued

Summarized in the following table is information for Rio Vista with respect to the standardized measure of discounted future net cash flows relating to proved reserves. Future cash inflows are computed by applying year-end prices relating to Rio Vista’s proved reserves to the year-end quantities of those reserves. Future production, development, site restoration and abandonment costs are derived based on current costs assuming continuation of existing economic conditions. There are no future income tax expenses because Rio Vista is a nontaxable entity.

The following represents changes in the Standard measure of discounted future net cash flow estimated.

Future cash inflows	$	179,015
Future production costs		(63,693	)
Future development costs		(10,891	)
Future cash flows before income taxes	$	104,431
Future net cash flows before income, taxes, discounted at 10%	$	41,272

	Year ended
	December 31, 2007
	(in thousands)
Beginning balance	$	—
Oil and gas sales, net of production costs		(183	)
Purchase of reserves in place, net of future development costs		41,455
Accretion of discount		—
Ending balance	$	41,272

It is necessary to emphasize that the data presented should not be viewed as representing the expected cash flow from, or current value of, existing proved reserves since the computations are based on a large number of estimates and arbitrary assumptions. Reserve quantities cannot be measured with precision and their estimation requires many judgmental determinations and frequent revisions. The required projection of production and related expenditures over time requires further estimates with respect to pipeline availability, rates of demand and governmental control. Actual future prices and costs are likely to be substantially different from the current prices and costs utilized in the computation of reported amounts. Any analysis or evaluation of the reported amounts should give specific recognition to the computational methods utilized and the limitations inherent therein.

103

RIO VISTA ENERGY PARTNERS L.P. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE Q – SEGMENT INFORMATION

Rio Vista has the following reportable segments: Transportation and Terminalling and Oil and Gas. The Transportation and Terminalling segment transports bulk liquids, including chemical and petroleum products, by truck and provides terminalling and storage services, the Oil and Gas segment produces, transports and sells oil and gas.

The accounting policies used to develop segment information correspond to those described in the summary of significant accounting policies. Segment profit (loss) is based on gross profit (loss) from operations before selling, general and administrative expenses, other income (expense) and income tax. The reportable segments are distinct business units operating in similar industries. They are separately managed, with separate marketing and distribution systems. The following information about the segments is for the years ended December 31, 2007. The LPG Transportation segment commenced August 22, 2006 and the oil and gas segment commenced November 19, 2007.

	Transportation and
Year ended December 31, 2007:	Terminalling		Oil and Gas			Totals
Revenues from external customers		5,378,000		865,000			6,243,000
Interest expense		712,000		275,000			987,000
Interest income		15,000		—			15,000
Depreciation and amortization		1,033,000		96,000			1,129,000
Segment gross profit (loss)		1,009,000		137,000			1,146,000
Segment assets		13,881,000		35,368,000			49,249,000
Segment liabilities		6,391,000		21,604,000			27,557,000
Expenditure for segment assets		125,000		—			125,000
Reconciliation to Consolidated Amounts:
Revenues
Total revenues for reportable segments			$	6,243,000
Elimination of intersegment revenues				(337,000	)
Total consolidated revenues			$	5,906,000
Profit (loss)
Total gross profit (loss) for reportable segments				1,146,000
Selling, general and administrative expense				(5,091,000	)
Interest and Fuel Products financing expense				(994,000	)
Interest income				17,000
Elimination of intersegment profits				—
Unallocated amounts
Corporate headquarters expense				—
Other expenses				—
Consolidated income from continuing operations before income tax			$	(4,922,000	)
Assets
Total assets for reportable segments				49,249,000
Other assets				206,000
Corporate headquarters				—
Other unallocated amounts				—
Total consolidated assets			$	49,455,000

104

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A(T). Controls and Procedures

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (Exchange Act), such as this Form 10-K, is reported in accordance with the rules of the SEC. Disclosure controls are also designed with the objective of ensuring that such information is accumulated appropriately and communicated to management, including the chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosures.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s chief executive officer/chief financial officer and the Company’s controller, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e).

The Company’s has only two members of management involved in the financial reporting process: the chief executive officer/chief financial officer and the controller. As a result, segregation of duties is difficult and therefore, the internal control environment is limited. As a result of this material weakness, management concluded that our disclosure controls and procedures were not effective as of December 31, 2007. As noted below, we believe we are taking the necessary steps to address the matters related to the material weakness. However, before concluding that the material weakness has been remediated, management believes that the new internal controls should be implemented and operational for a sufficient period of time to demonstrate that the controls are operating effectively. We believe our consolidated financial statements included in this Annual Report on Form 10-K fairly present in all material respects our financial position, results of operations and cash flows for the periods presented in accordance with United States generally accepted accounting principles.

Steps taken:

1. We are recruiting experienced accounting professionals with an emphasis on accounting and financial reporting.

2. We are utilizing outside consultants with extensive oil and gas financial reporting experience.

3. We are providing extensive training on our accounting software system to both new and established accounting personnel.

105

Management’s Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (GAAP). The Company’s internal control over financial reporting includes those policies and procedures that:

• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As required by Section 404 of the Sarbanes-Oxley Act of 2002, management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2007. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

Based on its assessment and those criteria, management concluded that the Rio Vista’s disclosure controls and procedures over financial reporting were not effective as of December 31, 2007.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Item 9B. Other Information

None.

106

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Rio Vista does not have directors, managers or officers. The board of managers and officers of Rio Vista GP LLC, the General Partner of Rio Vista (General Partner), a subsidiary of Penn Octane, perform all management functions for Rio Vista. Officers of the General Partner are appointed by its board of managers. The officers of the General Partner are paid directly by Penn Octane. Other than distributions attributable to its General Partner interest and incentive distribution rights, the General Partner does not receive a management fee or other compensation in connection with its management of Rio Vista’s business. Pursuant to the Omnibus Agreement, Penn Octane is entitled to receive reimbursement for all direct and indirect expenses it or the General Partner incurs on Rio Vista’s behalf, including general and administrative expenses. The indirect expenses include an allocation of the salaries and benefit costs related to employees (including executive officers) of Penn Octane who provide services to Rio Vista based on actual time spent performing services between Penn Octane and the General Partner. The General Partner has sole responsibility for conducting Rio Vista’s business and for managing Rio Vista’s operations.

Set forth below is certain information concerning the board of managers and executive officers of the General Partner:

Managers of Rio Vista GP LLC

The following table shows information for the board of managers of the General Partner. The members of the General Partner’s conflicts committee, audit committee and compensation committee are Murray J. Feiwell, Richard R. Canney and Douglas G. Manner.

			Manager
Name of Manager	Age	Position with the General Partner	Since
Douglas G. Manner	52	Manager and Chairman of the Board	2004
Richard R. Canney	53	Manager	2004
Murray J. Feiwell	70	Manager	2004
Bruce I. Raben	54	Manager	2008
Nicholas J. Singer	28	Manager	2008

All managers hold office until their successors are duly elected and qualified or until their earlier resignation or removal.

Douglas G. Manner was elected as a member of the board of managers of the General Partner in August 2004. Mr. Manner is currently Senior Vice President and Chief Operating Officer of Kosmos Energy, LLC, a private oil and gas exploration company. Mr. Manner joined Kosmos Energy in January 2004. Prior to Kosmos Energy, Mr. Manner served as President and Chief Operating Officer of White Stone Energy since August 2002. For the two years prior to joining White Stone Energy, Mr. Manner was Chairman and Chief Executive Officer of Mission Resources and Chairman of the Board of one of Mission’s predecessor companies, Bellwether Exploration. Prior to joining Bellwether, Mr. Manner was employed by Ryder Scott Petroleum Engineers for fifteen years and by Gulf Canada Resources Limited. Mr. Manner is a member of the board of directors of Blizzard Energy, Inc., an oil and gas company based in Alberta, Canada; Resolute Energy Inc., an oil and gas company based in Alberta, Canada; Westside Energy Corporation, an oil and gas company based in Texas; and Cordero Energy Inc., an oil and gas company based in Alberta, Canada. Mr. Manner holds a B.S. degree in mechanical engineering from Rice University. In January 2008, Mr. Manner was also elected to the board of directors of Penn Octane Corporation, an affiliate of Rio Vista.

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Richard R. Canney was elected as a member of the board of managers of the General Partner in August 2004. Since 1997, Mr. Canney has been employed in the mergers and acquisitions and new ventures division of Shell Oil Company in Houston, Texas. Prior to joining Shell, Mr. Canney was a Director and Managing Partner of Corporacion Mercantil Internacional, S.A. de C.V. in Mexico City. From 1994 to 1996, Mr. Canney was a professor of finance at Instituto Tecnologico Autonomo de Mexico in Mexico City. Mr. Canney earned a Masters of Business Administration from the University of Chicago in June 1989. Mr. Canney is also Chairman of the Board of Penn Octane.

Murray J. Feiwell was elected as a member of the board of managers of the General Partner in August 2004. From 1986 until January 1, 2007, Mr. Feiwell served as President and Chief Executive Officer of Feiwell & Hannoy, P.C., a law firm located in Indianapolis, Indiana, that specializes in general civil practice, bankruptcy and creditors’ rights, real estate and foreclosure, general business and commercial law. From 1997 until January 1, 2007, Mr. Feiwell also served as President and Chief Executive Officer of Statewide Title Company, a title company located in Indianapolis, Indiana. Mr. Feiwell earned a J.D. from the University of Michigan in 1963. Mr. Feiwell retired from the practice of law on January 1, 2007 and no longer owns an interest in the law firm or the title company.

Bruce I. Raben was elected as a member of the board of managers of the General Partner in January 2008. Mr. Raben is a founding Partner of Hudson Capital Advisors, LLC, a provider of investment banking advisory, placement and capital raising services formed in 2004. From 1979 until 1990, Mr. Raben worked at Drexel Burnham Lambert, an investment banking firm. From 1990 through 1995, he was an executive vice president with Jeffries & Company, an investment banking firm. From 1995 until 2002, Mr. Raben served as a managing director of CIBC World Markets, an investment banking firm. He continued to serve as a consultant to CIBC in 2003. Mr. Raben has previously served on the boards of numerous public and private companies. Mr. Raben currently serves as a member of the Board of Directors of Penn Octane.

Nicholas J. Singer was elected as a member of the board of managers of the General Partner in January 2008. Mr. Singer is a Co-Managing Member of Standard General Management LLC, an investment management firm based in New York City. Before joining Standard General Management LLC in 2007, Mr. Singer was a Founding Partner at Cyrus Capital Partners during 2005 and 2006. Prior to joining Cyrus Capital Partners, he was a senior research analyst and principal at Och-Ziff Capital Management from 2002 until 2005. He currently serves as a member of the Board of Directors of Aquila, Inc. Concurrent with his election to the board of managers of Rio Vista, Mr. Singer was also elected to the board of directors of Penn Octane.

Information Regarding The Board Of Managers

The business of Rio Vista is managed under the direction of the board of managers of Rio Vista GP LLC. The board conducts its business through meetings of the board and its committees. During 2007, the board held four meetings, and the audit committee held four meetings. No member of the board attended less than 75% of the meetings of the board and committees of which he was a member.

The board of managers currently consists of five members, none of whom are members of the management of either Rio Vista GP LLC or Penn Octane. The board has determined that all of its managers, Messrs. Manner, Canney, Feiwell, Raben and Singer, meet the independence requirements under the rules of the NASDAQ Stock Market. As a result, although not required by NASDAQ rules applicable to limited partnerships, the majority of the board of managers is comprised of independent managers.

Communication with the Board of Managers

Unitholders and other interested parties may communicate with the board of managers or the Chairman of the Board of our General Partner by sending written communication in an envelope addressed to “Board of Managers” or “Chairman of the Board of Managers” in care of Company Secretary, Rio Vista Energy Partners L.P., 1313 E. Alton Gloor Blvd., Suite J, Brownsville, TX 78526.

Audit Committee

Our General Partner’s audit committee (Audit Committee) consists of Mr. Canney (Chairman), Mr. Feiwell, and Mr. Manner. Mr. Canney and Mr. Manner are considered “audit committee financial experts” as defined in applicable rules of the Securities and Exchange Commission. The board has determined that all three members of the audit committee meet the audit committee independence requirements under the rules of the NASDAQ Stock Market. The board of managers has adopted a written charter for the audit committee, which is available on Rio Vista’s website of http://www.riovistaenergy.com.

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The audit committee reviews and reports to the board on various auditing and accounting matters, including the quality, objectivity and performance of Rio Vista’s internal and external accountants and auditors, the adequacy of its financial controls and the reliability of financial information reported to the public. The audit committee met four times in 2007.

Compensation Committee

Rio Vista GP LLC has a compensation committee composed of managers whom the board has determined to be independent consisting of Messrs. Canney, Feiwell and Manner.

Conflicts Committee

Rio Vista’s partnership agreement provides for a conflicts committee composed of the managers whom the board of mangers of the General Partner has determined to be independent. The conflicts committee reviews and makes recommendations relating to potential conflicts of interest between Rio Vista and its subsidiaries, on the one hand, and the General Partner and its affiliates (including Penn Octane), on the other hand. The members of the conflicts committee are Messrs. Feiwell, Canney, and Manner.

Executive Officers of the General Partner

The names of the General Partner’s executive officer and certain information about him are set forth below:

				Officer
Name of Executive Officer	Age		Position with General Partner	Since
Ian T. Bothwell		48	Acting Chief Executive Officer, Acting President, Vice President, Treasurer, Chief Financial Officer and Assistant Secretary		2003

Ian T. Bothwell was elected Treasurer of the General Partner in 2003. In 2004, Mr. Bothwell was elected to serve as Chief Financial Officer, Vice President and Assistant Secretary of the General Partner. He was elected Vice President, Treasurer, Chief Financial Officer, and Assistant Secretary of Penn Octane in October 1996. In November 2006, he was appointed Acting Chief Executive Officer and Acting President of the General Partner and of Penn Octane. He also served as a director of Penn Octane from March 1997 until July 2004. Since July 1993, Mr. Bothwell has been a principal of Bothwell & Asociados, S.A. de C.V., a Mexican management consulting and financial advisory company that was founded by Mr. Bothwell in 1993 and specializes in financing infrastructure projects in Mexico. Mr. Bothwell also serves as Chief Executive Officer of B & A Eco-Holdings, Inc., a company originally formed to purchase certain of Penn Octane’s compressed natural gas assets.

Code of Business Conduct

In 2004, Rio Vista adopted a code of conduct that applies to Rio Vista GP LLC’s executive officers, including its principal executive officer, principal financial officer and principal accounting officer. This Code charges the executive officers of Rio Vista GP LLC with responsibilities regarding honest and ethical conduct, the preparation and quality of the disclosures in the documents and reports Rio Vista files with the SEC and compliance with applicable laws, rules and regulations. In April 2007, the board of managers of the General Partner approved a revised code of conduct that incorporates a formal policy for the approval of transactions with related persons.

Compliance under Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Exchange Act requires the General Partner’s managers and executive officers, and persons who own more than 10% of a registered class of Rio Vista’s equity securities, to file initial reports of ownership and reports of changes in ownership with the SEC. Such persons are required by the SEC to furnish Rio Vista with copies of all Section 16(a) forms they file. Based solely on its review of the copies of Forms 3, 4 and 5 received by it, Rio Vista believes that all managers and officers of the General Partner and 10% unitholders of Rio Vista complied with such filing requirements except as follows: Jerome B. Richter filed a Form 5 in February 2008 for the fiscal year ended December 2007, which reflected the unreported purchase of 765 common units in November 2007. Richard Canney filed a Form 4A during January 2008 which corrected previously filed Form 4’s which incorrectly reflected options to purchase 26,963 common units.

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Item 11. Executive Compensation.

Rio Vista does not have any directors, managers or officers. The board of managers and officers of the General Partner perform all management functions for Rio Vista. Officers of the General Partner are appointed by its board of managers. The officers of the General Partner currently hold the same positions as the officers of Penn Octane. All officers of the General Partner are paid directly by Penn Octane. Pursuant to the Omnibus Agreement, Penn Octane is entitled to receive reimbursement for all direct and indirect expenses it or the General Partner incurs on Rio Vista’s behalf, including general and administrative expenses. The direct expenses include the salaries and benefit costs related to employees of Penn Octane who provide services to Rio Vista. The General Partner has sole discretion in determining the amount of these expenses.

Compensation from Penn Octane

The table below sets forth a summary of compensation paid for the last two years to those employees of Penn Octane who served as the General Partner’s Chief Executive Officer, Chief Financial Officer and its other two most highly compensated executive officers whose total annual salary and bonus exceeded $100,000 for the year ended December 31, 2007. The General Partner’s executive officers are paid by Penn Octane. The services rendered by the executive officers to the General Partner are provided pursuant to the terms of the Omnibus Agreement for which Rio Vista pays Penn Octane for its allocable portion of general and administrative expenses incurred by Penn Octane, including expenses for services rendered by Penn Octane employees, for the benefit of Rio Vista.

Penn Octane’s compensation to executive management was administered by the compensation committee of the board of directors of Penn Octane. As of December 31, 2007, the compensation committee of Penn Octane was comprised of two directors both of whom are outside directors, who report to the board of directors on all compensation matters concerning Penn Octane’s executive officers, including Penn Octane’s Chief Executive Officer, Chief Financial Officer and Penn Octane’s other executive officers (collectively, with the Chief Executive Officer and Chief Financial Officer, the Named Executive Officers). In determining annual compensation, including bonus, and other incentive compensation to be paid to the Named Executive Officers, the compensation committee considers several factors, including overall performance of the Named Executive Officers (measured in terms of financial performance of Penn Octane, opportunities provided to Penn Octane, responsibilities, quality of work and/or tenure with Penn Octane), and considers other factors, including retention and motivation of the Named Executive Officers and the overall financial condition of Penn Octane. The Named Executive Officers receive compensation in the form of cash and Penn Octane equity.

Compensation from Rio Vista

The compensation committee of the General Partner does not approve the cash or equity compensation paid by Penn Octane to the Named Executive Officers. The compensation committee of the General Partner has the ability to recommend the issuance of equity instruments of Rio Vista or other compensation to the Named Executive Officers in connection with their service to Rio Vista.

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Summary Compensation Table

The following table sets forth annual and all other compensation to Mr. Bothwell, our General Partner’s only executive officer in 2007, for services rendered in all capacities to both Penn Octane and Rio Vista and its subsidiaries during each of the periods indicated. This information includes the dollar values of base salaries, bonus awards, the number of warrants granted and certain other compensation, if any, whether paid or deferred. Rio Vista does not grant stock appreciation rights or other long-term compensation plans for employees.

															Changes in
															Pension Value
															and
															Nonqualified
													Non-Equity		Deferred
							Stock			Option			Incentive Plan		Compensation		All Other
			Salary		Bonus		Awards			Awards			Compensation		Earnings		Compensation			Total
Name and Principal Position	Year		($)		($)		($)			($)			($)		($)		($)			($)
Ian T. Bothwell		2007		219,000		58,000		93,000	(4)		309,000	(2)		—		—		88,000	(3)		767,000
Acting Chief Executive		2006		180,000		70,000		—			—			—		—		—			250,000
Officer, Acting President, Chief Financial Officer, Vice-President, Treasurer and Assistant Secretary(1)

(1)	Mr. Bothwell was appointed Acting President and Acting Chief Executive Officer of Penn Octane and the General Partner in November 2006.
(2)	Represents warrants to purchase 180,000 of common stock of Penn Octane valued using the Black-Scholes option pricing model.
(3)	Represents warrants to purchase 100,000 common units of Rio Vista valued using the Black-Scholes option pricing model.
(4)	Represents 8,334 common units granted.

Neither Penn Octane nor the General Partner has an employment agreement with Mr. Bothwell.

Outstanding Equity Awards at December 31, 2007

Option Awards

					Equity Incentive
	Number of		Number of		Plan Awards:
	Securities		Securities		Number of
	Underlying		Underlying		Securities
	Unexercised		Unexercised		Underlying		Option
	Options		Options		Unexercised		Exercise		Option
	Exercisable		Unexercisable		Unearned Options		Price		Expiration
Name	(#)		(#)		(#)		($)		Date
Ian T. Bothwell		15,625		—		—		12.51		3/08/2008
Ian T. Bothwell		1,457		—		3,543		8.38		2/12/2012
Ian T. Bothwell		5,205		—		14,795		7.36		3/20/2012
Ian T. Bothwell		18,699		—		56,301		11.21		6/28/2012

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Stock Awards

					Equity Incentive Plan Awards
					Number of		Market or Payout
					Unearned		Value of
	Number of		Market Value		Units or Other		Unearned Units
	Units of Stock		of Units of		Rights That		or Other Rights
	That Have Not		Stock that Have		Have Not		That Have Not
	Vested		Not Vested		Vested		Vested
Name	(#)		($)		(#)		($)
Ian T. Bothwell		—		—		16,667		186,667	(1)

(1) Based on the closing market price of Rio Vista’s common units on the NASDAQ Stock Market on December 31, 2007 of $17.00.

Termination and Change in Control

Rio Vista’s 2005 Equity Incentive Plan and the associated form of option agreement provide for acceleration of vesting of outstanding options in connection with the following events: a merger or consolidation in which Rio Vista and/or the General Partner is not the surviving entity; the sale, transfer or other disposition of at least 75% of the total assets of Rio Vista and/or the General Partner; the complete liquidation or dissolution of Rio Vista and/or the General Partner; a reverse merger in which Rio Vista and/or the General Partner is the surviving entity but (i) the Common Units outstanding immediately prior to such merger are converted or exchanged into other property by virtue of the merger, or (ii) in which securities possessing more than 50% of the total combined voting power of Rio Vista’s and/or the General Partner’s outstanding securities are transferred to persons different from those who held such securities immediately prior to such merger; the acquisition by any person of beneficial ownership of securities possessing more than 50% of the total combined voting power of Rio Vista’s and/or the General Partner’s outstanding securities; or a change in the composition of the board of managers of the General Partner over a period of 12 months or less such that a majority of the managers ceases, by reason of one or more contested elections for manager, to be comprised of individuals who are continuing managers (as defined in the form of option agreement).

Compensation of Managers

The following table lists all compensation to managers during the year ended December 31, 2007.

Manager Compensation

										Change in
										Pension Value
										and
	Fee Earned							Non-Equity		Nonqualified		All Other
	or Paid in		Stock		Option			Incentive Plan		Deferred		Compen-
	Cash		Awards		Awards			Compensation		Compensation		sation		Total
Name	($)(1)		($)		($)			($)		Earnings		($)(4)		($)
Richard R. Canney		25,000		—		36,000	(2)		—		—		33,500		94,500
Murray J. Feiwell		20,000		—		29,000	(3)		—		—		—		49,000
Douglas G. Manner		20,000		—		29,000	(3)		—		—		—		49,000

(1)	Amounts represent fees paid for the quarters ended March 2007 through September 2007 and amounts earned for the quarter ended December 2007.
(2)	Amounts represent warrants to purchase 9,375 common units of Rio Vista valued using the Black-Scholes option pricing model.
(3)	Amounts represent warrants to purchase 7,500 common units of Rio Vista valued using the Black-Scholes option pricing model.
(4)	Amount represent consulting fees.

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On April 10, 2007, the board of managers of the General Partner approved a form of Chairman Services Agreement and Manager Services Agreement. Pursuant to these agreements, the non-employee chairman of the board of managers of the General Partner receives annual cash compensation of $25,000, payable quarterly, and an annual grant of options to purchase 6,250 of our common units. Other non-employee managers of our General Partner receive annual cash compensation of $20,000, payable quarterly, and an annual grant of options to purchase 5,000 of our common units.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth the number of common units of Rio Vista beneficially owned as of March 28, 2008 by each person known by Rio Vista to own beneficially more than 5% of the outstanding common units of Rio Vista (Common Units).

	Amount and
	Nature of
	Beneficial
Name and Address of Beneficial Owner	Ownership(1)			Percent of Class
Jerome B. Richter 335 Tomahawk Drive, Palm Desert, CA 92211		599,004	(2)		23.81	%
Swank Group, LLC, Swank Energy Income Advisors, L.P. and Jerry V. Swank 3300 Oak Lawn Ave., Suite 650, Dallas, TX 75219		455,234	(3)		18.10	%
Standard General L.P., Standard General Fund, L.P., Soohyung Kim and Nicholas J. Singer		212,487	(4)		8.45	%

(1)	Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Common units which are purchasable under warrants which are currently exercisable, or which will become exercisable no later than 60 days after March 28, 2008, are deemed outstanding for computing the percentage of the person holding such warrants but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all common units shown as beneficially owned by them.
(2)	Includes 4,730 common units owned by Mr. Richter’s spouse.
(3)	Swank Group, LLC serves as the General Partner of Swank Energy Income Advisors, L.P. (Advisor) and may direct the Advisor to direct the vote and disposition of the 405,486 common units of Rio Vista held by the Cushing Fund, L.P and/or Swank MLP Conveyance Fund, L.P (collectively, “Swank Funds”). The Advisor is the General Partner of the Swank Funds. The principal of Swank Group, LLC, Mr. Jerry V. Swank, may direct the vote and disposition of the 455,234 common units of Rio Vista held by the Swank Funds.
(4)	Standard General, Mr. Kim and Mr. Singer do not directly own any of the common units. By reason of the provisions of Rule 13d-3 of the Securities Exchange Act of 1934, each of Standard General, Mr. Kim and Mr. Singer may be deemed to own beneficially 212,487 common unit (constituting approximately 8.45% of the common units outstanding). Each of Standard General, Mr. Kim and Mr. Singer disclaim direct beneficial ownership of any of the securities.

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The following table sets forth the number of common units of Rio Vista beneficially owned as of March 28, 2008 by each manager of the General Partner, each Named Executive Officer, and all managers and Named Executive Officers as a group. The address of each person in the table below is c/o Rio Vista Energy Partners L.P., 1313 E. Alton Gloor Blvd., Suite J, Brownsville, Texas 78526.

	Amount and Nature
	of Beneficial
Name of Beneficial Owner	Ownership(1)			Percent of Class
Nicholas J. Singer		212,487	(2)		8.45	%
Ian T. Bothwell		75,154	(3)		2.95	%
Murray J. Feiwell		20,635	(4)		*
Douglas G. Manner		19,375	(5)		*
Richard R. Canney		13,750	(6)		*
Bruce I. Raben		5,735			*
All Directors and Named Executive Officers as a group (6 persons)		347,136	(7)		13.39	%

*	Less than 1%
(1)	Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Common units which are purchasable under warrants which are currently exercisable, or which will become exercisable no later than 60 days after March 28, 2008, are deemed outstanding for computing the percentage of the person holding such warrants but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all common units shown as beneficially owned by them.
(2)	Standard General, Mr. Kim and Mr. Singer do not directly own any of the common units. By reason of the provisions of Rule 13d-3 of the Securities Exchange Act of 1934, each of Standard General, Mr. Kim and Mr. Singer may be deemed to own beneficially 212,487 common unit (constituting approximately 8.45% of the common units outstanding). Each of Standard General, Mr. Kim and Mr. Singer disclaim direct beneficial ownership of any of the securities.
(3)	Includes 36,342 common units issuable upon exercise of common unit purchase warrants.
(4)	Includes 12,500 common units issuable upon exercise of common unit purchase warrants.
(5)	Includes 14,375 common units issuable upon exercise of common unit purchase warrants.
(6)	Includes 13,750 common units issuable upon exercise of common unit purchase warrants.
(7)	Includes 76,967 common units issuable upon exercise of common unit purchase warrants.

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Equity Compensation Plans

The following table provides information concerning Rio Vista’s equity compensation plans as of December 31, 2007⁽²⁾.

					Number of securities
			Weighted-average		remaining available for
	Number of securities to		exercise price of		future issuance under
	be issued upon exercise		outstanding options,		equity compensation
	of outstanding options,		warrants and rights		plans (excluding securities
	warrants and rights		(per unit)		reflected in column (a))
Plan category	(a)		(b)		(c)
Equity compensation plans approved by security holders		—		—		—
Equity compensation plans not approved by security holders (1)		349,094	$	10.90		466,875
Total		349,094

(1)

Under the terms of the partnership agreement and applicable rules of the NASDAQ Market, no approval by the unitholders of Rio Vista was required.

(2)

On March 9, 2005, the board of managers of the General Partner approved the Rio Vista 2005 Equity Incentive Plan (2005 Plan). The 2005 Plan permits the grant of common unit options, common unit appreciation rights, restricted common units and phantom common units to any person who is an employee (including to any executive officer) or consultant of Rio Vista or the General Partner or any affiliate of Rio Vista or the General Partner. The 2005 Plan provides that each outside manager of the General Partner shall be granted a common unit option once each fiscal year for not more than 5,000 common units, in an equal amount as determined by the board of managers. The aggregate number of common units authorized for issuance as awards under the 2005 Plan is 750,000. The 2005 Plan shall remain available for the grant of awards until March 9, 2015, or such earlier date as the board of managers may determine. The 2005 Plan is administered by the compensation committee of the board of managers. In addition the board of managers may exercise any authority of the compensation committee under the 2005 Plan. Under the terms of the partnership agreement and applicable rules of the NASDAQ Stock Market, no approval of the 2005 Plan by the common unitholders of Rio Vista was required.

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Item 13. Certain Relationships and Related Transactions, and Director Independence

Certain Relationships and Related Transactions

General Partner Options

The General Partner of Rio Vista owns a 2% General Partner interest in Rio Vista. On July 1, 2006, Penn Octane’s 100% interest in the General Partner was decreased to 50% as a result of the exercise by Shore Capital LLC (Shore Capital), an affiliate of Mr. Richard Shore Jr., former president of Penn Octane and former chief executive officer of Rio Vista, and by Mr. Jerome B. Richter, of options to each acquire 25% of the General Partner (General Partner Options). The exercise price for each option was approximately $82,000. Mr. Richter’s option was amended to permit payment of the exercise price by surrender of Penn Octane common stock having a fair market value equal to the exercise price. Mr. Richter paid the exercise price for his option by surrender of 136,558 shares of Penn Octane common stock. In connection with the exercise of the General Partner Options, Penn Octane retained voting control of the General Partner pursuant to a voting agreement with each of Shore Capital and Mr. Richter. In December 2006, Shore Capital transferred its interest in the General Partner to Shore Trading LLC, an affiliated entity (Shore Trading). Shore Trading is also a party to the voting agreement with Penn Octane.

On February 6, 2007, Penn Octane entered into a purchase option agreement with Shore Trading that provided Penn Octane with the option to purchase the 25% interest in the General Partner held by Shore Trading. Penn Octane exercised its option on July 19, 2007 and acquired the 25% interest for a total cost of $1,400,000.

Consulting Agreement

During November 2005, Penn Octane, Rio Vista and Mr. Richter entered into a consulting agreement whereby Mr. Richter shall served as a special advisor to the board of directors of Penn Octane and the board of managers of the General Partner and provided the following services (Services) to both Penn Octane and Rio Vista: assistance with the sale of all or part of their LPG assets, assistance with other transactions (including restructurings) involving the companies as mutually agreed by the parties and such other services that the companies may reasonably request.

In consideration of the Services rendered by Mr. Richter to the companies, Penn Octane and Rio Vista paid the following fees (Fees) to Mr. Richter: an amount equal to two percent (2%) of (i) the net proceeds, as defined, to the companies resulting from a sale of assets to a third party, and (ii) the net proceeds, as defined, to the companies from sales of LPG to PMI for any calendar month in which such sales exceed the volumes pursuant to the previous agreement with PMI. Amounts expensed pursuant to (i) above (see note D) were $138,000 and have been paid to Mr. Richter. Amounts expensed pursuant to (ii) above for the year ended December 31, 2006 totaled approximately $3,000.

Mr. Richter’s consulting agreement expired on November 14, 2006.

Rio Vista entered into a consulting agreement (Consulting Agreement) with JBR Capital Resources, Inc. (JBR Capital) regarding consulting services to be rendered by JBR Capital to Rio Vista and to Penn Octane. JBR Capital is controlled by Mr. Richter. The provisions of the Consulting Agreement are effective as of November 15, 2006 (Effective Date).

Pursuant to the Consulting Agreement, JBR Capital has agreed to assist Rio Vista and Penn Octane with the potential acquisition and disposition of assets and with other transactions involving Rio Vista or Penn Octane. In exchange for these services, Rio Vista has agreed to pay JBR Capital a fee based on approved services rendered by JBR Capital plus a fee based on the net proceeds to Rio Vista resulting from a sale of assets to a third party introduced to Rio Vista by JBR Capital. In addition, in connection with the Regional transaction, JBR Capital earned a fee of $180,000 which fee was expensed. The term of the Consulting Agreement is six months following the Effective Date. The Consulting Agreement renews for additional six-month terms unless terminated by either party at least 30 days before the end of each term.

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Private Placement of Common Units

On November 29, 2007, Rio Vista and Rio Vista GP LLC (Rio Vista GP), entered into a Unit Purchase Agreement with Standard General Fund L.P., Credit Suisse Management LLC and Structured Finance Americas LLC (collectively, Purchasers) dated effective as of November 29, 2007 (the Unit Purchase Agreement). Pursuant to the terms of the Unit Purchase Agreement, Rio Vista agreed to sell, and the Purchasers agreed to purchase, a total of 355,556 common units of Rio Vista (Common Units) at a price of $11.25 per share in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (Securities Act). The total purchase price of the Common Units is $4,000,000. Rio Vista agreed to pay expenses of counsel to the Purchasers in an amount not to exceed $100,000. Rio Vista used the net proceeds from the sale of the Common Units for general working capital purposes, including repayment of indebtedness. Rio Vista agreed not to offer or sell any of its equity securities (including equity securities of subsidiaries) for a period of 12 months following the closing date without first offering such securities to the Purchasers, which shall have the right to purchase up to 30% of such securities. The Unit Purchase Agreement contains customary representations, warranties and covenants of the parties and is subject to customary conditions to closing, including approval for listing of the Common Units on the Nasdaq Global Market.

Omnibus Agreement with Penn Octane

Pursuant to the Omnibus Agreement, Penn Octane is entitled to reimbursement for all direct and indirect expenses it or the General Partner incurs on Rio Vista’s behalf, including general and administrative expenses.

Under the Omnibus Agreement, Penn Octane provides the General Partner with corporate staff and support services in connection with its management and operation of the assets of Rio Vista. These services include management and centralized corporate functions, such as accounting, treasury, engineering, information technology, insurance, administration of employee benefit and incentive compensation plans and other corporate services. Penn Octane is reimbursed for the costs and expenses it incurs in rendering these services using a percentage calculated based on the time spent by Penn Octane’s employees on Rio Vista’s business. Each Penn Octane employee involved with Rio Vista activities accounts for his or her time each month related to Rio Vista as a percentage of his or her total time worked. The General Partner calculates the general and administrative expenses that are allocated to Rio Vista using the cumulative percentage. Administrative and general expenses directly associated with providing services to Rio Vista (such as legal and accounting services) are not included in the above allocation of indirect costs; such expenses are charged directly to Rio Vista.

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Distributions

All Rio Vista unitholders have the right to receive distributions from Rio Vista of “available cash” as defined in the partnership agreement in an amount equal to at least the minimum distribution of $0.25 per quarter per unit, plus any arrearages in the payment of the minimum quarterly distribution on the units from prior quarters subject to any reserves determined by the General Partner. The General Partner has a right to receive a distribution corresponding to its 2% General Partner interest and its incentive distribution rights. During 2007, Rio Vista made $89,000 of distributions to the General Partner.

Guarantees and Assets Pledged on Certain of Penn Octane’s Obligations

Rio Vista is liable as guarantor on the RZB Credit Facility and will continue to pledge certain of its assets as collateral in connection with the RZB Credit Facility. See Item 7. “Management’s Discussion and Analysis of Financial Conditions, Results of Operations — Liquidation and Capital Resource — Debt Obligations. Rio Vista may also be prohibited from making any distributions to unitholders if it would cause an event of default, or if an event of default is existing, under the RZB Credit Facility.

Chairman Services Agreement and Manager Services Agreement

On April 10, 2007, the Board of Managers approved a form of Chairman Services Agreement and Manager Services Agreement with each member of the board of managers of the General Partner. Pursuant to these agreements, the non-employee chairman of the board will receive annual cash compensation of $25,000, payable quarterly, and an annual grant of options to purchase 6,250 Rio Vista common units. Other non-employee managers will receive annual cash compensation of $20,000, payable quarterly, and an annual grant of options to purchase 5,000 Rio Vista common units.

Indemnification Agreement

On April 10, 2007, the Board of Managers approved a form of Indemnification Agreement for the managers and officers of the General Partner. The agreement provides for indemnification against liabilities in the event of legal proceedings brought by a third party or by or in the right of the General Partner. The agreement also provides for advancement of expenses to an indemnified manager or officer.

Manager Independence

The board of managers is currently composed of five members, none of whom are members of the management of either Rio Vista GP LLC or Penn Octane. The board has determined that all five of its managers, Messrs. Canney, Feiwell, Raben, Singer and Manner, meet the independence requirements under the rules of the NASDAQ Stock Market. As a result, although not required by NASDAQ rules applicable to limited partnerships, the majority of the board of managers is comprised of independent managers.

The Company’s audit committee (Audit Committee) consists of Mr. Canney (Chairman), Mr. Feiwell, and Mr. Manner. The board has determined that all three members of the audit committee meet the audit committee independence requirements under the rules of the NASDAQ Stock Market.

118

Item 14. Principal Accountant Fees and Services.

Rio Vista has been billed as follows for the professional services of Burton McCumber & Cortez, L.L.P. rendered during the years ended December 31, 2006 and 2007:

	2006		2007
Audit Fees	$	235,000	$	540,000
Audit — Related Fees(1)	$	9,000	$	118,000
Tax Fees (2)	$	30,000	$	44,000
All Other Fees(3)	$	4,000	$	4,000

(1)	Represents fees related to the LPG asset sale.
(2)	Represents fees related to the Mexican subsidiaries.
(3)	Represents fees billed for tax compliance, tax advice and tax planning services.

The General Partner’s audit committee approves the engagement of our independent auditor to perform audit-related services. The audit committee does not formally approve specific amounts to be spent on non-audit related services which in the aggregate do not exceed amounts to be spent on audit-related services. In determining the reasonableness of audit fees, the audit committee considers historical amounts paid and the scope of services to be performed. The audit committee has determined that the professional services rendered by our accountants are compatible with maintaining the principal accountant’s independence. The audit committee gave prior approval to all audit services in 2006 and 2007.

119

PART IV

Item 15. Exhibits and Financial Statement Schedules

a. Financial Statements and Financial Statement Schedules.

The following documents are filed as part of this report:

(1) Consolidated Financial Statements:

Rio Vista Energy Partners L.P.

Report of Independent Public Accounting Firm

Consolidated Balance Sheet as of December 31, 2006 and 2007

Consolidated Statements of Operations for each of the three years in the period ended
December 31, 2007

Consolidated Statement of Partners’ Capital for each of the three years in the period ended December 31, 2007

Consolidated Statements of Cash Flows for each of the three years in the period ended
December 31, 2007

Notes to Consolidated Financial Statements

(2) Financial Statement Schedules:

Schedule II — Valuation and Qualifying Accounts

b. Exhibits.

120

The following Exhibits are incorporated by reference to previously filed reports, as noted:

Exhibit No.
	2.1	Distribution Agreement, dated September 16, 2004, by and among Penn Octane Corporation, Rio Vista Energy Partners L.P. and its Subsidiaries. (Incorporated by reference to Rio Vista’s Registration Statement on Form 10, filed August 26, 2004, SEC File No. 000-50394).
	2.2	Amended and Restated Purchase and Sale Agreement, dated August 15, 2006, by and between Rio Vista Operating Partnership L.P. and TransMontaigne Product Services Inc. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, filed on November 20, 2006, SEC File No. 000-50394).
	2.3	Agreement and Plan of Merger, dated July 27, 2007, by and among Rio Vista Energy Partners L.P., Regional Enterprises, Inc., Regional Enterprizes, Inc. (also known as Regional Enterprises, Inc.); the shareholders; and W. Gary Farrar, Jr.. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	2.4	Articles of Merger of Regional Enterprises, Inc. and Regional Enterprizes, Inc., dated July 27 2007. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	2.5	Asset Purchase Agreement, dated October 1, 2007, by and between Rio Vista Penny LLC and G M Oil Properties, Inc. (Incorporated by reference to Rio Vista’s Current Report on Form 8-K, filed on November 26, 2007, SEC File No. 000-50394).
	2.6	Amendment to Asset Purchase Agreement, dated November 16, 2007, by and between Rio Vista Penny LLC and G M Oil Properties, Inc. (Incorporated by reference to Rio Vista’s Current Report on Form 8-K, filed on November 26, 2007, SEC File No. 000-50394).
	2.7	Asset Purchase Agreement, dated as of October 1, 2007, by and between Rio Vista Penny LLC, Penny Petroleum Corporation and Gary Moores. (Incorporated by reference to Rio Vista’s Current Report on Form 8-K, filed on November 26, 2007, SEC File No. 000-50394).
	2.8	Amendment to Asset Purchase Agreement, dated October 25, 2007, by and among Rio Vista Energy Partners L.P., Rio Vista Penny LLC, Penny Petroleum Corporation and Gary Moores. (Incorporated by reference to Rio Vista’s Current Report on Form 8-K, filed on November 26, 2007, SEC File No. 000-50394).
	2.9	Second Amendment to Asset Purchase Agreement, dated November 16, 2007, by and among Rio Vista Energy Partners L.P., Rio Vista Penny LLC, Penny Petroleum Corporation and Gary Moores. (Incorporated by reference to Rio Vista’s Current Report on Form 8-K, filed on November 26, 2007, SEC File No. 000-50394).
	2.10	Stock Purchase Agreement, dated October 2, 2007, by and between Rio Vista GO, GO LLC, Outback Production Inc., Gary Moores and Bill Wood. (Incorporated by reference to Rio Vista’s Current Report on Form 8-K, filed on November 26, 2007, SEC File No. 000-50394).
	2.11	Amendment to Membership Interest Purchase and Sale Agreement, dated November 16, 2007, by and between Rio Vista Energy Partners L.P., Rio Vista GO LLC, Outback Production Inc., GO LLC, and Gary Moores and Bill Wood. (Incorporated by reference to Rio Vista’s Current Report on Form 8-K, filed on November 26, 2007, SEC File No. 000-50394).

121

Exhibit No.
	2.12	Purchase and Sale Agreement, dated December 26, 2007, by and among Rio Vista Operating Partnership L.P., Penn Octane International, LLC, TMOC Corp., TLP MEX L.L.C. and RAZORBACK L.L.C. (Incorporated by reference to Rio Vista’s Current Report on Form 8-K, filed on January 3, 2008, SEC File No. 000-50394).
	3.1	Certificate of Limited Partnership of Rio Vista Energy Partners L.P., filed July 10, 2003. (Incorporated by reference to Rio Vista’s Registration Statement on Form 10, filed August 26, 2004, SEC File No. 000-50394).
	3.2	Amendment of Certificate of Limited Partnership of Rio Vista Energy Partners L.P., filed September 17, 2003. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, filed on November 22, 2004, SEC File No. 000-50394).
	3.3	First Amended and Restated Limited Partnership Agreement of Rio Vista Energy Partners L.P., dated September 16, 2004. (Incorporated by reference to Rio Vista’s Registration Statement on Form 10, filed August 26, 2004, SEC File No. 000-50394).
	3.4	First Amendment to the First Amended and Restated Agreement of Limited Partnership of Rio Vista Energy Partners L.P., dated October 26, 2005. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed on November 21, 2005, SEC File No. 000-50394).
	3.5	Certificate of Formation of Rio Vista GP LLC. (Incorporated by reference to Rio Vista’s Registration Statement on Form 10, filed August 26, 2004, SEC File No. 000-50394).
	3.6	Rio Vista GP LLC Amended and Restated Limited Liability Company Agreement, dated September 16, 2004. (Incorporated by reference to Rio Vista’s Registration Statement on Form 10, filed August 26, 2004, SEC File No. 000-50394).
	3.7	First Amendment to Amended and Restated Limited Liability Company Agreement of Rio Vista GP LLC, dated October 2, 2006. (Incorporated by reference to Rio Vista’s Annual Report on Form 10-K for the year ended December 31, 2005, filed on April 6, 2006, SEC File No. 000-50394).
	4.1	Specimen Unit Certificate for Common Units. (Incorporated by reference to Rio Vista’s Registration Statement on Form 10, filed August 26, 2004, SEC File No. 000-50394).
	4.2	Forms of Warrants to Purchase Common Units to be issued to Penn Octane warrant holders. (Incorporated by reference to Rio Vista’s Registration Statement on Form 10, filed August 26, 2004, SEC File No. 000-50394).
	10.1	Contribution, Conveyance and Assumption Agreement, dated September 16, 2004, by and among Penn Octane Corporation, Rio Vista GP LLC, Rio Vista Energy Partners L.P., Rio Vista Operating GP LLC and Rio Vista Operating Partnership L.P. (Incorporated by reference to Rio Vista’s Registration Statement on Form 10, filed August 26, 2004, SEC File No. 000-50394).
	10.2	Omnibus Agreement, dated September 16, 2004, by and among Penn Octane Corporation, Rio Vista GP LLC, Rio Vista Energy Partners, L.P. and Rio Vista Operating Partnership L.P. (Incorporated by reference to Rio Vista’s Registration Statement on Form 10, filed August 26, 2004, SEC File No. 000-50394).
	10.3	Amendment No. 1 to Omnibus Agreement, dated September 16, 2004, by and among Penn Octane Corporation, Rio Vista GP LLC, Rio Vista Energy Partners L.P. and Rio Vista Operating Partnership L.P. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, filed on November 22, 2004, SEC File No. 000-50394).
	10.4	Purchase Contract, dated October 1, 2004, by and between Penn Octane Corporation and Rio Vista Operating Partnership L.P. (Incorporated by reference to Rio Vista’s Registration Statement on Form 10, filed August 26, 2004, SEC File No. 000-50394).

122

Exhibit No.
	10.5	Form of Unit Purchase Option between Penn Octane Corporation and Shore Capital LLC. (Incorporated by reference to Rio Vista’s Registration Statement on Form 10, filed August 26, 2004, SEC File No. 000-50394).
	10.6	Form of Unit Purchase Option between Penn Octane Corporation and Jerome B. Richter. (Incorporated by reference to Rio Vista’s Registration Statement on Form 10, filed August 26, 2004, SEC File No. 000-50394).
	10.7	Rio Vista Energy Partners L.P. Unit Option Agreement, dated July 10, 2003, granted to Shore Capital LLC. (Incorporated by reference to Rio Vista’s Registration Statement on Form 10, filed August 26, 2004, SEC File No. 000-50394).
	10.8	Form of RVGP Voting Agreement by and among Rio Vista GP LLC, Penn Octane Corporation and the members of Rio Vista GP LLC. (Incorporated by reference to Rio Vista’s Registration Statement on Form 10, filed August 26, 2004, SEC File No. 000-50394).
	10.9	Conveyance Agreement, dated September 30, 2004 from Penn Octane Corporation in favor of Rio Vista Operating Partnership L.P. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, filed on November 22, 2004, SEC File No. 000-50394).
	10.10	Guaranty & Agreement between Rio Vista Energy Partners L.P. and RZB Finance LLC, dated September 15, 2004. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, filed on November 22, 2004, SEC File No. 000-50394).
	10.11	Guaranty & Agreement, dated September 15, 2004, between Rio Vista Operating Partnership L.P. and RZB Finance LLC. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, filed on November 22, 2004, SEC File No. 000-50394).
	10.12	General Security Agreement, dated September 15, 2004, between Rio Vista Energy Partners L.P. and RZB Finance LLC. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, filed on November 22, 2004, SEC File No. 000-50394).
	10.13	General Security Agreement, dated September 15, 2004, between Rio Vista Operating Partnership L.P. and RZB Finance LLC. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, filed on November 22, 2004, SEC File No. 000-50394).
	10.14*	Rio Vista Energy Partners L.P. 2005 Equity Incentive Plan (Incorporated by reference to Rio Vista’s Annual Report on Form 10-K for the year ended December 31, 2004, filed on April 12, 2005, SEC File No. 000-50394).
	10.15	Promissory Note, dated August 15, 2005, between Rio Vista Operating Partnership L.P. and TransMontaigne Product Services Inc. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed on August 19, 2005, SEC File No. 000-50394).
	10.16	Security Agreement, dated August 15, 2005, between Rio Vista Operating Partnership L.P. and TransMontaigne Product Services Inc. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed on August 19, 2005, SEC File No. 000-50394).
	10.17	Amended and Restated Consulting Agreement, dated November 15, 2005, by and among Penn Octane Corporation, Rio Vista Energy Partners and Jerome B. Richter. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, filed on November 21, 2005, SEC File No. 000-50394).

123

Exhibit No.
	10.18	Unit Purchase Option, dated February 6, 2007, between Shore Trading LLC and Penn Octane Corporation. (Incorporated by reference to Rio Vista’s Annual Report on Form 10-K for the year ended December 31, 2006, filed on April 17, 2007, SEC File No. 000-50394).
	10.19	Consent to Transfer of Units, Acknowledgement of Representation, and Waiver of Conflicts, dated February 6, 2007, by and among Penn Octane Corporation, Rio Vista GP LLC and Shore Trading LLC. (Incorporated by reference to Rio Vista’s Annual Report on Form 10-K for the year ended December 31, 2006, filed on April 17, 2007, SEC File No. 000-50394).
	10.20	Consulting Agreement entered into on March 5, 2007, with an effective date of November 15, 2006 by and between Penn Octane Corporation and Rio Vista Energy Partners L.P. and JBR Capital Resources, Inc. (Incorporated by reference to Rio Vista’s Annual Report on Form 10-K for the year ended December 31, 2006, filed on April 17, 2007, SEC File No. 000-50394).
	10.21	Letter Agreement, dated March 5, 2007, by and between Penn Octane Corporation, Rio Vista Energy Partners L.P. and JBR Capital Resources, Inc. (Incorporated by reference to Rio Vista’s Annual Report on Form 10-K for the year ended December 31, 2006, filed on April 17, 2007, SEC File No. 000-50394).
	10.22*	Form of Rio Vista GP LLC Chairman Services Agreement. (Incorporated by reference to Rio Vista’s Annual Report on Form 10-K for the year ended December 31, 2006, filed on April 17, 2007, SEC File No. 000-50394).
	10.23*	Form of Rio Vista GP LLC Managers Services Agreement. (Incorporated by reference to Rio Vista’s Annual Report on Form 10-K for the year ended December 31, 2006, filed on April 17, 2007, SEC File No. 000-50394).
	10.24*	Form of Rio Vista GP LLC Manager and Officer Indemnification Agreement. (Incorporated by reference to Rio Vista’s Annual Report on Form 10-K for the year ended December 31, 2006, filed on April 17, 2007, SEC File No. 000-50394).
	10.25 *	Form of Nonqualified Unit Option Agreement under the 2005 Rio Vista Energy Partners L.P. Equity Incentive Plan. (Incorporated by reference to Rio Vista’s Annual Report on Form 10-K for the year ended December 31, 2006, filed on April 17, 2007, SEC File No. 000-50394).
	10.26	Consulting Agreement, dated November 1, 2006, by and among Penn Octane Corporation And Rio Vista Energy Partners L.P. and Ricardo Rodriguez Canney. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	10.27	Consulting Agreement, dated July 2, 2007, by and between Rio Vista Energy Partners, L.P. and CEOcast, Inc. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	10.28	Employment and Non-Competition Agreement, dated July 27, 2007, by and between Regional Enterprises, Inc. and W. Gary Farrar, III. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	10.29	Escrow Agreement, dated July 27, 2007, by and among Rio Vista Energy Partners L.P., Regional Enterprises, Inc., W. Gary Farrar, Jr., and First Capital Bank. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	10.30	Loan Agreement, dated July 26, 2007, by and between Rio Vista Energy Partners L.P., and RZB Finance LLC (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).

124

Exhibit No.
	10.31	Guaranty and Agreement, dated July 26, 2007, by and between Regional Enterprises, Inc., and RZB Finance LLC. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	10.32	Guaranty and Agreement, dated July 26, 2007, by and between Penn Octane Corporation, and RZB Finance LLC. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	10.33	Guaranty and Agreement, dated July 26, 2007, by and between Rio Vista Operating Partnership L.P. and RZB Finance LLC Dated As Of July 26, 2007. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	10.34	$5,000,000 Promissory Note, dated July 26, 2007, issued by Rio Vista Energy Partners L.P. to RZB Finance LLC. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	10.35	General Security Agreement, dated July 26, 2007, by and between RZB Finance LLC and Regional Enterprises, Inc. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	10.36	Pledge Agreement, dated July 26, 2007, by and between: Rio Vista Energy Partners L.P., and RZB Finance LLC. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	10.37	First Amendment to Line Letter, dated July 26, 2007, by and between RZB Finance LLC and Penn Octane Corporation. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	10.38	Debt Assumption Agreement, dated July 26, 2007, by and between Rio Vista Energy Partners L.P. and Regional Enterprises, Inc. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	10.39	$5,000,000 Debt Assumption Note, dated July 26, 2007, issued by Regional Enterprises, Inc. to Rio Vista Energy Partners L.P. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	10.40	$2,500,000 Promissory Note, dated July 26, 2007, issued by Regional Enterprises, Inc. to Rio Vista Energy Partners L.P. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	10.41	Environmental Indemnity Agreement, dated July 26, 2007, by and between Regional Enterprises, Inc. and RZB Finance LLC. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	10.42	Reaffirmation of Security Agreements, dated July 26, 2007, by and among Rio Vista Energy Partners L.P., Penn Octane Corporation Rio Vista Operating Partnership L.P., and RZB Finance LLC. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, filed on August 20, 2007, SEC File No. 000-50394).
	10.43	Binding Letter of Intent, dated September 12, 2007, by and between TransMontaigne Partners L.P. and Rio Vista Operating Partnership L.P. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, filed on November 19, 2007, SEC File No. 000-50394).
	10.44	Restated and Amended Promissory Note, dated September 12, 2007, by and between Rio Vista Operating Partnership L.P. and TransMontaigne Product Services, Inc. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, filed on November 19, 2007, SEC File No. 000-50394).

125

Exhibit No.
	10.45	Restated and Amended Security Agreement, dated September 12, 2007, by and among Rio Vista Operating Partnership, L.P., TransMontaigne Product Services, Inc. and TransMontaigne Partners L.P. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, filed on November 19, 2007, SEC File No. 000-50394).
	10.46	First Priority Equity Interest Pledge Agreement, dated September 12, 2007, by and among Rio Vista Operating Partnership, L.P., Penn Octane International, LLC, TransMontaigne Product Services, Inc. and TransMontaigne Partners L.P., with the acknowledgment of Penn Octane de Mexico, S. de R.L. de C.V. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, filed on November 19, 2007, SEC File No. 000-50394).
	10.47	First Priority Equity Interest Pledge Agreement, dated September 12, 2007, by and among Rio Vista Operating Partnership, L.P., Penn Octane International, LLC, TransMontaigne Product Services, Inc. and TransMontaigne Partners L.P., with the acknowledgment of Termatsal, S. de R.L. de C.V. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, filed on November 19, 2007, SEC File No. 000-50394).
	10.48	Assignment Agreement, dated September 12, 2007, by and among Rio Vista Operating Partnership, L.P., TransMontaigne Partners L.P. and TransMontaigne Product Services, Inc. (Incorporated by reference to Rio Vista’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, filed on November 19, 2007, SEC File No. 000-50394).
	10.49	Unit Purchase Agreement, dated November 29, 2007, by and among Rio Vista Energy Partners L.P., Rio Vista GP LLC, Standard General Fund L.P., Credit Suisse Management LLC and Structured Finance Americas LLC. (Incorporated by reference to Rio Vista’s Current Report on Form 8-K, filed on December 4, 2007, SEC File No. 000-50394).
	10.50	Registration Rights Agreement, dated December 3, 2007, by and among Rio Vista Energy Partners L.P., Rio Vista GP LLC, Standard General Fund L.P., Credit Suisse Management LLC and Structured Finance Americas LLC. (Incorporated by reference to Rio Vista’s Current Report on Form 8-K, filed on December 4, 2007, SEC File No. 000-50394).

126

The following Exhibits are filed as part of this report:

Exhibit No.
	10.52	Note Purchase Agreement between Rio Vista Penny LLC, TCW Asset Management Company and TCW Energy Fund X Investors dated November 19, 2007.
	10.53	Guaranty made as of November 19, 2007 by Rio Vista Eco LLC, Rio Vista GO LLC, GO LLC and MV Pipeline Company in favor of TCW Asset Management Company as administrative agent for Holders.
	10.54	Security Agreement dated as of November 19, 2007 by Rio Vista Penny LLC in favor of TCW Asset Management Company, as administrative agent.
	10.55	Assumption Agreement dated November 19, 2007 by and among GM Oil Properties, Inc., Rio Vista Penny LLC, TCW Asset Management Company, as administrative agent and the holders party to the Note Purchase Agreement.
	10.56	Rio Vista Energy Partners L.P. Common Unit Purchase Warrant issued to TCW Energy Funds X Holdings, L.P.
	10.57	Promissory note dated November 19, 2007 issued by Rio Vista to Gary Moores.
	21	Subsidiaries of the Registrant
	23.1	Consent of Burton McCumber & Cortez, L.L.P.
	23.2	Consent of Lee Keeling and Associates, Inc.
	31.1	Certification Pursuant to Rule 13a-14(a) / 15d — 14(a) of the Exchange Act
	31.2	Certification Pursuant to Rule 13a-14(a) / 15d — 14(a) of the Exchange Act
	32	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes — Oxley Act of 2002

* indicates management contract or compensatory plan or arrangement.

All of the Exhibits are available from the SEC’s website at www.sec.gov. In addition, Rio Vista will furnish a copy of any Exhibit upon payment of a fee (based on the estimated actual cost which shall be determined at the time of the request) together with a request addressed to Ian T. Bothwell, Rio Vista Energy Partners L.P., 1313 E. Alton Gloor Blvd., Suite J, Brownsville, TX 78526.

127

Schedule II

VALUATION AND QUALIFYING ACCOUNTS

	Balance at		Charged to
	Beginning of		Costs and		Charged to				Balance at End
Description	Period		Expenses		Other Accounts		Deductions		of Period
Year ended December 31, 2007
Allowance for doubtful accounts	$	—	$	—	$	—	$	—	$	—
Year ended December 31, 2006
Allowance for doubtful accounts	$	—	$	—	$	—	$	—	$	—
Year ended December 31, 2005
Allowance for doubtful accounts	$	—	$	—	$	—	$	—	$	—

128

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

RIO VISTA ENERGY PARTNERS L.P.
By:	RIO VISTA GP LLC, GENERAL PARTNER

April 15, 2008	By:	/s/ Ian T. Bothwell
		Ian T. Bothwell
		Acting Chief Executive Officer, Acting President, Vice-President, Chief Financial Officer, Treasurer and Assistant Secretary (Principal, Executive, Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Each capacity refers to the signer’s position with Rio Vista GP LLC, the General Partner of the registrant.

Signature	Title	Date
/s/ Ian T. Bothwell	Ian T. Bothwell Acting Chief Executive Officer, Acting President, Vice-President, Chief Financial Officer, Treasurer and Assistant Secretary (Principal, Executive, Financial and Accounting Officer)	April 15, 2008
/s/ Richard R. Canney	Richard R. Canney Manager	April 15, 2008
/s/ Murray J. Feiwell	Murray J. Feiwell Manager	April 15, 2008
/s/ Douglas G. Manner	Douglas G. Manner Manager	April 15, 2008
/s/ Nicholas J. Singer	Nicholas J. Singer Manager	April 15, 2008
/s/ Bruce I. Raben	Bruce I. Raben Manager	April 15, 2008

129

EXHIBIT INDEX

Exhibit No.
	10.52	Note Purchase Agreement between Rio Vista Penny LLC, TCW Asset Management Company and TCW Energy Fund X Investors dated November 19, 2007.
	10.53	Guaranty made as of November 19, 2007 by Rio Vista Eco LLC, Rio Vista GO LLC, GO LLC and MV Pipeline Company in favor of TCW Asset Management Company as administrative agent for Holders.
	10.54	Security Agreement dated as of November 19, 2007 by Rio Vista Penny LLC in favor of TCW Asset Management Company, as administrative agent.
	10.55	Assumption Agreement dated November 19, 2007 by and among GM Oil Properties, Inc., Rio Vista Penny LLC, TCW Asset Management Company, as administrative agent and the holders party to the Note Purchase Agreement.
	10.56	Rio Vista Energy Partners L.P. Common Unit Purchase Warrant issued to TCW Energy Funds X Holdings, L.P.
	10.57	Promissory note dated November 19, 2007 issued by Rio Vista to Gary Moores.
	21	Subsidiaries of the Registrant
	23.1	Consent of Burton McCumber & Cortez, L.L.P.
	23.2	Consent of Lee Keeling and Associates, Inc.
	31.1	Certification Pursuant to Rule 13a-14(a) / 15d — 14(a) of the Exchange Act
	31.2	Certification Pursuant to Rule 13a-14(a) / 15d — 14(a) of the Exchange Act
	32	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes — Oxley Act of 2002

130

EX-10.52

Exhibit 10.52

NOTE PURCHASE AGREEMENT

RIO VISTA PENNY LLC

TCW ASSET MANAGEMENT COMPANY,
as Administrative Agent

and

TCW ENERGY FUND X INVESTORS,
as Holders

$30,000,000 Senior Secured Notes

November 19, 2007

TABLE OF CONTENTS

	Page
ARTICLE I — Definitions and References		2
Section 1.1. Defined Terms		2
Section 1.2. Exhibits and Schedules; Additional Definitions		21
Section 1.3. Amendment of Defined Instruments		21
Section 1.4. References and Titles		21
Section 1.5. Calculations and Determinations		22
Section 1.6. Joint Preparation; Construction of Indemnities and Releases		22
ARTICLE II — Purchase and Sale of Securities		22
Section 2.1. Note Purchase; Amendment & Restatement		22
Section 2.2. The Notes		23
Section 2.3. Requests for New Loans		23
Section 2.4. [Reserved]		24
Section 2.5. Use of Proceeds		24
Section 2.6. Interest Rates and Fees; Payment Dates		24
Section 2.7. Collateral Account		25
Section 2.8. Mandatory Prepayments & Note Exchange		27
Section 2.9. Optional Prepayments		28
Section 2.10. Financing Arrangements		28
ARTICLE III — Payments to Holders		28
Section 3.1. General Procedures		28
Section 3.2. Payment of Interest		29
Section 3.3. Place of Payment		29
Section 3.4. Capital Reimbursement		29
Section 3.5. Reimbursable Taxes		30
ARTICLE IV — Conditions Precedent to Lending		31
Section 4.1. Closing Date Conditions		31
Section 4.2. Additional Conditions Precedent		33
Section 4.3. Conditions Precedent to Company’s Obligations		34
ARTICLE V — Representations and Warranties of Company		35
Section 5.1. No Default		35
Section 5.2. Organization and Good Standing		35
Section 5.3. Authorization		35
Section 5.4. No Conflicts or Consents		35
Section 5.5. Enforceable Obligations		36
Section 5.6. Initial Pro Forma Financial Statements		36
Section 5.7. Other Obligations and Restrictions		36
Section 5.8. Full Disclosure		36
Section 5.9. Litigation		37

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Section 5.10. Labor Disputes and Acts of God		37
Section 5.11. ERISA Plans and Liabilities		37
Section 5.12. Environmental and Other Laws		37
Section 5.13. Insurance		38
Section 5.14. Names and Places of Business		38
Section 5.15. Subsidiaries		38
Section 5.16. Government Regulation		38
Section 5.17. Solvency		39
Section 5.18. Title to Properties; Licenses		39
Section 5.19. Regulation U		39
Section 5.20. Leases and Contracts; Performance of Obligations		40
Section 5.21. Marketing Arrangements		40
Section 5.22. Right to Receive Payment for Future Production		41
Section 5.23. Operation of Oil and Gas Properties		41
Section 5.24. Ad Valorem and Severance Taxes; Litigation		41
Section 5.25. Acquisition		42
ARTICLE VI — Representations and Warranties of Holders		42
Section 6.1. Organization of Holders		42
Section 6.2. Authority of Holders		42
Section 6.3. Compliance with Laws and Other Instruments		42
Section 6.4. Acquisition for Holder’s Account		42
Section 6.5. Notes Not Registered		43
Section 6.6. Accredited Investor		43
ARTICLE VII — Affirmative Covenants of Company		43
Section 7.1. Payment and Performance		43
Section 7.2. Books, Financial Statements and Reports		43
Section 7.3. Notice of Material Events and Change of Address		46
Section 7.4. Maintenance of Properties		47
Section 7.5. Maintenance of Existence and Qualifications		47
Section 7.6. Payment of Trade Liabilities, Taxes, etc.		47
Section 7.7. Insurance		47
Section 7.8. Performance on Company’s Behalf		48
Section 7.9. Interest		48
Section 7.10. Compliance with Agreements and Law		48
Section 7.11. Board Observation Rights		48
Section 7.12. Separateness Covenants		49
Section 7.13. Environmental Matters; Environmental Reviews		49
Section 7.14. Evidence of Compliance		50
Section 7.15. Bank Accounts; Offset		50
Section 7.16. Guaranties of Company’s Subsidiaries		50
Section 7.17. Agreement to Deliver Security Documents		51
Section 7.18. Production Proceeds		51
Section 7.19. Leases and Contracts; Performance of Obligations		52
Section 7.20. Approved Plan of Development; Project Area		52
Section 7.21. Hedging Contracts		52

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	Page
Section 7.22. Other Information and Inspections		52
Section 7.23. Post Closing Items		53
ARTICLE VIII — Negative Covenants of Company		54
Section 8.1. Indebtedness		54
Section 8.2. Limitation on Liens		54
Section 8.3. Limitation on Hedging Contracts		54
Section 8.4. Limitation on Mergers, Issuances of Securities		54
Section 8.5. Limitation on Dispositions of Property		54
Section 8.6. Limitation on Dividends and Redemptions		55
Section 8.7. Limitation on Investments and New Businesses		56
Section 8.8. Limitation on Credit Extensions		56
Section 8.9. Transactions with Affiliates		56
Section 8.10. Prohibited Contracts		56
Section 8.11. Coverage Ratio		57
Section 8.12. Current Ratio		57
Section 8.13. Amendments to Organizational Documents; Other Material Agreements		57
Section 8.14. Acquisition Documents		57
Section 8.15. Excess Drilling & Completion Costs		57
Section 8.16. General and Administrative Expenses		57
Section 8.17. Capital Expenditures		57
ARTICLE IX — Events of Default and Remedies		58
Section 9.1. Events of Default		58
Section 9.2. Remedies		60
ARTICLE X — TRANSFERABILITY OF SECURITIES		60
Section 10.1. Restrictive Legend		60
ARTICLE XI — Administrative Agent		61
Section 11.1. Appointment and Authority		61
Section 11.2. Exculpation, Administrative Agent’s Reliance, Etc.		61
Section 11.3. Credit Decisions		62
Section 11.4. Indemnification		62
Section 11.5. Rights as Holder		63
Section 11.6. Sharing of Set-Offs and Other Payments		63
Section 11.7. Investments		63
Section 11.8. Benefit of Article XI		64
Section 11.9. Resignation		64
Section 11.10. Notice of Default		64
Section 11.11. Limitation of Duties and Fiduciary Relationship		65
Section 11.12. Limitation of Liability		65
Section 11.13. Reliance upon Documentation		65
Section 11.14. Reliance by Company		65

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	Page
ARTICLE XII — Miscellaneous		66
Section 12.1. Waivers and Amendments; Acknowledgments		66
Section 12.2. Survival of Agreements; Cumulative Nature		68
Section 12.3. Notices		69
Section 12.4. Payment of Expenses; Indemnity		70
Section 12.5. Joint and Several Liability		71
Section 12.6. Registration, Transfer, Exchange, Substitution of Notes		72
Section 12.7. Confidentiality		73
Section 12.8. Governing Law; Submission to Process		74
Section 12.9. Limitation on Interest		75
Section 12.10. Termination; Limited Survival		75
Section 12.11. Severability		76
Section 12.12. Counterparts; Fax		76
Section 12.13. Third Party Beneficiaries		76
Section 12.14. USA PATRIOT Act Notice		76
Section 12.15. Waiver of Jury Trial, Punitive Damages, etc.		76
Section 12.16. Amendment and Reconveyance Fee		77
Section 12.17. Amendment and Restatement		77

Schedules and Exhibits:

Schedule 1	—	Disclosure Schedule
Schedule 2	—	Security Schedule
Schedule 3	—	Insurance Schedule
Schedule 4	—	Holders Schedule
Schedule 5	—	Organizational Structure
Schedule 6	—	Approved Plan of Development
Exhibit A	—	Form of Promissory Note
Exhibit B	—	Form of Borrowing Notice
Exhibit C	—	Form of Prepayment Notice
Exhibit D	—	Certificate Accompanying Financial Statements
Exhibit E	—	Form of Opinion of Counsel
Exhibit F	—	Form of Approval Letter

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NOTE PURCHASE AGREEMENT

THIS NOTE PURCHASE AGREEMENT is made as of November 19, 2007, by and among:

• Rio Vista Penny LLC, an Oklahoma limited liability company (“Company”);

• TCW Energy Fund X — NL, L.P., a California limited partnership (“Fund X — NL”);

• TCW Energy Fund XB — NL, L.P., a California limited partnership (“Fund XB — NL”);

• TCW Energy Fund XC — NL, L.P., a California limited partnership (“Fund XC — NL”);

• TCW Energy Fund XD — NL, L.P., a California limited partnership (“Fund XD — NL”);

• TCW Asset Management Company (“TAMCO”), a California corporation, as Investment Manager under the Amended and Restated Investment Management and Custody Agreement dated as of December 3, 2003 among Ensign Peak Advisors, Inc., TAMCO and Trust Company of the West (“TCW”), a California trust company, as Sub-Custodian;

• TAMCO as Investment Manager under the Amended and Restated Investment Management and Custody Agreement dated as of March 18, 2004 among ING Life Insurance and Annuity Company, TAMCO and TCW as Sub-Custodian;

• TAMCO as Investment Manager under the Amended and Restated Investment Management and Custody Agreement dated as of December 11, 2003, among Harry L. Bradley, Jr. Partition Trust, Harry L. Bradley, Jr. Trust, Jane Bradley Uihlien Pettit Partition Trust, Jane Bradley Uihlien Trust, TAMCO and TCW as Sub-Custodian (TAMCO in the capacities designated above, Fund X — NL, Fund XB — NL, Fund XC — NL, and Fund XD — NL together with their respective successors and assigns, are hereinafter collectively referred to as the “Holders”, each a “Holder”); and

• TAMCO, as Administrative Agent (together with its successors in such capacity, the “Administrative Agent”).

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RECITALS:

WHEREAS, capitalized terms used in these Recitals shall have the respective meanings set forth for such terms in Section 1.1 hereof;

WHEREAS, Existing Borrower, Administrative Agent and Holders entered into the Existing Note Purchase Agreement, for the purpose and consideration therein expressed, whereby Holders became obligated to make loans to Existing Borrower as therein provided;

WHEREAS, Existing Borrower and Company entered into the Acquisition GM Agreement wherein Existing Borrower agreed to convey the Assets (as such term is defined in the Acquisition GM Agreement) of Existing Borrower to Company, subject to the Liens of Administrative Agent and Holders under the Existing Note Purchase Agreement, and Company agreed to assume all indebtedness and obligations owing by Existing Borrower under the Existing Note Purchase Agreement; and

WHEREAS, Administrative Agent and Holders consented to the conveyance of such GM Assets to Company, and Company assumed and promised to pay according to the terms thereof all Existing Obligations and also assumed and promised to keep and perform all other covenants and obligations in the Existing Note Purchase Agreement and all other Existing Credit Documents to be performed by Existing Borrower thereunder, in each case pursuant to the terms, conditions, and provisions set forth in the Assumption Agreement;

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, in consideration of the loans which may hereafter be made by Holders, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

ARTICLE I — Definitions and References

Section 1.1. Defined Terms. As used in this Agreement, each of the following terms has the meaning given to such term in this Section 1.1 or in the sections and subsections referred to below:

“Acquisition” means (a) the purchase by Company of the Assets (as such term is defined in the Acquisition Penny Agreement), (b) the purchase by GO of the Membership Interests (as such term is defined in the Acquisition GO Agreement) of GO LLC, and (c) the purchase by Company of the Assets of Existing Borrower.

“Acquisition Agreements” means, collectively, (a) the Acquisition Penny Agreement, (b) the Acquisition GO Agreement, and (c) the Acquisition GM Agreement.

“Acquisition Closing Date” means the date on which the closing of the Acquisition occurs under the Acquisition Documents.

“Acquisition Documents” means (a) the Acquisition Agreements, (b) the transfers, assignments and conveyances executed and delivered pursuant thereto, and (c) all other agreements, assignments, deeds, conveyances, certificates and other documents and instruments now or hereafter executed and delivered pursuant to the Acquisition Agreements or in connection with the Acquisition.

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“Acquisition GM Agreement” means that certain Asset Purchase Agreement dated as of October 1, 2007 by and between Company and Existing Borrower, as amended by that certain Amendment to Asset Purchase Agreement dated as of November 16, 2007.

“Acquisition GO Agreement” means that certain Stock Purchase Agreement dated as of October 2, 2007 by and between GO and Outback Production, Inc., a Nevada corporation, GO LLC, and the shareholders named therein, as amended by that certain Amendment to Membership Interest Purchase and Sale Agreement dated as of November 16, 2007.

“Acquisition Penny Agreement” means that certain Asset Purchase Agreement dated effective as of October 1, 2007 by and between Company and Penny Petroleum, as amended by that certain Amendment to Asset Purchase Agreement dated October 25, 2007, and that certain Second Amendment to Asset Purchase Agreement dated as of November 16, 2007.

“Administrative Agent” has the meaning given to such term in the preamble hereto.

“Affiliate” means, as to any Person, each other Person that directly or indirectly (through one or more intermediaries or otherwise) controls, is controlled by, or is under common control with, such Person. A Person shall be deemed to be “controlled by” any other Person if such other Person possesses, directly or indirectly, power:

(a) to vote 10% or more of the securities or other equity interests (on a fully diluted basis) having ordinary voting power for the election of directors, the managing general partner or partners or the managing member or members; or

(b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

“Aggregate Advance Amount” means, at the time in question, the aggregate principal amount of Loans advanced by Holders during the term of this Agreement.

“Agreed Pricing” means:

(a) for anticipated sales of Hydrocarbons that are fixed in a firm fixed price sales contract with an investment grade counterparty (or another counterparty approved by Administrative Agent), the fixed price or prices provided for in such sales contract during the term thereof;

(b) for anticipated sales of Hydrocarbons that are hedged by a fixed price Hedging Contract with an investment grade counterparty, the fixed price or prices provided for in such Hedging Contract during the term thereof, as modified by any necessary adjustment specified by Administrative Agent for quality and geographical differentials;

(c) for anticipated sales of Hydrocarbons that are hedged by a Hedging Contract with an investment grade counterparty which Hedging Contract provides for a range of prices between a floor and a ceiling, the prices provided for in subsection (d) below, provided that during the term of such Hedging Contract such prices shall in no event be less than such floor or exceed such ceiling, as such floor and ceiling are modified by any necessary adjustment specified by Administrative Agent for quality and geographical differentials;

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(d) for anticipated sales of Hydrocarbons, if such sales are not hedged by a Hedging Contract or sales contract that is described in paragraphs (a), (b), or (c) above, for the date of calculation (or, if such date is not a Business Day, for the first Business Day thereafter), and with any necessary adjustment specified by Administrative Agent for quality and geographical differentials:

(i) For the remainder of the current calendar year, the average NYMEX Pricing for the remaining contracts in the current calendar year,

(ii) For each of the succeeding three complete calendar years, the average NYMEX Pricing for the twelve months in each such calendar year,

(iii) For the succeeding fourth complete calendar year, and for each calendar year thereafter, the average NYMEX Pricing for the twelve months in such fourth calendar year.

“Agreement” means this Note Purchase Agreement.

“AMI Violation” means the ownership or acquisition, directly or indirectly of any interest of any kind (including any interests or rights of the kinds described in the definition of Oil and Gas Properties) in the Project Area by any Affiliate of or holder of Equity in Parent or Company, other than the oil and gas pipeline assets owned by GO LLC and MV Pipeline on the Acquisition Closing Date.

“ANCF” (or “Adjusted Net Cash Flow”) means the positive remainder of:

(a) Gross Cash Revenues determined on a Consolidated basis during any ANCF Quarter (or other period of calculation, if applicable), less

(b) actual Consolidated cash payments by ECO and its Subsidiaries during such ANCF Quarter (or other period of calculation, if applicable) for:

(i) Existing royalties and burdens on the Eligible Mortgaged Properties, if any, that constitute Permitted Liens (to the extent and only to the extent production receipts relating to the same are included in Gross Cash Revenues);

(ii) Direct Taxes on the Eligible Mortgaged Properties;

(iii) ANCF LOE;

(iv) ANCF Transportation Costs;

(iv) ANCF Overhead Costs;

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(v) Interest payments on the Notes and accrued commitment fees under Section 2.6(c); and

(vi) ANCF Capital Expenditures.

“ANCF Capital Expenditures” means capital expenditures made by Restricted Persons on the Eligible Mortgaged Properties, to the extent the same either (a) have been approved by Required Holders at the time in question by means of an Approval Letter, or (b) are included in the Approved Plan of Development, as then in effect (excluding (i) capital expenditures paid for with proceeds of Loans hereunder and (ii) any Excess Drilling & Completion Costs).

“ANCF LOE” means (i) leasehold operating expenses in the ordinary course of business, provided that such expenses shall in no event exceed the amount of $0.50 per mcf of natural gas (determined on a net basis to Restricted Persons), in each case without the express written approval of Required Holders (which approval may be given in their sole and absolute discretion), and (ii) other field level or lease level charges for operations on the Eligible Mortgaged Properties (excluding ANCF Capital Expenditures and other capital expenditures) that have been approved by Administrative Agent on behalf of Required Holders at the time in question by means of an Approval Letter.

“ANCF Overhead Costs” means (i) Permitted G&A Expense Amounts, and (ii) other costs of Restricted Persons to the extent such other costs have been approved as ANCF Overhead Costs by Administrative Agent on behalf of Required Holders at the time in question by means of an Approval Letter.

“ANCF Quarter” means, with respect to a Quarterly Payment Date and the calculation of ANCF, the three calendar month period ending on the last day of the most recent February, May, August or November immediately preceding such Quarterly Payment Date.

“ANCF Transportation Costs” means (i) the actual costs of gathering, processing, compressing, and transporting production from the Eligible Mortgaged Properties from the wellhead to the point of sale, provided that all such costs are negotiated with, and paid to, third parties in arms-length transactions on terms which are reasonable in the area of operations for the quality and quantity of such production for the time period negotiated, at the time such prices are agreed to, or (ii) other transportation or marketing costs, to the extent such other transportation and marketing costs have been approved by Administrative Agent on behalf of Required Holders at the time in question by means of an Approval Letter; provided that such costs shall in no event exceed the amount of (1) $0.42 per mcf of natural gas with respect to the Enogex pipeline, or (2) $0.44 per mcf of natural gas with respect to the PetroQuest pipeline, in each case without the express written approval of Required Holders (which approval may be given in their sole and absolute discretion).

“Approval Letter” means a letter given by Administrative Agent on behalf of Required Holders in the form of Exhibit F.

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“Approved Plan of Development” or “APOD” means Company’s written plan of development with respect to budgeted capital expenditures (including maximum annual expenditures) and other development activities that is described in Schedule 6, as amended and supplemented from time to time with the consent of Required Holders; provided that no such consent shall be required for amendments, modifications or supplements to the extent, but only to the extent, that any such amendments, modifications or supplements (a) either (i) are administrative or ministerial in nature, or (ii) would make non-material amendments to the timing for the completion of any such development (other than an amendment extending the timing of the substantial completion of the APOD), and (b) do not increase the aggregate permitted budgeted capital expenditures of Company and its Subsidiaries under such written plan.

“Assumption Agreement” means that certain Assumption Agreement of even date herewith among Existing Borrower, Company, Administrative Agent, and Holders.

“Availability Period” means the period from and including the Closing Date until the earliest to occur of: (a) the date on which an Event of Default occurs; (b) the date on which a Coverage Deficiency occurs; and (c) October 31, 2008 (or, if earlier, the day on which the obligations of Holders to make Loans hereunder have been terminated or the Notes first become due and payable in full); provided that such date may be extended in writing by Required Holders in their sole and absolute discretion.

“Borrowing” means a borrowing of new Loans pursuant to Section 2.3.

“Borrowing Notice” means a written or telephonic request, or a written confirmation, made by Company which meets the requirements of Section 2.3.

“Budgeted Drilling & Completion Costs” means, with respect to each well comprising part of the APOD, (a) the budgeted drilling costs for such well set forth in the APOD, and (b) the budgeted completion costs for such well set forth in the APOD.

“Business Day” means a day, other than a Saturday or Sunday, on which commercial banks are open for business with the public in New York, New York.

“Capital Lease” means a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP.

“Capital Lease Obligation” means, with respect to any Person and a Capital Lease, the amount of the obligation of such Person as the lessee under such Capital Lease which should, in accordance with GAAP, appear as a liability on the balance sheet of such Person.

“Cash Equivalents” means Investments in:

(a) marketable obligations, maturing within twelve months after acquisition thereof, issued or unconditionally guaranteed by the United States of America or an instrumentality or agency thereof and entitled to the full faith and credit of the United States of America;

(b) demand deposits, and time deposits (including certificates of deposit) maturing within twelve months from the date of deposit thereof, with a domestic office of any national or state bank or trust company which is organized under the Laws of the United States of America or any state therein, which has capital, surplus and undivided profits of at least $500,000,000, and whose long term certificates of deposit are rated at least Aa3 by Moody’s or AA- by S & P;

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(c) repurchase obligations with a term of not more than seven days for underlying securities of the types described in subsection (a) above entered into with any commercial bank meeting the specifications of subsection (b) above;

(d) open market commercial paper, maturing within 270 days after acquisition thereof, which are rated at least P-1 by Moody’s or A-1 by S & P; and

(e) money market or other mutual funds substantially all of whose assets comprise securities of the types described in subsections (a) through (d) above.

“Change of Control” means the occurrence of any of the following events: (a) General Partner shall cease to be the sole general partner of Parent, (b) Penn Octane Corporation, a Delaware corporation shall cease to own at least fifty-one percent (51%) of the Equity of General Partner, (c) any amendment, modification or supplement to the Partnership Agreement that materially reduces the powers and discretion of General Partner to manage the business and affairs of Parent, (d) any merger or consolidation of General Partner or Parent with or into any other business entity, (e) Ian Bothwell ceases for any reason to serve as the sole Manager of Company and is not replaced within 60 days thereafter by a person reasonably acceptable to Required Holders, (f) Parent shall at any time fail to own, directly or indirectly, 100% of the then issued and outstanding Equity of ECO, or (g) ECO shall at any time fail to own, directly or indirectly, 100% of the then issued and outstanding Equity of Company or any Guarantor.

“Closing Date” means the date on which all of the conditions precedent set forth in Section 4.1 shall have been satisfied or waived.

“Closing Date Transactions” means the consummation on the Acquisition Closing Date of the transactions contemplated by the Acquisition Documents.

“Collateral” means all property of any kind which is subject to a Lien in favor of Holders (or in favor of Administrative Agent for the benefit of Holders) or which, under the terms of any Security Document, is purported to be subject to such a Lien.

“Collateral Account” means the deposit account to be established in the name of Company within ten Business Days after the date herewith with a depository institution satisfactory to Administrative Agent, or such other deposit account as may be established by Company from time to time with the prior written consent of Administrative Agent, which consent may be given or withheld in its sole and absolute discretion.

“Collateral Account Agreement” means all documents or agreements governing or evidencing the Collateral Account.

“Collateral Coverage Ratio” means the quotient of (i) the sum of (a) Restricted Persons’ Total Modified NPV10 and (b) Restricted Persons’ Working Capital (which, if negative, shall be deducted from Total Modified NPV10) divided by (ii) Restricted Persons’ total Indebtedness.

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“Commitment” means, as to each Holder, its obligation to make Loans to Company pursuant to Section 2.1 in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Holder’s name on the Holders Schedule under the heading “Commitment” or in the Assignment Agreement pursuant to which such Holder becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement. Notwithstanding that the Note Documents are documented with reference to the Maximum Credit Amount, it is expressly understood and agreed that Holders have no obligation to make Loans up to the Maximum Credit Amount or to increase the amount of the commitments set forth on the Holders Schedule or such Assignment Agreement, as applicable, and that Holders’ commitments to make Loans hereunder is determined by reference to the “Commitment” set forth on such Holders Schedule or such Assignment Agreement, as applicable.

“Commitment Fee Rate” means the per annum rate equal to one-half of one percent (0.50%).

“Company” means Rio Vista Penny LLC, an Oklahoma limited liability company.

“Company Confidential Information” has the meaning given to such term in Section 12.7(b).

“Consolidated” refers to the consolidation of any Person, in accordance with GAAP, with its properly consolidated subsidiaries. References herein to a Person’s Consolidated financial statements, financial position, financial condition, liabilities, etc. refer to the consolidated financial statements, financial position, financial condition, liabilities, etc. of such Person and its properly consolidated subsidiaries. The above reference to GAAP shall not be deemed to cause matters described herein as being on a cash basis, such as Gross Cash Revenues or ANCF, to be changed to an accrual basis.

“Coverage Default” means that the Collateral Coverage Ratio is less than 1.2 at any time in question.

“Coverage Deficiency” means the Collateral Coverage Ratio is less than 1.50 but equal to or greater than 1.20.

“Current Ratio” means, at any time, the ratio of ECO’s Consolidated current assets to ECO’s Consolidated current liabilities at such time. For purposes of this Agreement, “Consolidated current assets” and “Consolidated current liabilities” shall be determined in accordance with GAAP, except that Consolidated current assets and Consolidated current liabilities will be calculated without including any amounts resulting from the application of FASB Statements 133 or 143.

“Dedication Rate” means 90%, provided that such rate will increase to 100% whenever (a) an Event of Default exists or (b) a Coverage Deficiency occurs that is not cured within thirty (30) days after such occurrence.

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“Default” means any Event of Default and any default, event or condition which would, with the giving of any requisite notices and the passage of any requisite periods of time, constitute an Event of Default.

“Default Rate” means the rate per annum equal to two percent (2%) above the Fixed Rate, provided that no Default Rate charged by any Person shall ever exceed the Highest Lawful Rate.

“Deposit Account” means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit, and any other deposit account, as defined in the UCC.

“Direct Taxes” means any severance, ad valorem, or other direct taxes on properties owned by any Restricted Person or the production therefrom or the proceeds of such production; provided that federal, state, or local income or franchise taxes shall in no event be considered Direct Taxes.

“Disclosure Schedule” means Schedule 1 hereto.

“Distribution” means (a) any dividend or other distribution made by a Restricted Person on or in respect of any stock, partnership interest, or other equity interest in such Restricted Person or any other Restricted Person (including any option or warrant to buy such an equity interest), or (b) any payment made by a Restricted Person to purchase, redeem, acquire or retire any stock, partnership interest, or other equity interest in such Restricted Person or any other Restricted Person (including any such option or warrant).

“ECO” means Rio Vista ECO LLC, an Oklahoma limited liability company.

“Eligible Mortgaged Properties” means, collectively, those Oil and Gas Properties (a) which are owned by Company or any other Restricted Person and mortgaged to Administrative Agent to secure the Obligations, (b) for which Administrative Agent has received title opinions or other title information concerning such interests in form, substance and authorship satisfactory to Administrative Agent, and (c) which are free and clear of all Liens other than Permitted Liens.

“Engineering Report” means each engineering report delivered pursuant to Section 7.2.

“Environmental Laws” means any and all Laws relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes.

“Equity” means shares of capital stock or a partnership, profits, capital, member or other equity interest, or options, warrants or any other rights to substitute for or otherwise acquire the capital stock or a partnership, profits, capital, member or other equity interest of any Person.

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statutes or statute, together with all rules and regulations promulgated with respect thereto.

“ERISA Affiliate” means each Restricted Person and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control that, together with such Restricted Person, are treated as a single employer under Section 414 of the Internal Revenue Code.

“ERISA Plan” means any employee pension benefit plan subject to Title IV of ERISA maintained by any ERISA Affiliate with respect to which any Restricted Person has a fixed or contingent liability.

“Event of Default” has the meaning given to such term in Section 9.1.

“Excess Drilling & Completion Costs” means, with respect to each well comprising part of the APOD, an amount (if positive) equal to the remainder of (a) the drilling and completion costs incurred to such date for such well, minus (b) the Budgeted Drilling & Completion Costs for such well.

“Existing Borrower” means G M Oil Properties, Inc., an Oklahoma corporation, as successor by merger to Steadfast Resources, Inc., a Nevada corporation.

“Existing Credit Documents” means (a) the Existing Note Purchase Agreement, (b) the Existing Notes and Security Documents (as such term is defined in the Existing Note Purchase Agreement), and (c) and all other certificates, documents, instruments or agreements executed and delivered in connection therewith.

“Existing Note Purchase Agreement” means that certain Note Purchase Agreement dated as of August 29, 2005 by and among Existing Borrower, Administrative Agent, and the holders party thereto, as amended or supplemented. Without limiting the provisions of the Assumption Agreement, pursuant to the Assumption Agreement, Company has assumed and promised to pay according to the terms thereof all Existing Obligations and also assumed and promised to keep and perform all other covenants and obligations in the Existing Note Purchase Agreement to be performed by Existing Borrower thereunder.

“Existing Notes” means the Notes (as such term is defined in the Existing Note Purchase Agreement).

“Existing Obligations” means the Obligations (as such term is defined in the Existing Note Purchase Agreement) evidenced by the Existing Notes in the aggregate principal amount of $16,500,000 that has been assumed by Company pursuant to the terms of the Assumption Agreement and renewed and continued (but not novated or extinguished) by this Agreement and the Notes.

“Fiscal Quarter” means a three-month period ending on March 31, June 30, September 30 or December 31 of any year.

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“Fiscal Year” means a twelve-month period ending on December 31 of any year.

“Fixed Rate” means the rate of ten and one-half percent (10.50%) per annum.

“GAAP” means those generally accepted accounting principles and practices which are recognized as such by the Financial Accounting Standards Board (or any generally recognized successor) and which, in the case of Restricted Persons and their Consolidated Subsidiaries, are applied for all periods after the date hereof in a manner consistent with the manner in which such principles and practices were applied to the Initial Pro Forma Financial Statements. If any change in any accounting principle or practice is required by the Financial Accounting Standards Board (or any such successor) in order for such principle or practice to continue as a generally accepted accounting principle or practice, all reports and financial statements required hereunder with respect to any Restricted Person or with respect to any Restricted Person and its Consolidated Subsidiaries may be prepared in accordance with such change, but all calculations and determinations to be made hereunder may be made in accordance with such change only after notice of such change is given to each Holder, and Required Holders and Administrative Agent agree to such change insofar as it affects the accounting of such Restricted Person and its Consolidated Subsidiaries.

“General Partner” means Rio Vista GP LLC, a Delaware limited liability company.

“GO” means Rio Vista GO LLC, an Oklahoma limited liability company.

“GO LLC” means GO, LLC, an Oklahoma limited liability company.

“GO Note” means that certain Promissory Note dated of even date herewith made by GO payable to the order of Company in the original principal amount of $2,200,000.

“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Gross Cash Revenues” means all cash revenues and cash receipts of ECO and its Subsidiaries on a Consolidated basis during any ANCF Quarter from any source or activity (excluding without duplication only (a) funds received from Loans hereunder, (b) funds received from capital contributions made to Restricted Persons, including sales of new Equity and funds received for options or warrants to acquire such Equity, and (c) funds belonging to or received for the credit of third parties, such as royalty, working interest or other interest owners, that are received for transfer or payment to such third parties).

“Guarantor” means ECO and any Subsidiary of ECO which now or hereafter executes and delivers a guaranty to Administrative Agent pursuant to Section 7.17.

“Hazardous Materials” means any substances regulated under any Environmental Law, whether as pollutants, contaminants, or chemicals, or as industrial, toxic or hazardous substances or wastes, or otherwise.

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“Hedging Contract” means (a) any agreement providing for options, swaps, floors, caps, collars, forward sales or forward purchases involving interest rates, commodities or commodity prices, equities, currencies, bonds, or indexes based on any of the foregoing, (b) any option, futures or forward contract traded on an exchange, and (c) any other derivative agreement or other similar agreement or arrangement.

“Highest Lawful Rate” means, with respect to each Holder Party to whom Obligations are owed, the maximum nonusurious rate of interest that such Holder Party is permitted under applicable Law to contract for, take, charge, or receive with respect to such Obligations. All determinations herein of the Highest Lawful Rate, or of any interest rate determined by reference to the Highest Lawful Rate, shall be made separately for each Holder Party as appropriate to assure that the Note Documents are not construed to obligate any Person to pay interest to any Holder Party at a rate in excess of the Highest Lawful Rate applicable to such Holder Party.

“Holder Confidential Information” has the meaning given to such term in Section 12.7(a).

“Holder Parties” means Administrative Agent and all Holders.

“Holders” has the meaning given to such term in the preamble hereto.

“Holders Schedule” means Schedule 4 hereto.

“Hydrocarbons” means crude oil, natural gas or other liquid or gaseous hydrocarbons.

“Indebtedness” of any Person means Liabilities in any of the following categories:

(a) Liabilities for borrowed money;

(b) Liabilities constituting an obligation to pay the deferred purchase price of property or services;

(c) Liabilities evidenced by a bond, debenture, note or similar instrument;

(d) Liabilities which (i) would under GAAP be shown on such Person’s balance sheet as a liability, and (ii) are payable more than one year from the date of creation or incurrence thereof (other than reserves for taxes and reserves for contingent obligations);

(e) Liabilities arising under Hedging Contracts;

(f) Capital Lease Obligations;

(g) Liabilities arising under conditional sales or other title retention agreements;

(h) Liabilities owing under direct or indirect guaranties of Liabilities of any other Person or otherwise constituting obligations to purchase or acquire or to otherwise protect or insure a creditor against loss in respect of Liabilities of any other Person (such as obligations under working capital maintenance agreements, agreements to keep-well, or agreements to purchase Liabilities, assets, goods, securities or services), but excluding endorsements in the ordinary course of business of negotiable instruments in the course of collection;

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(i) Liabilities (for example, repurchase agreements, mandatorily redeemable preferred stock and sale/leaseback agreements) consisting of an obligation to purchase or redeem securities or other property, if such Liabilities arise out of or in connection with the sale or issuance of the same or similar securities or property;

(j) Liabilities with respect to letters of credit or applications or reimbursement agreements therefore;

(k) Liabilities with respect to banker’s acceptances;

(1) Liabilities with respect to payments received in consideration of oil, gas, or other minerals yet to be acquired or produced at the time of payment (including obligations under “take-or-pay” contracts to deliver gas in return for payments already received and the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment); or

(m) Liabilities with respect to other obligations to deliver goods or services in consideration of advance payments therefor;

provided, however, that the “Indebtedness” of any Person shall not include Liabilities that were incurred by such Person on ordinary trade terms to vendors, suppliers, or other Persons providing goods and services for use by such Person in the ordinary course of its business, unless and until such Liabilities are outstanding more than 90 days past the original invoice or billing date therefor.

“Independent Engineer” means a nationally or regionally recognized independent petroleum engineering company, which may be chosen by Company if acceptable to the Required Holders in their sole and absolute discretion.

“Initial Pro Forma Financial Statements” means the pro forma balance sheet of Company as of the Closing Date (after giving effect to the Closing Date Transactions).

“Insurance Advisor” means Aon Risk Services or such other reputable insurance advisor reasonably acceptable to the Required Holders.

“Insurance Schedule” means Schedule 3 attached hereto.

“Internal Revenue Code” means the United States Internal Revenue Code of 1986, as amended from time to time and any successor statute or statutes, together with all rules and regulations promulgated with respect thereto.

“Investment” means any investment, made directly or indirectly, in any Person, whether by purchase, acquisition of equity interests, indebtedness or other obligations or securities or by extension of credit, loan, advance, capital contribution or otherwise and whether made in cash, by the transfer of property, or by any other means.

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“Law” means any statute, law, regulation, ordinance, rule, treaty, judgment, order, decree, permit, concession, franchise, license, agreement or other governmental restriction of the United States or any state or political subdivision thereof or of any foreign country or any department, province or other political subdivision thereof. Any reference to a Law includes any amendment or modification to such Law, and all regulations, rulings, and other Laws promulgated under such Law.

“Liabilities” means, as to any Person, all indebtedness, liabilities and obligations of such Person, whether matured or unmatured, liquidated or unliquidated, primary or secondary, direct or indirect, absolute, fixed or contingent, and whether or not required to be considered pursuant to GAAP.

“Lien” means, with respect to any property or assets, any right or interest therein of a creditor to secure Liabilities owed to it or any other arrangement with such creditor which provides for the payment of such Liabilities out of such property or assets or which allows such creditor to have such Liabilities satisfied out of such property or assets prior to the general creditors of any owner thereof, including any lien, mortgage, security interest, pledge, deposit, production payment, rights of a vendor under any title retention or conditional sale agreement or lease substantially equivalent thereto, tax lien, mechanic’s or materialman’s lien, or any other charge or encumbrance for security purposes, whether arising by Law or agreement or otherwise, but excluding any right of offset which arises without agreement in the ordinary course of business. “Lien” also means any filed financing statement, any registration of a pledge (such as with an Holder of uncertificated securities), or any other arrangement or action which would serve to perfect a Lien described in the preceding sentence, regardless of whether such financing statement is filed, such registration is made, or such arrangement or action is undertaken before or after such Lien exists.

“Loans” means any Loan made by a Holder to Company pursuant to Section 2.1.

“Management Services Agreement” means the Management Services Agreement dated of even date herewith among Parent, Northport, and Company, under which Northport has agreed to provide certain management services and general and administrative services for the Restricted Persons and has made certain other agreements.

“Material Adverse Change” means a material and adverse change, from the state of affairs existing on November 19, 2007 or from the state of affairs represented or warranted in any Note Document, to (a) ECO’s or Parent’s Consolidated financial condition, (b) ECO’s or Parent’s Consolidated business, assets, operations, properties or prospects, considered as a whole, (c) Company’s ability to timely pay the Obligations, (d) Parent’s ability to timely perform its obligations under the Warrant, (e) Northport’s ability to timely perform its obligations under the Management Services Agreement, or (f) the enforceability of the material terms of any Note Documents.

“Material Contracts” means (a) the Acquisition Documents, and (b) any contract or other arrangement to which ECO or any of its Subsidiaries is a party (other than the Note Documents) for which breach, nonperformance, cancellation or failure to renew could reasonably be expected to have a Material Adverse Change.

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“Maturity Date” means August 29, 2010.

“Maximum Credit Amount” means the amount of $30,000,000.

“Minimum Scheduled Quarterly Principal Payment” means, with respect to any Quarterly Payment Date, an amount equal to 3.125% of the outstanding principal balance of the Notes on such date.

“Modified NPV10” means the sum of:

(a) with respect to any Proved Developed Producing Reserves attributable to the Eligible Mortgaged Properties, the NPV10 of such Reserves (calculated utilizing 95% of the expected future revenues of Restricted Persons attributable to such Reserves and 100% of expected expenses); plus

(b) with respect to any Proved Developed Non-Producing Reserves attributable to the Eligible Mortgaged Properties, the NPV10 of such Reserves (calculated utilizing 85% of the expected future revenues of Restricted Persons attributable to such Reserves and 100% of expected expenses); plus

(c) with respect to any Proved Undeveloped Reserves attributable to the Eligible Mortgaged Properties, the NPV10 of such Reserves (calculated utilizing 75% of the expected future revenues of Restricted Persons attributable to such Reserves and 100% of expected expenses);

provided, however, that the Modified NPV10 for any particular Proved Developed Non-Producing Reserves or Proved Undeveloped Reserves shall be zero (0) unless capital expenditures for the development of such Reserves, in at least the amounts required pursuant to the most recent Engineering Report, have been approved by Holder Parties as ANCF Capital Expenditures and such capital is reasonably expected to be available from Borrowings or as a deduction from ANCF as ANCF Capital Expenditures.

“Moody’s” means Moody’s Investors Service, Inc., or its successor.

“Mortgage” means each deed of trust or mortgage from time to time given by Company or any Guarantor to secure any of the Obligations, as each may be amended, supplemented or otherwise modified from time to time.

“MV Pipeline” means MV Pipeline Company, an Oklahoma corporation.

“Northport” means Northport Production Company, an Oklahoma corporation.

“Note” means a promissory note in the form of Exhibit A evidencing one or more Loans, as amended, supplemented or otherwise modified from time to time.

“Note Documents” means this Agreement, the Notes, the Security Documents, the ORRI Conveyance, the Management Services Agreement, the Warrant, and all other agreements, certificates, documents, instruments and writings at any time delivered in connection herewith or therewith (exclusive of term sheets and commitment letters).

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“NPV10” means, with respect to any Proved Reserves expected to be produced from the Eligible Mortgaged Properties, the net present value of the future net revenues expected to accrue to Restricted Persons’ interests in such Reserves during the remaining expected economic lives of such Reserves, discounted at 10% per annum. Each calculation of such expected future net revenues shall be made as of the date requested in accordance with the then existing standards of the Society of Petroleum Engineers and Society of Petroleum Evaluation Engineers, provided that in any event:

(a) appropriate deductions shall be made for (i) Direct Taxes and existing burdens that are Permitted Liens, (ii) leasehold operating expenses, (iii) transportation, gathering, compression, and marketing burdens, (iv) capital expenditures (including plugging and abandonment costs) included in the Approved Plan of Development or otherwise approved in writing by Required Holders, and (v) ANCF Overhead Costs, all consistent with the most recent Engineering Report;

(b) the pricing assumptions used in determining NPV10 for any particular Proved Reserves shall be the Agreed Pricing; and

(c) leasehold operating expenses and capital expenditures in the most recently delivered Engineering Report will be escalated at the then current inflation rate.

NPV10 shall be calculated hereunder in connection with each Engineering Report, either by Company, by Administrative Agent, or by the engineering firm who prepares such Engineering Report; in the event of any conflict, Administrative Agent’s calculation shall be conclusive and final, absent manifest error. As used above, “investment grade counterparty” means a Person whose senior unsecured long-term debt obligations are rated BBB- by S&P and Baa3 or higher by Moody’s.

“NYMEX Pricing” means, as of any date of determination:

(a) for crude oil, ninety percent (90%) of the closing settlement price for the Light, Sweet Crude Oil futures contract for the applicable month, and

(b) for natural gas, ninety percent (90%) of the closing settlement price for the Henry Hub Natural Gas futures contract for the applicable month,

in each case as published by New York Mercantile Exchange (NYMEX) on its website currently located at www.nymex.com, or any successor thereto (as such price may be corrected or revised from time to time by the NYMEX in accordance with its rules and regulations).

“Obligations” means all Liabilities from time to time owing by any Restricted Person to any Holder Party (or any third party beneficiary of any Note Document) under or pursuant to any of the Note Documents. “Obligation” means any part of the Obligations.

“Observer” has the meaning assigned to such term in Section 7.11.

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“Oil and Gas Properties” means all of the following which are, at the time in question, owned by ECO or any of its Subsidiaries: oil, gas and/or mineral leases, oil, gas or mineral properties, mineral servitudes and/or mineral rights of any kind (including, without limitation, mineral fee interests, lease interests, farmout interests, overriding royalty and royalty interests, net profits interests, oil payment interests, production payment interests and other types of mineral interests), and all oil and gas gathering, treating, compression, storage, processing and handling assets.

“ORRI” means the overriding royalty interest in the Oil and Gas Properties conveyed to Royalty Owner pursuant to the ORRI Conveyance.

“ORRI Conveyance” means the Overriding Royalty Conveyance executed by Existing Borrower pursuant to the Existing Note Purchase Agreement in favor of Royalty Owner whereby Existing Borrower conveyed an overriding royalty profits interest in and to its Oil and Gas Properties, as amended or supplemented.

“Parent” means Rio Vista Energy Partners L.P., a Delaware limited partnership.

“Partnership Agreement” means that certain First Amended and Restated Agreement of Limited Partnership of Rio Vista Energy Partners L.P. dated as of September 16, 2004.

“PDP Collateral Coverage Ratio” means the quotient of (i) the sum of (a) the Modified NPV10 with respect to all Proved Developed Producing Reserves attributable to the Eligible Mortgaged Properties, plus (b) Restricted Persons’ Working Capital (which, if negative, shall be deducted) divided by (ii) Restricted Persons’ total Indebtedness.

“Penny Petroleum” means Penny Petroleum Corporation, an Oklahoma corporation.

“Percentage Share” means, with respect to any Holder (a) when used in Section 2.1 or Section 2.2, in any Borrowing Notice or when no Loans are outstanding hereunder, the percentage set forth below such Holder’s name on Holders Schedule, and (b) when used otherwise, the percentage obtained by dividing (i) the sum of the unpaid principal balance of such Holder’s Loans at the time in question, by (ii) the sum of the aggregate unpaid principal balance of all Loans at such time.

“Permitted ANCF Distributions” has the meaning given to such term in Section 8.6.

“Permitted G&A Expense Amount” means, with respect to a calendar month, the amount equal to the “Service Fee” described in the Management Services Agreement.

“Permitted Investments” means

(a) Cash Equivalents; and

(b) normal and prudent extensions of credit by Restricted Persons to their customers for buying goods and services in the ordinary course of business or to another Restricted Person in the ordinary course of business, which extensions shall not be for longer periods than those extended by similar businesses operated in a normal and prudent manner.

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“Permitted Liens” means:

(a) statutory Liens for taxes, assessments or other governmental charges or levies which are not yet delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;

(b) landlords’, operators’, carriers’, warehousemen’s, repairmen’s, mechanics’, materialmen’s, or other like Liens which do not secure Indebtedness, in each case only to the extent arising in the ordinary course of business and only to the extent securing obligations which are not delinquent or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been maintained in accordance with GAAP;

(c) minor defects and irregularities in title to any property, so long as such defects and irregularities neither secure Indebtedness nor materially impair the value of such property or the use of such property for the purposes for which such property is held;

(d) deposits of cash or securities to secure the performance of bids, trade contracts, leases, statutory obligations and other obligations of a like nature (excluding appeal bonds) incurred in the ordinary course of business and not constituting Indebtedness;

(e) Liens under the Security Documents;

(f) with respect only to property subject to any particular Security Document, additional Liens burdening such property which are expressly allowed by such Security Document; and

(g) Liens arising on or before the date hereof securing Indebtedness permitted under Section 8.1 not to exceed the aggregate amount of $100,000.

“Person” means an individual, corporation, general partnership, limited partnership, limited liability company, association, joint stock company, trust or trustee thereof, estate or executor thereof, Governmental Authority, or any other legally recognizable entity.

“Prepayment Notice” means a notice in the form of Exhibit C, appropriately completed.

“Project” means all drilling and reserve acquisition activities in or relating to the Project Area.

“Project Area” means Haskell County, Oklahoma, McIntosh County, Oklahoma and Pittsburgh County, Oklahoma.

“Projected PDP Oil and Gas Production” means the projected production of oil or gas (measured by volume unit or BTU equivalent, not sales price) for the term of the contracts or a particular month, as applicable, from properties and interests owned by the Restricted Persons that are located in or offshore of the United States and that have attributable to them Proved Developed Producing Reserves, as such production is projected in the Engineering Report most recently delivered, after deducting projected production from any properties or interests sold or under contract for sale that had been included in such report and after adding projected production from any properties or interests that had not been reflected in such report but that are reflected in a separate or supplemental report meeting the requirements of Section 7.2(i) or (j), as applicable, and otherwise are satisfactory to Administrative Agent.

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“Proved Reserves” means “Proved Reserves” as defined in the Petroleum Resources Management System as in effect at the time in question (in this definition, the “PRMS”) prepared by the Oil and Gas Reserves Committee of the Society of Petroleum Engineers and reviewed and jointly sponsored by the World Petroleum Council, the American Association of Petroleum Geologists and the Society of Petroleum Evaluation Engineers (or any generally recognized successor organizations). “Proved Developed Producing Reserves” means Proved Reserves that are categorized as “Developed Producing Reserves” in the PRMS, “Proved Developed Nonproducing Reserves” means Proved Reserves that are categorized as “Developed Nonproducing Reserves” in the PRMS, and “Proved Undeveloped Reserves” means Proved Reserves that are categorized as “Undeveloped Reserves” in the PRMS.

“Quarterly Payment Date” means the second Business Day prior to the last day of each March, June, September and December.

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect.

“Required Holders” means Holders whose aggregate Percentage Shares exceed fifty percent (50.0%).

“Reserves” means estimated volumes of crude oil, condensate, natural gas, natural gas liquids, and associated substances anticipated to be commercially recoverable from known accumulations from a given date forward, under then existing economic conditions, by established operating practices, and under current government regulations. Reserve estimates are based on interpretation of geologic or engineering data available at the time of the estimate. Reserves do not include volumes of crude oil, condensate, natural gas, or natural gas liquids that have been produced (whether held in tanks, pipelines, processing plants, or in a formation or aquifer that is being used for storage). If required for financial reporting, reserve estimates or other purposes, Reserves may be reduced for on-site or processing losses.

“Restricted Notes” has the meaning set forth under Rule 144 promulgated under the Securities Act.

“Restricted Person” means any of Company, ECO, and each Subsidiary of ECO.

“Royalties” means overriding royalty and royalty interests, production payments, and similar types of mineral interests.

“Royalty Owner” means TCW Energy Funds X Holdings, L.P.

“S & P” means Standard & Poor’s Ratings Services (a division of The McGraw Hill Companies), or its successor.

“Securities Act” means the Securities Act of 1933, as amended.

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“Security Documents” means the instruments listed in the Security Schedule and all other security agreements, deeds of trust, mortgages, chattel mortgages, pledges, guaranties, financing statements, continuation statements, extension agreements and other agreements or instruments now, heretofore, or hereafter delivered by any Restricted Person to Administrative Agent in connection with this Agreement or any transaction contemplated hereby to secure or guarantee the payment of any part of the Obligations or the performance of any Restricted Person’s other duties and obligations under the Note Documents.

“Security Schedule” means Schedule 2 hereto.

“Subsidiary” means, with respect to any Person, any corporation, association, partnership, limited liability company, joint venture, or other business or corporate entity, enterprise or organization which is directly or indirectly (through one or more intermediaries) controlled by or owned fifty percent or more by such Person.

“TCW Governing Documents” has the meaning given to such term in Section 11.11.

“Termination Event” means (a) the occurrence with respect to any ERISA Plan of (i) a reportable event described in Section 4043(c)(5) or (6) of ERISA or (ii) any other reportable event described in Section 4043(c) of ERISA other than a reportable event not subject to the provision for 30-day notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation under Section 4043(a) or 4043(b)(4) of ERISA, or (b) the withdrawal of any ERISA Affiliate from an ERISA Plan during a plan year in which it was a “substantial employer” as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of intent to terminate any ERISA Plan or the treatment of any ERISA Plan amendment as a termination under Section 4041(c) of ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (e) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any ERISA Plan.

“Total Modified NPV10” means the sum of the Modified NPV10’s for all Proved Developed Producing Reserves, Proved Developed Non-Producing Reserves and Proved Undeveloped Reserves as determined by Administrative Agent from the Engineering Report most recently prepared as of such time.

“Transaction Documents” means the Note Documents and the Acquisition Documents.

“UCC” means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction.

“Unused Commitment Amount” means an amount equal to the remainder of (a) the Commitment amount, minus (b) the Aggregate Advance Amount.

“Warrant” means the Common Unit Purchase Warrant dated of even date herewith from Parent issued to Warrant Owner.

“Warrant Owner” means TCW Energy Fund X-NL, L.P., a California limited partnership, together with its successors and assigns under the Warrant.

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“Working Capital” means ECO’s Consolidated current assets minus ECO’s Consolidated current liabilities. For purposes of this definition, “Consolidated current assets” and “Consolidated current liabilities” shall be determined in accordance with GAAP, except that:

(a) current assets will be calculated without including inventory and without including any accounts receivable or other Indebtedness owed to ECO or its Subsidiaries by their Affiliates;

(b) “Consolidated current assets” and “Consolidated current liabilities” will be calculated without including any amounts resulting from the application of FASB Statement 133;

(c) accounts receivable more than 90 days delinquent will be deleted; and

(d) so long as no Event of Default or Default has occurred, current liabilities will be calculated without including any payments of current maturities of principal on the Notes.

Section 1.2. Exhibits and Schedules; Additional Definitions. All Exhibits and Schedules attached to this Agreement are a part hereof for all purposes. Reference is hereby made to the Security Schedule for the meaning of certain terms defined therein and used but not defined herein, which definitions are incorporated herein by reference.

Section 1.3. Amendment of Defined Instruments. Unless the context otherwise requires or unless otherwise provided herein the terms defined in this Agreement which refer to a particular agreement, instrument or document also refer to and include all renewals, extensions, modifications, amendments and restatements of such agreement, instrument or document, provided that nothing contained in this section shall be construed to authorize any such renewal, extension, modification, amendment or restatement.

Section 1.4. References and Titles. All references in this Agreement to Exhibits, Schedules, articles, sections, subsections and other subdivisions refer to the Exhibits, Schedules, articles, sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise. Exhibits and Schedules to any Note Document shall be deemed incorporated by reference in such Note Document. References to any document, instrument, or agreement (a) shall include all exhibits, schedules, and other attachments thereto, and (b) shall include all documents, instruments, or agreements issued or executed in replacement thereof. Titles appearing at the beginning of any subdivisions are for convenience only and do not constitute any part of such subdivisions and shall be disregarded in construing the language contained in such subdivisions. The words “this Agreement”, “this instrument”, “herein”, “hereof”, “hereby”, “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The phrases “this section” and “this subsection” and similar phrases refer only to the sections or subsections hereof in which such phrases occur. The word “or” is not exclusive, and the word “including” (in its various forms) means “including without limitation”. Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. Accounting terms have the meanings assigned to them by GAAP, as applied by the accounting entity to which they refer. References to “days” shall mean calendar days, unless the term “Business Day” is used. Unless otherwise specified, references herein to any particular Person also refer to its successors and permitted assigns.

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Section 1.5. Calculations and Determinations. All calculations under the Note Documents of interest chargeable with respect to Loans and of fees shall be made on the basis of actual days elapsed (including the first day but excluding the last) and a year of 360 days. Each determination by a Holder Party of amounts to be paid under Article III or any other matters which are to be determined hereunder by a Holder Party shall, in the absence of manifest error, be conclusive and binding. Unless otherwise expressly provided herein or unless Required Holders otherwise consent all financial statements and reports furnished to any Holder Party hereunder shall be prepared and all financial computations and determinations pursuant hereto shall be made in accordance with GAAP.

Section 1.6. Joint Preparation; Construction of Indemnities and Releases. This Agreement and the other Note Documents have been reviewed and negotiated by sophisticated parties with access to legal counsel and no rule of construction shall apply hereto or thereto which would require or allow any Note Document to be construed against any party because of its role in drafting such Note Document. All indemnification and release provisions of this Agreement shall be construed broadly (and not narrowly) in favor of the Persons receiving indemnification or being released.

ARTICLE II — Purchase and Sale of Securities

Section 2.1. Note Purchase; Amendment & Restatement.

(a) Subject to the terms and conditions hereof, on the Closing Date Company shall issue to Holders, and each Holder shall purchase from Company (so long as all conditions precedent required hereby shall have then been satisfied), a Note or Notes in an aggregate principal amount equal to the such Holder’s Percentage Share of the Commitment on the Closing Date at which time Holders shall make an advance on the Notes in accordance with their respective Percentage Shares in the aggregate amount of $5,200,000. As described in subsection (c) below, the Existing Obligations in the principal amount of $16,500,000 together with accrued interest and other amounts due and owing thereunder shall be deemed to be renewed and extended Indebtedness of Company, and Loans to Company under the Notes, in accordance with Holders’ respective Percentage Shares. The Loans described in this subsection (a), including such renewed and extended Existing Obligations, shall be considered parts of a single Borrowing of $21,700,000.

(b) Subject to the terms and conditions hereof, Holders agree to make additional advances to Company (so long as all conditions precedent required hereby shall have been satisfied) on the Notes in accordance with their respective Percentage Shares from time to time during the Availability Period; provided, the aggregate amount of all Borrowings from any Holder shall not exceed the Commitment of that Holder. The aggregate amount of all Loans in any Borrowing must be greater than or equal to $2,500,000 (or any smaller amount that may be approved from time to time by Administrative Agent) or any higher integral multiple of $500,000 or must equal the amount of the remaining aggregate Commitments.

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(c) This Agreement and the Notes amend and restate in their entirety (but do not novate or extinguish) the Existing Note Purchase Agreement and promissory notes included in the Existing Credit Documents, and from and after the date hereof, the terms and provisions of such loan agreements and promissory notes shall be superseded by the terms and provisions hereof and of the Notes, respectively. Company acknowledges and agrees that (i) the Existing Obligations, and all accrued and unpaid interest thereon, shall be deemed to be renewed and extended Indebtedness of Company outstanding under and governed by this Agreement and evidenced by the Notes, and (ii) all Liens securing the Existing Obligations shall continue in full force and effect to secure the Obligations and be evidenced and governed by the Security Documents. On the Quarterly Payment Date of September 27, 2007, Existing Borrower failed to pay accrued interest in respect of the Loans in the aggregate amount of $590,868.06, and Company hereby agrees to pay to Administrative Agent for the account of the Holders $250,000 of such interest on the date hereof and the remaining balance on or before November 21, 2007.

Section 2.2. The Notes. The obligation of Company to repay to each Holder the aggregate amount of all Loans made by such Holder, together with interest accruing in connection therewith, shall be evidenced by a single Note made by Company payable to the order of such Holder in the form of Exhibit A with appropriate insertions. The amount of principal owing on any Holder’s Note at any given time shall be the aggregate amount of all Loans theretofore made by such Holder minus all payments of principal theretofore received by such Holder on such Note. Interest on each Note shall accrue and be due and payable as provided herein. Each Note shall be due and payable as provided herein, and shall be due and payable in full on the Maturity Date. Company may not borrow, repay, and reborrow hereunder or under the Notes.

Section 2.3. Requests for New Loans. Company must give to Administrative Agent written or electronic notice (or telephonic notice promptly confirmed in writing) of any requested Borrowing of new Loans to be advanced by Holders. Each such notice constitutes a “Borrowing Notice” hereunder and must:

(a) specify the aggregate amount of any such Borrowing of new Loans and the date on which such Loans are to be advanced; and

(b) be received by Administrative Agent not later than 10:00 a.m., New York, New York time, on the tenth (10^th) Business Day preceding the day on which any such Loans are to be made.

Each such written request or confirmation must be made in the form and substance of the “Borrowing Notice” attached hereto as Exhibit B, duly completed. Each such telephonic request shall be deemed a representation, warranty, acknowledgment and agreement by Company as to the matters which are required to be set out in such written confirmation. Upon receipt of any such Borrowing Notice, Administrative Agent shall give each Holder prompt notice of the terms thereof. If all conditions precedent to such new Loans have been met, each Holder will on the date requested promptly remit to Administrative Agent at Administrative Agent’s office in Los Angeles, California the amount of such Holder’s new Loan in immediately available funds, and upon receipt of such funds, unless to its actual knowledge any conditions precedent to such Loans have been neither met nor waived as provided herein, Administrative Agent shall promptly make such Loans available to Company. The failure of any Holder to make any new Loan to be made by it hereunder shall not relieve any other Holder of its obligation hereunder, if any, to make its new Loan, but no Holder shall be responsible for the failure of any other Holder to make any new Loan to be made by such other Holder.

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Section 2.4. [Reserved].

Section 2.5. Use of Proceeds. Company will use the proceeds of the Loans made on the Closing Date: (a) up to $800,000 to consummate the Acquisition, (b) to make a loan to GO in the amount of $2,200,000 pursuant to the GO Note, (c) up to $250,000 to pay accrued and unpaid interest in respect of the Existing Notes, (d) to pay the $1,950,000 Amendment and Reconveyance Fee described in Section 12.16, and (e) to pay closing expenses, costs and fees. The proceeds of the Loans made after the Closing Date shall be applied by Company to implement the Approved Plan of Development and to make other expenditures from time to time approved by Required Holders. In no event shall the funds from any Loan be used directly or indirectly by any Person (x) to fund Excess Drilling & Completion Costs, (y) for personal, family, household or agricultural purposes, or (z) for the purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or carrying any “margin stock” (as such term is defined in Regulation U promulgated by the Board of Governors of the Federal Reserve System) or to extend credit to others directly or indirectly for the purpose of purchasing or carrying any such margin stock.

Section 2.6. Interest Rates and Fees; Payment Dates.

(a) Interest Rates. Subject to subsection (b) below, each Loan shall bear interest on each day outstanding at the Fixed Rate compounded quarterly on each Quarterly Payment Date to the extent not paid.

(b) Default Rate. If an Event of Default shall have occurred and be continuing under Section 9.1(a), (b), (k)(i), (k)(ii), or
(k)(iii), all outstanding Loans shall bear interest at the Default Rate. In addition, if an Event of Default shall have occurred and be continuing (other than under Section 9.1(a), (b), (k)(i), (k)(ii), or (k)(iii)), Required Holders may, by notice to Company, elect to have the outstanding Loans bear interest at the Default Rate, and upon the giving of such notice, such Loans shall bear interest at the Default Rate until the earlier of (i) the first date thereafter upon which there shall be no Event of Default continuing and (ii) the date upon which Required Holders shall have rescinded such notice.

(c) Commitment Fees. In consideration of each Holder’s commitment to make Loans, Company will pay to Administrative Agent (for the account of the Holders in accordance with their respective Percentage Shares) a commitment fee determined on a daily basis by applying the Commitment Fee Rate to the aggregate Unused Commitment Amount determined as of the end of each day during the Availability Period. This commitment fee shall be due and payable in arrears on each Quarterly Payment Date for the preceding ANCF Quarter.

(d) Up-Front Payment. In consideration of each Holder’s commitment to make Loans, Company will pay to Administrative Agent (or its designee or designees) an up-front payment equal to 1.5% of the aggregate amount of any increase in the Commitments (payable on a date that is prior to or concurrent with the effective date of any such increase). Payment of such payment shall be by wire transfer of immediately available funds or upon the instruction of Company, by deduction from the purchase price of the Notes.

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Section 2.7. Collateral Account.

(a) Establishment of Collateral Accounts; Rules for Application.

(i) Company shall establish and maintain at its expense the Collateral Account pursuant to the Collateral Account Agreement.

(ii) Company shall deposit or cause to be deposited into the Collateral Account all Gross Cash Revenues from and after the Closing Date through the Maturity Date or, if later, the date when all Obligations are paid in full. In addition, Company shall deposit all funds into the Collateral Account from the Borrowing on the Closing Date that are not applied under clauses (a) or (c) of the first sentence of Section 2.5 until such funds may be applied to the development of Oil and Gas Properties comprising part of the APOD pursuant to clause (b) of such sentence.

(iii) Except as provided in clause (v) below, all amounts in the Collateral Account shall be applied to the following purposes in the following order or priority:

(A) Direct Taxes and Royalties;

(B) ANCF LOE and ANCF Transportation Costs;

(C) Fees and expenses under the Note Documents;

(D) Accrued and unpaid interest on the Notes and accrued unpaid commitment fees under Section 2.6(c);

(E) ANCF Overhead Costs;

(F) ANCF Capital Expenditures;

(G) Payments of principal on the Notes as required hereunder; and

(H) Permitted ANCF Distributions.

(iv) Prior to its receipt of a Notice of Exclusive Control (defined below), Company may instruct the administrator of the Collateral Account to transfer or disburse amounts from it to Company’s operating account from time to time for use in the ordinary course of its business, subject to the terms and provisions of this Agreement, including the priority of payment provisions specified in subsection (a)(iii) above. Administrative Agent may at any time determine to exercise exclusive dominion and control over the Collateral Account, and, upon receipt of notice from Administrative Agent of such determination (a “Notice of Exclusive Control”), Company shall cease giving the instructions described in the preceding sentence to the administrator of the Collateral Account. During the time when a Notice of Exclusive Control is in effect, Administrative Agent shall, subject to the provisions of subsection (a)(v) below, transfer or disburse amounts from the Collateral Account to Company’s operating account (or, in Administrative Agent’s discretion, directly to the Persons entitled to receive payment of such amounts) from time to time for use in the ordinary course of Company’s business, subject to the terms and provisions of this Agreement, including the priority of payment provisions specified in subsection (a)(iii) above.

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(v) After the occurrence of an Event of Default under any Note Document or Company’s failure to comply with the terms of this Section 2.7, Administrative Agent may, at its option, from time to time apply all sums in the Collateral Account to the reduction of outstanding principal, interest and other sums owed by Company on, the Notes or other Note Documents.

(vi) Upon the satisfaction in full of all amounts owed by Company under the Note Obligation Documents, Administrative Agent shall have all amounts remaining in the Collateral Account disbursed to Company.

(b) Notice. Not later than 5 Business Days after the date hereof and at all times thereafter, Restricted Persons shall send a notice, in form satisfactory to Administrative Agent, to all existing and/or new purchasers of Hydrocarbons produced from the Eligible Mortgaged Properties and/or other Persons making payments to Restricted Persons in respect of their oil and gas business, directing them to forward all amounts payable to Restricted Persons directly to the Collateral Account at the mailing address of the depositary bank for deposit into the Collateral Account (or alternatively, by wire transfer directly into the Collateral Account). The failure of such purchasers to comply with any such notice shall not constitute a Default hereunder by any Restricted Person, provided that (i) such purchaser’s failure to comply with such notice is not done at the request of a Restricted Person and (ii) Company or Company’s Affiliate shall forward all amounts received from such purchaser to the Collateral Account within one (1) Business Day of Company’s or Company’s Affiliate’s receipt thereof.

(c) Acknowledgments. Company hereby acknowledges that:

(i) It has granted and assigned to Administrative Agent a first priority, perfected security interest in the Collateral Account, all funds therein and all proceeds thereof pursuant to the Collateral Account Agreement; and

(ii) Company shall not be permitted to withdraw, transfer or disburse any funds from the Collateral Account except in accordance with the terms hereof, the Collateral Account Agreement and each other Note Document.

(d) Attorney-in-fact. Company hereby appoints Administrative Agent its attorney-in-fact, with full power of substitution, to execute and file on behalf of Company, any financing statement, continuation statement or instrument of further assurance to more effectively perfect, continue or confirm (i) the provisions of this Section 2.7 and of any agreement entered into by Company, Administrative Agent and the depositary bank administering the Collateral Account and (ii) the security interest granted in the Collateral Account. This power, being coupled with an interest, shall be irrevocable until all amounts due in connection with the Notes have been paid in full.

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Section 2.8. Mandatory Prepayments & Note Exchange.

(a) On each Quarterly Payment Date beginning with December 29,2008 and on each Quarterly Payment Date thereafter, to and including the Quarterly Payment Date immediately preceding the Maturity Date, Company shall make a principal payment in respect of the Notes in an aggregate amount equal to the greater of (i) (x) the Dedication Rate multiplied by the Adjusted Net Cash Flow for the ANCF Quarter applicable thereto, minus (y) the Permitted ANCF Distribution, if any, permitted to be made by ECO on such Quarterly Payment Date, and (ii) the Minimum Scheduled Quarterly Principal Payment. If any principal or interest amount payable under the Notes remains outstanding at the Maturity Date, such amount will be paid in full by Company to the Holders in immediately available funds on the Maturity Date.

(b) If the Required Holders shall, in their sole and absolute discretion, approve the sale of any Collateral requested by a Restricted Person, Company shall make a payment in respect of the Notes in an aggregate amount equal to the sales proceeds received by such Restricted Person net only of reasonable out-of-pocket costs of such sale paid to non-Affiliates of Company.

(c) Company has requested a Loan from Holders in order to finance the payment of the Amendment and Reconveyance Fee, as defined and described in Section 12.16, and the interest payment described in Section 2.5 in the aggregate principal amount of $2,250,000 (the “Demand Loan”). At any time and from time to time during the period commencing on May 19, 2008 through and including November 19, 2009 (the “Demand Period”), Administrative Agent may, in the exercise of its sole discretion, demand in writing that Company repay all or any portion of the outstanding principal amount of the Demand Loan, together with all interest then accrued and unpaid on the principal so prepaid (a “Demand Notice”). The principal amount of the Demand Loan to be prepaid shall mature and become due and payable on the date fixed for such prepayment (which shall be a Business Day) in the Demand Notice, together with interest on such principal amount accrued to such date; provided that such date fixed for prepayment shall not be earlier than ninety (90) days after the delivery of such Demand Notice.

(d) Company hereby acknowledges that Parent has granted Holders the right to exchange all or any portion of the Loans evidenced by the Notes for Equity of Parent, upon the terms and as provided in the Warrant. Upon giving effect to any such exchange, the outstanding principal amount of the Loans shall be reduced to the extent of any such exchange, and, upon the written request of Company, Administrative Agent will confirm the outstanding principal balance of the Loans after giving effect to any such exchange.

(e) In the event that Company receives any payments of principal in respect of the GO Note (a “GO Principal Payment”), it shall immediately make a principal payment in respect of the Notes in an aggregate amount equal to such GO Principal Payment.

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Section 2.9. Optional Prepayments.

(a) Company may, upon not less than thirty and not more than forty-five days’ notice to Administrative Agent in the form of a Prepayment Notice, prepay on any Quarterly Payment Date all or any part of the Notes, without premium or penalty, at 100% of the principal amount so prepaid, provided that any partial payment on the Notes must not be less than $2,500,000 in the aggregate for all Notes then outstanding. Each prepayment of principal under this section shall be accompanied by all interest then accrued and unpaid on the principal so prepaid. In the case of each partial prepayment of the Notes, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment.

(b) In the case of each prepayment of Notes pursuant to this Section 2.9, the principal amount of each Note to be prepaid shall mature and become due and payable on the Quarterly Payment Date fixed for such prepayment, together with interest on such principal amount accrued to such date. From and after such date, unless Company shall fail to pay such principal amount when so due and payable, together with the interest, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.

(c) Any principal prepaid pursuant to this Section 2.9 shall be in addition to, and not in lieu of, all payments otherwise required to be paid under the Note Documents at the time of such prepayment. Any such prepayments hereof shall be applied first, to accrued but unpaid interest on the Notes, and second, to outstanding principal on the Notes until paid in full. No prepayment on the Notes shall, until the Notes have been paid in full, have the effect of reducing the mandatory prepayments required under Section 2.8.

Section 2.10. Financing Arrangements. Regardless of whether the Loans have been paid or prepaid in full, prior to the expiration of the Availability Period neither Company nor any Affiliate of Company or any equity holder of Company shall seek or obtain any financing to acquire any Oil and Gas Properties in the Project Area or fund any development of Oil and Gas Properties in the Project Area from any source other than TCW or an Affiliate of TCW.

ARTICLE III — Payments to Holders

Section 3.1. General Procedures. Company will make each payment which it owes under the Note Documents to Administrative Agent for the account of the Person to whom such payment is owed, in lawful money of the United States of America, without set-off, deduction or counterclaim, and in immediately available funds. Each such payment must be received by Administrative Agent not later than 10:00 a.m., New York, New York time, on the date such payment becomes due and payable. Any payment received by Administrative Agent after such time will be deemed to have been made on the next following Business Day. Should any such payment become due and payable on a day other than a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day, and, in the case of a payment of principal or past due interest, interest shall accrue and be payable thereon for the period of such extension as provided in the Note Document under which such payment is due.

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Each payment under a Note Document shall be due and payable at the place set forth for Administrative Agent on the Holders Schedule. When Administrative Agent collects or receives money on account of the Obligations, Administrative Agent shall distribute all money so collected or received, and each Holder Party shall apply all such money so distributed, as follows:

(a) first, for the payment of all Obligations which are then due (and if such money is insufficient to pay all such Obligations, first to any reimbursements due Administrative Agent under Section 7.9 or 12.4 and then to the partial payment of all other Obligations then due in proportion to the amounts thereof, or as Holder Parties shall otherwise agree);

(b) then for the prepayment of amounts owing under the Note Documents (other than principal of the Loans) if so specified by Company;

(c) then for the prepayment of principal of the Loans, together with accrued and unpaid interest on the principal so prepaid; and

(d) last, for the payment or prepayment of any other Obligations.

All payments applied to principal or interest on any Note shall be applied first to any interest then due and payable, then to principal then due and payable, and last to any prepayment of principal and interest in compliance with Section 2.6. All distributions of amounts described in any of subsections (b), (c) or (d) above shall be made by Administrative Agent pro rata to each Holder Party then owed Obligations described in such subsection in proportion to all amounts owed to all Holder Parties which are described in such subsection; provided that if any Holder then owes payments to Administrative Agent under Section 11.4, any amounts otherwise distributable under this section to such Holder shall be deemed to belong to Administrative Agent to the extent of such unpaid payments, and Administrative Agent shall apply such amounts to make such unpaid payments rather than distribute such amounts to such Holder.

Section 3.2. Payment of Interest. On each Quarterly Payment Date, Company shall pay the interest then accrued on the Loans in full in immediately available funds.

Section 3.3. Place of Payment. Payments becoming due and payable on the Notes and under the other Note Documents shall be made in New York, New York at Administrative Agent’s offices located at 200 Park Avenue, Suite 2200, New York, New York 10166 or, at the election of Administrative Agent, by wire transfer to a bank and account located in the State of New York specified by Administrative Agent. Administrative Agent may at any time, by notice to Company, change the place of payment of any such payments so long as such place of payment shall be in the State of New York.

Section 3.4. Capital Reimbursement. If either (a) the introduction or implementation after the date hereof of or the compliance with or any change after the date hereof in or in the interpretation of any Law regarding capital adequacy, or (b) the introduction or implementation after the date hereof of or the compliance with any request, directive or guideline issued after the date hereof from any central bank or other Governmental Authority (whether or not having the force of Law) regarding capital requirements has or would have the effect of reducing the rate of return on any Holder Party’s capital, or on the capital of any corporation controlling such Holder Party, as a consequence of the Loans made by such Holder Party, to a level below that which such Holder Party or such corporation could have achieved but for such change (taking into consideration such Holder Party’s policies and the policies of any such corporation with respect to capital adequacy), then from time to time Company will pay to Administrative Agent for the benefit of such Holder Party, within 3 Business Days of demand therefore by such Holder Party, such additional amount or amounts which such Holder Party shall determine to be appropriate to compensate such Holder Party for such reduction.

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Section 3.5. Reimbursable Taxes. Company covenants and agrees that:

(a) Company will indemnify each Holder Party against and reimburse each Holder Party for all present and future income, stamp and other taxes, levies, costs and charges whatsoever imposed, assessed, levied or collected on or in respect of this Agreement or any Loans (whether or not legally or correctly imposed, assessed, levied or collected), excluding, however, (i) taxes imposed on or measured by its overall net income, and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the Laws of which it is organized or otherwise resides for tax purposes or maintains the office, branch, or agency through which it administers this Agreement, (ii) with respect to each Holder Party, taxes imposed by reason of any present or former connection between such Holder Party and the jurisdiction imposing such taxes, other than solely as a result of this Agreement or any Note or any transaction contemplated hereby, and (iii) any United States withholding tax imposed on any payment by Company pursuant to this Agreement or under any Loans, but not excluding any portion of such tax that exceeds the United States withholding tax which would have been imposed on such a payment to such Holder Party under the laws and treaties in effect when such Holder Party first becomes a party to this Agreement (all such non-excluded taxes, levies, costs and charges being collectively called “Reimbursable Taxes”). Such indemnification shall be on an after-tax basis and paid within 3 Business Days after a Holder Party makes demand therefor.

(b) All payments on account of the principal of, and interest on, each Holder Party’s Loans and Note, and all other amounts payable by Company to any Holder Party hereunder, shall be made in full without set-off or counterclaim and shall be made free and clear of and without deductions or withholdings of any nature by reason of any Reimbursable Taxes, all of which will be for the account of Company. In the event of Company being compelled by Law to make any such deduction or withholding from any payment to any Holder Party, Company shall pay on the due date of such payment, by way of additional interest, such additional amounts as are needed to cause the amount receivable by such Holder Party after such deduction or withholding to equal the amount which would have been receivable in the absence of such deduction or withholding. If Company should make any deduction or withholding as aforesaid, Company shall within 60 days thereafter forward to such Holder Party an official receipt or other official document evidencing payment of such deduction or withholding.

(c) Notwithstanding the foregoing provisions of this section, Company shall be entitled, to the extent it is required to do so by Law, to deduct or withhold (and not to make any indemnification or reimbursement for) income or other similar taxes imposed by the United States of America from interest, fees or other amounts payable hereunder for the account of any Holder Party, other than a Holder Party (i) who is a U.S. person for Federal income tax purposes or (ii) who has the Prescribed Forms on file with Administrative Agent (with copies provided to Company) for the applicable year to the extent deduction or withholding of such taxes is not required as a result of the filing of such Prescribed Forms, provided that if Company shall so deduct or withhold any such taxes, it shall provide a statement to Administrative Agent and such Holder Party, setting forth the amount of such taxes so deducted or withheld, the applicable rate and any other information or documentation which such Holder Party may reasonably request for assisting such Holder Party to obtain any allowable credits or deductions for the taxes so deducted or withheld in the jurisdiction or jurisdictions in which such Holder Party is subject to tax.

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As used in this section, “Prescribed Forms” means such duly executed forms or statements, and in such number of copies, which may, from time to time, be prescribed by Law and which, pursuant to applicable provisions of (x) an income tax treaty between the United States and the country of residence of the Holder Party providing the forms or statements, (y) the Internal Revenue Code, or (z) any applicable rules or regulations thereunder, permit Company to make payments hereunder for the account of such Holder Party free of such deduction or withholding of income or similar taxes.

ARTICLE IV — Conditions Precedent to Lending

Section 4.1. Closing Date Conditions. The obligation of any Holder to make a Loan on the Closing Date is subject to the satisfaction, or waiver in accordance with Section 12.1, of the following conditions on or before the Closing Date:

(a) Closing Documents. Administrative Agent shall have received all of the following, duly executed and delivered and in form, substance and date satisfactory to Administrative Agent:

(i) This Agreement and any other documents that Holders are to execute in connection herewith.

(ii) Each Note.

(iii) each Security Document listed in the Security Schedule.

(iv) the Management Services Agreement.

(v) Certain certificates of Company including:

(A) An “Omnibus Certificate” of the Secretary and of the President (or equivalent representatives) of Company, which shall contain the names and signatures of the officers or representatives authorized to execute Note Documents and which shall certify to the truth, correctness and completeness of the following exhibits attached thereto: (1) a copy of resolutions duly adopted by the Board of Directors (or other governing board) and in full force and effect at the time this Agreement is entered into, authorizing the execution of this Agreement and the other Note Documents delivered or to be delivered in connection herewith and the consummation of the transactions contemplated herein and therein, (2) a copy of the charter documents and all amendments thereto, certified by the appropriate official of the state of organization, and (3) a copy of any bylaws (or other equivalent documents); and

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(B) A “Compliance Certificate” of the Chairman of the Board or President (or equivalent representative) of Company, of even date with such Loan, in which such officer certifies to the satisfaction of the conditions set out in Section 4.2.

(vi) Certificate (or certificates) of the due formation, valid existence and good standing of Company in its state of organization, issued by the appropriate authorities of such jurisdiction, and certificates of Company’s good standing and due qualification to do business, issued by appropriate officials in any states in which Company owns property subject to Security Documents.

(vii) Documents similar to those specified in subsections (a)(iv)(A) and (a)(v) of this section with respect to each Guarantor.

(viii) Certificates or binders evidencing Restricted Persons’ insurance in effect on the date hereof.

(ix) Title opinions and other title information concerning the Project Area in form and substance satisfactory to Administrative Agent.

(x) A copy of each Acquisition Document, duly executed and delivered by each party thereto.

(xi) A solvency certificate of Company dated the Closing Date demonstrating that after giving effect to the consummation of the Closing Date Transactions and the Transaction Documents such Person is solvent.

(b) Investment Committee Approval. The Investment Committee of TCW shall have approved the purchase of the Notes.

(c) Collateral Account. Company shall have established the Collateral Account set forth in Section 2.7 hereof, and upon the funding of the initial Loans, Administrative Agent shall deliver such funds to the Collateral Account.

(d) Organizational Structure. The organizational structure and capital structure of Company shall be as set forth in Schedule 5, which Schedule shall be in form and substance satisfactory to Administrative Agent in its sole and absolute discretion.

(e) Insurance Report. The Holders shall have received and approved a certificate of insurance coverage of the Holder evidencing that the Holder is carrying insurance in accordance with Section 7.8.

(f) Financial Statements. The Holders shall have received, in form and substance satisfactory to it, the pro forma opening financial statements and projections of Company demonstrating the ability of Company to (i) repay its debts, including the Obligations, and satisfy its other obligations when due and (ii) comply with the covenants contained in Articles VII and VIII hereof.

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(g) Payment of Expenses. The Holders and their counsel shall have received all fees and other amounts due and payable on or prior to the Closing Date with respect to this Agreement, including, without limitation, fees and reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by Company hereunder or under each mandate or expense letter executed by Company or any Affiliate thereof.

(h) Equity Contributions. Company shall have received from ECO $6,400,000, in cash, and 1,000,000 common units of Parent, in each case as a capital contribution to Company.

(i) Closing Date Transactions. Administrative Agent shall have received a certificate of the president or chief financial officer of Company certifying that Company is concurrently consummating the Closing Date Transactions (with all of the material conditions precedent thereto having been satisfied in all material respects by the parties thereto) and acquiring all of the Oil and Gas Properties contemplated thereby.

(j) Legal Opinions. Administrative Agent shall have received favorable opinions of Sprouse Shrader Smith P.C. and Kevin W. Finck, counsel for the Restricted Persons, Parent, General Partner, and Northport, in form and substance acceptable to Administrative Agent.

(k) Completion of Proceedings. All corporate, partnership, limited liability company, and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent and its counsel shall be reasonably satisfactory in form and substance to Administrative Agent and such counsel, and Administrative Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent may reasonably request.

(1) Due Diligence. Administrative Agent and Holders shall have completed satisfactory due diligence review of the assets, liabilities, business, operations and condition (financial or otherwise) of Company, including a review of its relevant Oil and Gas Properties and all legal, financial, accounting, governmental, environmental, tax and regulatory matters, and fiduciary aspects relevant to the financing under the Note Purchase Agreement.

(m) Other Documentation. Administrative Agent shall have received all documents and instruments which Administrative Agent has then reasonably requested, in addition to those described in this Section 3.1. All such additional documents and instruments shall be reasonably satisfactory to Administrative Agent in form, substance and date.

(n) No Default. No event shall have occurred and be continuing that would constitute an Event of Default or a Default.

Section 4.2. Additional Conditions Precedent. No Holder has any obligation to make any Loan (including its first) unless the following conditions precedent have been satisfied:

(a) All representations and warranties made by any Person in any Note Document shall be true in all respects on and as of the date of such Loan as if such representations and warranties had been made as of the date of such Loan, except to the extent that such representation or warranty was made as of a specific date or updated, modified or supplemented as of a subsequent date with the consent of Required Holders and Administrative Agent.

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(b) All representations and warranties made by any party to the Acquisition Documents shall be true in all respects as of the Closing Date.

(c) No Default shall exist at the date of such Loan.

(d) No Material Adverse Change shall have occurred to, and no event or circumstance shall have occurred that could reasonably be expected to cause a Material Adverse Change to, Company’s Consolidated financial condition or businesses since the Closing Date.

(e) Each Restricted Person shall have performed and complied with all agreements and conditions required in the Note Documents to be performed or complied with by it on or prior to the date of such Loan.

(f) The making of such Loan shall not be prohibited by any Law and shall not subject any Holder to any penalty or other onerous condition under or pursuant to any such Law.

(g) Administrative Agent shall have received all documents and instruments which Administrative Agent has then requested, in addition to those described in Section 4.1 (including opinions of legal counsel for Restricted Persons and Administrative Agent; corporate documents and records; documents evidencing governmental authorizations, consents, approvals, licenses and exemptions; and certificates of public officials and of officers and representatives of Company and other Persons), as to (i) the accuracy and validity of or compliance with all representations, warranties and covenants made by any Restricted Person in this Agreement and the other Note Documents, (ii) the satisfaction of all conditions contained herein or therein, and (iii) all other matters pertaining hereto and thereto. All such additional documents and instruments shall be satisfactory to Administrative Agent in form, substance and date.

(h) Company shall have provided Administrative Agent with documentation and cost estimates demonstrating that the proceeds of such Loan will be applied by Company to implement the Approved Plan of Development as provided by the second sentence of Section 2.5, as requested by Administrative Agent and in form satisfactory to Administrative Agent in its sole and absolute discretion.

Section 4.3. Conditions Precedent to Company’s Obligations. The obligations of Company to issue the Notes under Section 2.1 of this Agreement are subject to the fulfillment on or before the Closing Date of each of the following conditions, the waiver of which shall not be effective against Holders if they do not consent thereto:

(a) All representations and warranties made by any Holder in Article VI shall be true in all respects on and as of the date of such Loan as if such representations and warranties had been made as of the date of such Loan, except to the extent that such representation or warranty was made as of a specific date or updated, modified or supplemented as of a subsequent date with the consent of Required Holders and Administrative Agent.

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(b) There shall exist no action, suit, investigation, litigation or proceeding affecting any Holder, or any Affiliate of Holder or threatened before any court, governmental agency or arbitrator that purports to affect the legality, validity or enforceability of any Note Document delivered on the Closing Date or the consummation of the transactions contemplated thereby.

ARTICLE V — Representations and Warranties of Company

To confirm each Holder’s understanding concerning Restricted Persons and Restricted Persons’ businesses, properties and obligations and to induce each Holder to enter into this Agreement and to extend credit hereunder, Company represents and warrants to Administrative Agent and each Holder that:

Section 5.1. No Default. No Restricted Person is in default in the performance of any of its covenants and agreements contained in any Transaction Document. No seller under the Acquisition Documents is in default of any of its obligations to Company under any Acquisition Document or in breach of any of its representations and warranties to Company thereunder. No event has occurred and is continuing which constitutes a Default.

Section 5.2. Organization and Good Standing. Each Restricted Person is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, having all powers required to carry on its business and enter into and carry out the transactions contemplated hereby. Each Restricted Person is duly qualified, in good standing, and authorized to do business in all other jurisdictions within the United States wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such qualification necessary. Each Restricted Person has taken all actions and procedures customarily taken in order to enter, for the purpose of conducting business or owning property, each jurisdiction outside the United States wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such actions and procedures desirable.

Section 5.3. Authorization. Each Restricted Person has duly taken all action necessary to authorize the execution and delivery by it of the Transaction Documents to which it is a party and to authorize the consummation of the transactions contemplated thereby and the performance of its obligations thereunder. Company is duly authorized to borrow funds hereunder.

Section 5.4. No Conflicts or Consents. The execution and delivery by the various Restricted Persons of the Transaction Documents to which each is a party, the performance by each of its obligations under such Transaction Documents, and the consummation of the transactions contemplated by the various Transaction Documents, do not and will not (a) conflict with any provision of (i) any Law, (ii) the organizational documents of any Restricted Person, or (iii) any material agreement, judgment, license, order or permit applicable to or binding upon any Restricted Person, (b) result in the acceleration of any Indebtedness owed by any Restricted Person, or (c) result in or require the creation of any Lien upon any assets or properties of any Restricted Person except as expressly contemplated or permitted in the Transaction Documents. Except as expressly contemplated in the Transaction Documents no permit, consent, approval, authorization or order of, and no notice to or filing with, any Governmental Authority or third party is required in connection with the execution, delivery or performance by any Restricted Person of any Transaction Document or to consummate any transactions contemplated by the Transaction Documents. The Equity of MV Pipeline being pledged pursuant to the Security Documents is not subject to any restriction on the transfer, pledge, or voting of such Equity.

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Section 5.5. Enforceable Obligations. This Agreement is, and the other Transaction Documents when duly executed and delivered will be, legal, valid and binding obligations of each of the Restricted Persons and each of their respective Affiliates which is a party hereto or thereto, enforceable in accordance with their terms except as such enforcement may be limited by bankruptcy, insolvency or similar Laws of general application relating to the enforcement of creditors’ rights.

Section 5.6. Initial Pro Forma Financial Statements. Once delivered pursuant to Section 7.23, the Initial Pro Forma Financial Statements will fairly present ECO’s Consolidated financial position at the effective time of the Acquisition and the Consolidated results of its operations and its Consolidated cash flows for the respective periods thereof.

Section 5.7. Other Obligations and Restrictions. No Restricted Person has any outstanding Liabilities of any kind (including contingent obligations, tax assessments, and unusual forward or long-term commitments) which are, in the aggregate, material to Company or material with respect to Company’s Consolidated financial condition and not shown in the most recently delivered financial statements or disclosed in Section 5.7 of the Disclosure Schedule or which constitute Indebtedness and are otherwise permitted under Section 8.1. Except as shown in the Initial Pro Forma Financial Statements or disclosed in Section 5.7 of the Disclosure Schedule, no Restricted Person is subject to or restricted by any franchise, contract, deed, charter restriction, or other instrument or restriction which could reasonably be expected to cause a Material Adverse Change. Except as listed in Section 5.7 of the Disclosure Schedule, no Restricted Person has any Material Contracts (other than oil and gas leases, unit agreements, unit operating agreements, and joint operating agreements that are specifically listed on the property descriptions attached to the Mortgage).

Section 5.8. Full Disclosure. No certificate, statement or other information delivered herewith or heretofore to Administrative Agent by or on behalf of Company or any of its Affiliates in connection with the negotiation of this Agreement or in connection with any transaction contemplated hereby contains any untrue statement of a material fact or omits to state any material fact known to Company or its Affiliates (other than industry-wide risks normally associated with the types of businesses conducted by Restricted Persons) necessary to make the statements contained herein or therein not misleading as of the date made or deemed made. No Material Adverse Change has occurred since the date of the first Borrowing. There is no fact known to Company or its Affiliates (other than industry-wide risks normally associated with the types of businesses conducted by Restricted Persons) that has not been disclosed to Administrative Agent in writing which could cause a Material Adverse Change. There are no statements or conclusions in any Engineering Report which are based upon or include misleading information or fail to take into account material information regarding the matters reported therein, it being understood that each Engineering Report are necessarily based upon professional opinions, estimates and projections and that Company does not warrant that such opinions, estimates and projections will ultimately prove to have been accurate. Except for the Acquisition Documents and the GO Note, Company has no Material Contracts.

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Section 5.9. Litigation. Except as disclosed in the Initial Pro Forma Financial Statements or in Section 5.9 of the Disclosure Schedule: (a) there are no actions, suits or legal, equitable, arbitrative or administrative proceedings pending, or to the knowledge of any Restricted Person threatened, against any Restricted Person or affecting any Collateral (including any which challenge or otherwise pertain to any Restricted Person’s title to any Collateral) before any Governmental Authority which could cause a Material Adverse Change, and (b) there are no outstanding judgments, injunctions, writs, rulings or orders by any such Governmental Authority against any Restricted Person or any Restricted Person’s stockholders, partners, members, directors or officers or affecting any Collateral or any of its material assets or property which could cause a Material Adverse Change.

Section 5.10. Labor Disputes and Acts of God. Except as disclosed in Section 5.10 of the Disclosure Schedule, neither the business nor the properties of any Restricted Person has been affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance), which could cause a Material Adverse Change.

Section 5.11. ERISA Plans and Liabilities. All currently existing ERISA Plans, if any, are listed in Section 5.11 of the Disclosure Schedule. Except as disclosed in the Initial Pro Forma Financial Statements or in Section 5.11 of the Disclosure Schedule, no Termination Event has occurred with respect to any ERISA Plan and all ERISA Affiliates are in compliance with ERISA in all material respects. No ERISA Affiliate is required to contribute to, or has any other absolute or contingent liability in respect of, any “multiemployer plan” as defined in Section 4001 of ERISA. Except as set forth in Section 5.11 of the Disclosure Schedule: (a) no “accumulated funding deficiency” (as defined in Section 412(a) of the Internal Revenue Code) exists with respect to any ERISA Plan, whether or not waived by the Secretary of the Treasury or his delegate, and (b) the current value of each ERISA Plan’s benefits does not exceed the current value of such ERISA Plan’s assets available for the payment of such benefits by more than $500,000.

Section 5.12. Environmental and Other Laws. Except as disclosed in Section 5.12 of the Disclosure Schedule: (a) Restricted Persons are conducting their businesses in material compliance with all applicable Laws, including Environmental Laws, and have and are in compliance with all licenses and permits required under any such Laws; (b) none of the operations or properties of any Restricted Person is the subject of federal, state or local investigation evaluating whether any material remedial action is needed to respond to a release of any Hazardous Materials into the environment or to the improper storage or disposal (including storage or disposal at offsite locations) of any Hazardous Materials; (c) no Restricted Person (and to the best knowledge of Company, no other Person) has filed any notice under any Law indicating that any Restricted Person is responsible for the improper release into the environment, or the improper storage or disposal, of any material amount of any Hazardous Materials or that any Hazardous Materials have been improperly released, or are improperly stored or disposed of, upon any Collateral; (d) no Restricted Person has transported or arranged for the transportation of any Hazardous Material to any location which is (i) listed on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, listed for possible inclusion on such National Priorities List by the Environmental Protection Agency in its Comprehensive Environmental Response, Compensation and Liability Information System List, or listed on any similar state list or (ii) the subject of federal, state or local enforcement actions or other investigations which may lead to claims against any Restricted Person for clean-up costs, remedial work, damages to natural resources or for personal injury claims (whether under Environmental Laws or otherwise); and (e) no Restricted Person otherwise has any known material contingent liability under any Environmental Laws or in connection with the release into the environment, or the storage or disposal, of any Hazardous Materials. Each Restricted Person undertook, at the time of its acquisition of each of its material properties, all appropriate inquiry into the previous ownership and uses of such properties and any potential environmental liabilities associated therewith.

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Section 5.13. Insurance. The Insurance Schedule contains an accurate and complete description of all material policies of property and casualty, liability, workmen’s compensation and other forms of insurance owned or held by or on behalf of any Restricted Person. Such policies constitute all policies of insurance required to be maintained under Section 7.8 hereof. All such policies are in full force and effect, all premiums due with respect thereto have been paid, and no notice of cancellation or termination in all material respects has been received with respect to any such policy. Such policies are sufficient for compliance in all material respects with all requirements of law and of all agreements to which any Restricted Person is a party; are valid, outstanding and enforceable policies; provide adequate insurance coverage in at least such amounts and against at least such risks (but including in any event public liability) as are usually insured against in the same general area by companies engaged in the same or a similar business for the assets and operations of the Restricted Persons; will remain in full force and effect through the respective dates set forth in the Insurance Schedule without the payment of additional premiums; and will not in any way be affected by, or terminate or lapse by reason of, the transactions contemplated by this Agreement and the other Note Documents.

Section 5.14. Names and Places of Business. No Restricted Person has, during the preceding five years, had, been known by, or used any other trade or fictitious name, except as disclosed in Section 5.14 of the Disclosure Schedule. Except as otherwise indicated in Section 5.14 of the Disclosure Schedule, the chief executive office and principal place of business of each Restricted Person are (and for the preceding five years have been) located at the address of Company set out in Section 12.3. Except as indicated in Section 5.14 of the Disclosure Schedule or otherwise disclosed in writing to Administrative Agent, no Restricted Person has any other office or place of business.

Section 5.15. Subsidiaries. Company does not presently have any Subsidiary except those listed in Section 5.14 of the Disclosure Schedule or disclosed to Administrative Agent in writing. No Restricted Person has any equity investments in any other Person except those listed in Section 5.14 of the Disclosure Schedule. Company owns, directly or indirectly, the equity interests in each of its Subsidiaries which is indicated in Section 5.14 of the Disclosure Schedule or as disclosed to Administrative Agent in writing.

Section 5.16. Government Regulation. Neither Company nor any other Restricted Person owing Obligations is (a) a “registered holding company”, or a “subsidiary company” of a “registered holding company”, or an “affiliate” of a “registered holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended, (b) an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, or (c) subject to regulation under the Federal Power Act, as amended, or any other Law which regulates the incurring by such Person of Indebtedness, including Laws relating to common contract carriers or the sale of electricity, gas, steam, water or other public utility services.

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Section 5.17. Solvency. Upon giving effect to the issuance of the Notes, the execution of the Transaction Documents by the parties thereto and the consummation of the transactions contemplated hereby and thereby, Restricted Person will be solvent (as such term is used in applicable bankruptcy, liquidation, receivership, insolvency or similar Laws), and the sum of each Restricted Person’s absolute and contingent liabilities, including the Obligations or guarantees thereof, shall not exceed the fair market value of such Restricted Person’s assets, and (ii) each Restricted Person’s capital should be adequate for the businesses in which such Restricted Person is engaged and intends to be engaged. No Restricted Person has incurred (whether under the Note Documents or otherwise), nor does any Restricted Person intend to incur or believe that it will incur, debts which will be beyond its ability to pay as such debts mature.

Section 5.18. Title to Properties; Licenses. Each Restricted Person has good and defensible title to, or valid leasehold interests in, all of the Collateral owned or leased by such Restricted Person and all of its other material properties and assets necessary or used in the ordinary conduct of its business, free and clear of all Liens, encumbrances, or adverse claims other than Permitted Liens and of all impediments to the use of such properties and assets in such Restricted Person’s business. Each Engineering Report at any time delivered pursuant to Section 7.2(i) correctly states the working interests and net revenue interests of the Restricted Persons in the Proved Reserves that are the subject of such Engineering Report. Except for obligations to contribute a proportionate share of the costs of defaulting co-owners, no Restricted Person is obligated to bear any percentage share of the costs and expenses relating to the drilling, development and production of such Proved Reserves in excess of such working interests, and (subject to the Note Documents) each Restricted Person is entitled to receive percentage shares of the revenues from the production of such Proved Reserves that are at least equal to such net revenue interests. Each Restricted Person possesses all licenses, permits, franchises, patents, copyrights, trademarks and trade names, and other intellectual property (or otherwise possesses the right to use such intellectual property without violation of the rights of any other Person) that are necessary to carry out its business as presently conducted and as presently proposed to be conducted hereafter, and no Restricted Person is in violation in any material respect of the terms under which it possesses such intellectual property or the right to use such intellectual property. No Restricted Person has granted control over any Deposit Accounts to any Person, other than Administrative Agent and the bank with which any Deposit Account is maintained. No Restricted Person has any “securities accounts” as defined and described in the UCC.

Section 5.19. Regulation U. None of Company, Parent, nor any of their Subsidiaries are engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Loans will be used for a purpose which violates Regulation U.

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Section 5.20. Leases and Contracts; Performance of Obligations. The leases, deeds, and other agreements comprising part of the Acquisition or forming a part of the Oil and Gas Properties of the Restricted Persons to which Proved Reserves are attributed in each Engineering Report are in full force and effect. To the best knowledge of Restricted Persons after due inquiry, all rents, royalties and other payments due and payable under such leases, deeds, and other agreements have been properly and timely paid other than to the extent such could not reasonably be expected to cause the loss or forfeiture of any such Proved Reserves. No Restricted Person is in default with respect to its obligations (and no Restricted Person is aware of any default by any third party with respect to such third party’s obligations) under any such leases, deeds, and other agreements, or under any Permitted Liens, or otherwise attendant to the ownership or operation of any part of the Oil and Gas Properties, where such default could adversely affect the ownership or operation of any Oil and Gas Properties to which any such Proved Reserves are attributed. No Restricted Person is currently accounting for any royalties, or overriding royalties or other payments out of production, on a basis (other than delivery in kind) less favorable to such Restricted Person than proceeds received by such Restricted Person (calculated at the well) from sale of production, and no Restricted Person has any liability (or alleged liability) to account for the same on any such less favorable basis.

Section 5.21. Marketing Arrangements. Except as set forth in Section 5.21 of the Disclosure Schedule, no Oil and Gas Property is subject to any contractual or other arrangement (i) whereby payment for production is or can be deferred for a substantial period after the month in which such production is delivered (in the case of oil, not in excess of 60 days, and in the case of gas, not in excess of 90 days) or (ii) whereby payments are made to a Restricted Person other than by checks, drafts, wire transfers, or other similar writings, instruments or communications for the immediate payment of money. Except for production sales contracts, processing agreements, transportation agreements and other agreements relating to the marketing of production that are listed in Section 5.21 of the Disclosure Schedule in connection with the Oil and Gas Properties to which such contract or agreement relates: (i) no Oil and Gas Property of a Restricted Person is subject to any contractual or other arrangement for the sale, processing or transportation of production (or otherwise related to the marketing of production) which cannot be canceled by such Restricted Person on 120 days’ (or less) notice and (ii) all contractual or other arrangements for the sale, processing or transportation of production (or otherwise related to the marketing of production) are bona fide arm’s length transactions made on the best terms reasonably available with third parties not affiliated with Company. Each Restricted Person is presently receiving a price for all production from (or attributable to) each Oil and Gas Property covered by a production sales contract or marketing contract listed in Section 5.21 of the Disclosure Schedule that is computed in accordance with the terms of such contract, and no Restricted Person is having deliveries of production from such Oil and Gas Property curtailed substantially below such property’s delivery capacity, except for curtailments caused (a) by an act or event of force majeure not reasonably within the control of and not caused by the fault or negligence of a Restricted Person and which by the exercise of reasonable diligence such Restricted Person is unable to prevent or overcome, and (b) by routine maintenance requirements in the ordinary course of business.

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Section 5.22. Right to Receive Payment for Future Production. Except as set forth in Section 5.22 of the Disclosure Schedule, no Restricted Person, nor to the best knowledge of Restricted Persons after due inquiry any Restricted Person’s predecessors in title, has received prepayments (including payments for gas not taken pursuant to “take or pay” or other similar arrangements) for any oil, gas or other hydrocarbons produced or to be produced from any Oil and Gas Properties after the date hereof. Except as set forth in Section 5.22 of the Disclosure Schedule, no Oil and Gas Property is subject to any “take or pay”, gas imbalances or other similar arrangement (i) which can be satisfied in whole or in part by the production or transportation of gas from other properties or (ii) as a result of which production from any Oil and Gas Property may be required to be delivered to one or more third parties without payment (or without full payment) therefor as a result of payments made, or other actions taken, with respect to other properties. Except as set forth in Section 5.22 of the Disclosure Schedule, there is no Oil and Gas Property with respect to which any Restricted Person, or any Restricted Person’s predecessors in title, has, prior to the date hereof, taken more (“overproduced”), or less (“underproduced”), gas from the lands covered thereby (or pooled or unitized therewith) than its ownership interest in such Oil and Gas Property would entitle it to take; and Section 5.22 of the Disclosure Schedule accurately reflects, for each well or unit with respect to which such an imbalance is shown thereon to exist, (i) whether such Restricted Person is overproduced or underproduced and (ii) the volumes (in cubic feet or British thermal units) of such overproduction or underproduction and the effective date of such information. No Oil and Gas Property is subject at the present time to any regulatory refund obligation and, to the best of Restricted Person’s knowledge, no facts exist which might cause the same to be imposed.

Section 5.23. Operation of Oil and Gas Properties. The Oil and Gas Properties (and all properties unitized therewith) are being (and, to the extent the same could adversely affect the ownership or operation of the Oil and Gas Properties after the date hereof, have in the past been) maintained, operated and developed in a good and workmanlike manner, in accordance with prudent industry standards and in conformity with all applicable Laws and in conformity with all oil, gas or other mineral leases and other contracts and agreements forming a part of the Oil and Gas Property and in conformity with the Permitted Liens. No Oil and Gas Property is subject to having allowable production after the date hereof reduced below the full and regular allowable (including the maximum permissible tolerance) because of any overproduction (whether or not the same was permissible at the time) prior to the date hereof and (ii) none of the wells located on the Oil and Gas Properties (or properties unitized therewith) are or will be deviated from the vertical more than the maximum permitted by applicable laws, regulations, rules and orders, and such wells are bottomed under and producing from, with the well bores wholly within, the Oil and Gas Properties (or, in the case of wells located on properties unitized therewith, such unitized properties). Each Restricted Person has all governmental licenses and permits necessary or appropriate to own and operate its Oil and Gas Property, and no Restricted Person has received notice of any violations in respect of any such licenses or permits.

Section 5.24. Ad Valorem and Severance Taxes; Litigation. Each Restricted Person has paid and discharged all ad valorem taxes assessed against its Oil and Gas Property or any part thereof and all production, severance and other taxes assessed against, or measured by, the production or the value, or proceeds, of the production therefrom. There are no suits, actions, claims, investigations, inquiries, proceedings or demands pending (or, to any Restricted Person’s knowledge, threatened) which might affect the Oil and Gas Property, including any which challenge or otherwise pertain to any Restricted Person’s title to any Oil and Gas Property or rights to produce and sell oil and gas therefrom.

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Section 5.25. Acquisition. Company has concurrently herewith delivered to Administrative Agent true, correct and complete copies of the Acquisition Documents, which have been executed and delivered in the forms previously delivered to the Holders for their review (in each case, as appropriately completed). Company has not waived or amended any term or condition thereof. As of the Closing Date, each of the representations and warranties made by any party in the Acquisition Documents is true and correct in all respects, except for any such representation or warranty that expressly applies only to a specified earlier date, in which case such representation or warranty shall have been true and correct in all respects as of such earlier date; and neither Company nor any other party thereto has failed in any respect to perform any obligation or covenant required by the Acquisition Documents to be performed or complied with by it on or before the Closing Date. The Acquisition will have been consummated on or prior to the Closing Date in compliance with the terms and conditions thereof and all conditions precedent to such consummation will be fully satisfied.

ARTICLE VI — Representations and Warranties of Holders

Each of the Holders hereby, represents, warrants and covenants to Company as follows:

Section 6.1. Organization of Holders. Each of the Holders has been duly formed and is validly existing as a corporation or other legal entity in good standing under the laws of its jurisdiction of organization. Each of the Holders has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby.

Section 6.2. Authority of Holders. The execution and delivery by each of the Holders of this Agreement, and the performance of its obligations hereunder, have been duly and validly authorized by all necessary actions of such Holder. This Agreement and all other Closing Documents executed by each of the Holders have been duly and validly executed and delivered by such Holder and constitute the legal, valid and binding obligations of such Holder, enforceable against such Holder, in accordance with their terms, except to the extent such enforceability (a) may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors’ rights generally and (b) is subject to general principles of equity.

Section 6.3. Compliance with Laws and Other Instruments. The consummation of the transactions contemplated by this Agreement and the execution, delivery and performance of the terms and provisions of the Closing Documents to which each of the Holders is a party will not (i) contravene, result in any breach of, or constitute a default under, any charter or bylaws or other organizational documents of such Holder, or any material agreement or instrument to which such Holder is a party, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order of any court, arbitrator or Governmental Authority applicable to such Holder, or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to such Holder.

Section 6.4. Acquisition for Holder’s Account. Each of the Holders is acquiring and will acquire the Notes for its own account, with no present intention of distributing or reselling such Notes or any part thereof in violation of applicable securities laws.

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Section 6.5. Notes Not Registered. Each of the Holders acknowledges that its Notes have not been, and when issued will not be, registered under the Securities Act or the securities laws of any state in the United States or any other jurisdiction and may not be offered or sold by such Holder unless subsequently registered under the Securities Act (if applicable to the transaction) and any other securities laws or unless exemptions from the registration or other requirements of the Securities Act and any other securities laws are available for the transaction.

Section 6.6. Accredited Investor. Each of the Holders represents that it is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, as presently in effect, or a Qualified Institutional Buyer (as defined in Rule 144A promulgated under the Securities Act, as presently in effect).

ARTICLE VII — Affirmative Covenants of Company

To conform with the terms and conditions under which each Holder is willing to have credit outstanding to Company, and to induce each Holder to enter into this Agreement and extend credit hereunder, Company warrants, covenants and agrees that until the full and final payment of the Obligations and the termination of this Agreement, unless Required Holders have previously agreed otherwise:

Section 7.1. Payment and Performance. Each Restricted Person will pay all amounts due under the Note Documents, to which it is a party, in accordance with the terms thereof and will observe, perform and comply with every covenant, term and condition set forth in the Note Documents to which it is a party. Company will cause each of its Affiliates to observe, perform and comply with every such term, covenant and condition in any Note Document.

Section 7.2. Books, Financial Statements and Reports. Each Restricted Person will at all times maintain full and accurate books of account and records. ECO and Company will maintain and will cause their Subsidiaries to maintain a standard system of accounting, will maintain its Fiscal Year, and will furnish the following statements and reports to each Holder Party at Company’s expense:

(a) As soon as available, and in any event within ninety (90) days after the end of each Fiscal Year, complete Consolidated and consolidating financial statements of ECO together with all notes thereto, prepared in reasonable detail in accordance with GAAP, together with an unqualified opinion, based on an audit using generally accepted auditing standards, by an independent certified public accounting firm selected by ECO and acceptable to Administrative Agent, stating that such Consolidated financial statements have been so prepared. These financial statements shall contain a Consolidated and consolidating balance sheet as of the end of such Fiscal Year and Consolidated and consolidating statements of earnings, of cash flows, and of changes in owners’ equity for such Fiscal Year, each setting forth in comparative form the corresponding figures for the preceding Fiscal Year. In addition, concurrently with the delivery of such financial statements, Company will furnish a report signed by such accountants (i) containing calculations showing compliance (or non-compliance) at the end of such Fiscal Year with the requirements of Sections 8.11 and 8.12, and (ii) further stating that in making their examination and reporting on the Consolidated financial statements described above they did not conclude that any Default existed at the end of such Fiscal Year or at the time of their report, or, if they did conclude that a Default existed, specifying its nature and period of existence.

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(b) As soon as available, and in any event within forty-five (45) days after the end of each Fiscal Quarter, ECO’s Consolidated and consolidating balance sheet as of the end of such Fiscal Quarter and Consolidated and consolidating statements of ECO’s earnings and cash flows for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, all in reasonable detail and prepared in accordance with GAAP, subject to changes resulting from normal year-end adjustments. In addition Company will, together with each such set of financial statements and each set of financial statements furnished under subsection (a) of this section, furnish a certificate in the form of Exhibit D signed by the chief financial officer of ECO stating that such financial statements are accurate and complete (subject to normal year-end adjustments), stating that he has reviewed the Note Documents, containing calculations showing compliance (or non-compliance) at the end of such Fiscal Quarter with the requirements of Sections 8.11 and 8.12 and stating that no Default exists at the end of such Fiscal Quarter or at the time of such certificate or specifying the nature and period of existence of any such Default.

(c) Promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent by Parent or any Restricted Person to its equity holders and all registration statements, periodic reports and other statements and schedules filed by Parent or any Restricted Person with any securities exchange, the Securities and Exchange Commission or any similar Governmental Authority.

(d) Together with each set of financial statements furnished under subsections (a) and (b) of this section, Company will furnish a report (in form reasonably satisfactory to Administrative Agent) of all Hedging Contracts of each of the Restricted Persons, setting forth the type, term, effective date, termination date and notional amounts or volumes and the counterparty to each such agreement.

(e) As soon as available, and in any event within ninety (90) days after the end of each Fiscal Year, a business and financial plan, together with a capital expenditure schedule, for Restricted Persons (in form reasonably satisfactory to Administrative Agent), prepared by a senior financial officer thereof, setting forth for the first year thereof, quarterly financial projections and budgets for Restricted Persons, and thereafter yearly financial projections and budgets during the Availability Period.

(f) Concurrently with the annual renewal of Restricted Persons’ insurance policies, Company shall, if requested by Administrative Agent in writing, cause a certificate or report to be issued by Administrative Agent’s Insurance Advisor or other insurance consultants satisfactory to Administrative Agent certifying that Restricted Persons’ insurance for the next succeeding year after such renewal (or for such longer period for which such insurance is in effect) complies with the provisions of this Agreement and the Security Documents.

(g) As soon as available and in any event no later than the fifteenth (15th) day after the end of each month, monthly operating reports of Restricted Persons which shall include a description by field of the gross quantities of Hydrocarbons and water produced from the Eligible Mortgaged Properties during such month;

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(h) On each Quarterly Payment Date, a consolidated report in detail acceptable to Administrative Agent containing:

(i) a detailed calculation of ANCF for the preceding ANCF Quarter including a detailed aging of Restricted Persons’ accounts receivable and payable;

(ii) regardless of whether the same are included in such calculation of ANCF, a detailed calculation of any leasehold operating expenses, overhead costs, capital expenditures, and other direct charges or overhead costs with respect to the Eligible Mortgaged Properties specifying any material differences from those approved and those actually incurred;

(iii) a summary of wells drilled, completed or worked over during the reporting period showing the total depth drilled or tested, and the existing or anticipated perforated interval and upon request copies of any well logs across the pay sectors;

(iv) a discussion of any current operating problems with any wells and any proposed solutions;

(v) any technical studies conducted during the reporting period of performance; and

(vi) a projection of capital expenditures for the next ANCF Quarter and if any of such capital expenditures are not ANCF Capital Expenditures the sources of capital for the payment thereof.

(i) during the Availability Period, a semi-annual Engineering Report, to be effective as of each May 1 and November 1 of each year and to be delivered to Administrative Agent prior to June 1 and December 1 for each respective period; and after the end of the Availability Period, an annual Engineering Report to be effective as of November 1 of each year and to be delivered prior to December 1 of each year. Each Engineering Report shall:

(i) be prepared at Company’s expense by the Independent Engineer, concerning all of the oil and gas properties of Restricted Persons, including the Eligible Mortgaged Properties;

(ii) separately report on Proved Developed Producing Reserves, Proved Developed Non-Producing Reserves and Proved Undeveloped Reserves of the Eligible Mortgaged Properties, and separately calculate the NPV10 of each such category of Reserves;

(iii) use Agreed Pricing;

(iv) take into account Restricted Persons’ actual experiences with leasehold operating expenses and other costs in determining projected leasehold operating expenses and other costs;

(v) take into account any “over-produced” status under gas balancing arrangements; and

(vi) otherwise be in form and substance satisfactory to Administrative Agent.

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In the event that Company and Administrative Agent disagree over whether or not any workovers or other remedial capital expenditures should be included in an Engineering Report for the purposes of calculating NPV10, the engineers preparing the report shall resolve such disagreement by determining whether such expenditures are likely to be required in accordance with prudent industry practice and shall include or exclude such expenditures based upon such determination.

(j) after the Availability Period, a semi-annual engineering report as of May 1 of each year, which shall be generated internally by Company and shall satisfy the requirements of clauses (ii) through (vi) of the preceding subsection (i). Such interim engineering reports shall include, but not be limited to, calculations of NPV10 on the Eligible Mortgaged Properties.

(k) as soon as available and in any event not later than December 28 of each Fiscal Year, an annual budget of ECO and its Subsidiaries reviewed by the Manager and the principal financial officer of ECO, setting forth in reasonable detail, the projected revenues and expenses for ECO and its Subsidiaries for the next succeeding Fiscal Year.

(1) Upon request by Administrative Agent, a list, by name and address, of those Persons who have purchased production during such Fiscal Quarter from the Eligible Mortgaged Properties, in form and substance satisfactory to Administrative Agent.

Section 7.3. Notice of Material Events and Change of Address. Company will promptly notify each Holder Party in writing, stating that such notice is being given pursuant to this Agreement, of:

(a) occurrence of any Material Adverse Change,

(b) the occurrence of any Default,

(c) the acceleration of the maturity of any Indebtedness owed by any Restricted Person or of any default by any Restricted Person under any indenture, mortgage, agreement, contract or other instrument to which any of them is a party or by which any of them or any of their properties is bound, if such acceleration or default could cause a Material Adverse Change,

(d) the occurrence of any Termination Event,

(e) any claim of $50,000 or more, any notice of potential liability under any Environmental Laws which might exceed such amount, or any other material adverse claim asserted against any Restricted Person or with respect to any Restricted Person’s properties, and

(f) the filing of any suit or proceeding against any Restricted Person in which an adverse decision could cause a Material Adverse Change.

Upon the occurrence of any of the foregoing Restricted Persons will take all necessary or appropriate steps to remedy promptly any such Material Adverse Change, Default, acceleration, default or Termination Event, to protect against any such adverse claim, to defend any such suit or proceeding, and to resolve all controversies on account of any of the foregoing. Company will also notify Administrative Agent and Administrative Agent’s counsel in writing at least twenty Business Days prior to the date that any Restricted Person changes its name or the location of its chief executive office or its location under the Uniform Commercial Code.

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Section 7.4. Maintenance of Properties. Each Restricted Person will maintain, preserve, protect, and keep all Collateral and all other property used or useful in the conduct of its business in good condition (normal wear and tear excepted) and in accordance with prudent industry standards, and will from time to time make all repairs, renewals and replacements needed to enable the business and operations carried on in connection therewith to be conducted at all times consistent with prudent industry practices. All Collateral is, and will remain, located on the premises subject to a Mortgage, except for that portion thereof which is or shall be located elsewhere (including that usually located on such premises but temporarily located elsewhere) in the course of the normal operation of the Properties. Each Restricted Person will maintain, good and defensible title to the fee interests in real property and the oil and gas leasehold interests comprising the Collateral, free and clear of all Liens, except for Permitted Liens. Company will obtain and pay for the services of all engineering and professional staff and other Persons needed to prudently execute the Approved Plan of Development.

Section 7.5. Maintenance of Existence and Qualifications. Each Restricted Person will maintain and preserve its existence and its rights and franchises in full force and effect and will qualify to do business in all states or jurisdictions where required by applicable Law, except where the failure so to qualify could cause a Material Adverse Change.

Section 7.6. Payment of Trade Liabilities, Taxes, etc. Each Restricted Person will (a) timely file all required tax returns including any extensions; (b) timely pay all taxes, assessments, and other governmental charges or levies imposed upon it or upon its income, profits or property before the same become delinquent; (c) within ninety (90) days past the original invoice billing date therefor same becomes due pay all Liabilities owed by it on ordinary trade terms to vendors, suppliers and other Persons providing goods and services used by it in the ordinary course of its business; (d) pay and discharge when due all other Liabilities now or hereafter owed by it, other than royalty payments suspended in the ordinary course of business; and (e) maintain appropriate accruals and reserves for all of the foregoing in accordance with GAAP. Each Restricted Person may, however, delay paying or discharging any of the foregoing so long as it is in good faith contesting the validity thereof by appropriate proceedings, if necessary, and has set aside on its books adequate reserves therefore which are required by GAAP.

Section 7.7. Insurance. The Company will, and will cause each of its Subsidiaries to, (i) keep and maintain all of its Property in good working order and condition, ordinary wear and tear excepted, and (ii) maintain insurance with responsible and reputable insurance companies or associations (including, without limitation, comprehensive general liability, hazard, business interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks as is required by any Governmental Authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated, and, in any event in amount, adequacy and scope as required by the Insurance Schedule and satisfactory to Administrative Agent and Required Holders.

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If Company or any of its Subsidiaries fails to maintain such insurance, Administrative Agent or any Holder may arrange for such insurance, but at Company’s expense and without any responsibility on the part of Administrative Agent or any Holder for obtaining the insurance, the solvency of the insurance companies, the adequacy of the coverage, or the collection of claims. Upon the occurrence and during the continuance of an Event of Default, Administrative Agent shall have the sole right, in the name of the Holders, Company and its Subsidiaries, to file claims under any insurance policies, to receive, receipt and give acquittance for any payments that may be payable thereunder, and to execute any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be necessary to effect the collection, compromise or settlement of any claims under any such insurance policies.

Section 7.8. Performance on Company’s Behalf. If any Restricted Person fails to pay any taxes, insurance premiums, expenses, attorneys’ fees or other amounts it is required to pay under any Note Document, Administrative Agent may pay the same. Company shall immediately reimburse Administrative Agent for any such payments and each amount paid by Administrative Agent shall constitute an Obligation owed hereunder which is due and payable on the date such amount is paid by Administrative Agent.

Section 7.9. Interest. Company hereby promises to each Holder Party to pay interest at the Default Rate on all Obligations (including Obligations to pay fees or to reimburse or indemnify any Holder but excluding principal of, and interest on, any Loan interest on which is covered by Section 2.6) which Company has in this Agreement promised to pay to such Holder Party and which are not paid when due. Such interest shall accrue from the date such Obligations become due until they are paid.

Section 7.10. Compliance with Agreements and Law. Each Restricted Person will perform all material obligations it is required to perform under the terms of each indenture, mortgage, deed of trust, security agreement, lease, franchise, agreement, contract or other instrument or obligation to which it is a party or by which it or any of its properties is bound. Each Restricted Person will conduct its business and affairs in compliance with all Laws applicable thereto. Each Restricted Person will cause all licenses and permits necessary or appropriate for the conduct of its business and the ownership and operation of its property used and useful in the conduct of its business to be at all times maintained in good standing and in full force and effect.

Section 7.11. Board Observation Rights. The Holders shall be entitled to appoint one observer (an “Observer”) to the Board of Directors or board of managers (or any similar group performing an executive oversight or similar function) of Company and each Subsidiary and each committee thereof (collectively, the “Board”). Each Observer shall have the right to attend and receive all materials distributed for or at all meetings (telephonic or otherwise) of the Board, except that such Observer shall not be entitled to vote on matters presented to or discussed by the Board nor participate in attorney-client privileged discussions or receive or review any documents subject to an attorney-client or attorney work product privilege. Each of the Holders shall be notified of all meetings and each Observer will be notified of all proposed actions (including not less than two (2) Business Days prior notice of any proposed action to be taken without a meeting) by the Board as if a representative of such Holders were a member of the Board. Each Observer shall be entitled to be reimbursed by Company for all reasonable and documented out-of-pocket costs and expenses it incurred in connection with its participation in meetings or other activities of the Board.

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Section 7.12. Separateness Covenants.

(a) No Restricted Person will commingle its assets with those of any other Person.

(b) Each Restricted Person will conduct its business separately and in its own name from any direct or ultimate parent of such Person.

(c) Each Restricted Person will maintain separate accounts, financial statements, books and records from those of any other Person.

(d) Except as expressly permitted under Section 8.9, each Restricted Person will maintain an “arm’s-length” relationship with its Affiliates.

(e) Each Restricted Person will use separate stationery, invoices and checks and will hold itself out as a separate and distinct entity from any other Person.

(f) Each Restricted Person will observe all normal corporate or company formalities.

(g) Each Restricted Person will correct any known misunderstanding regarding its separate identity.

(h) Each Restricted Person will maintain adequate capital in light of its contemplated business operations.

Section 7.13. Environmental Matters; Environmental Reviews.

(a) Each Restricted Person will comply in all material respects with all Environmental Laws now or hereafter applicable to it, as well as all contractual obligations and agreements with respect to environmental remediation or other environmental matters, and will obtain, at or prior to the time required by applicable Environmental Laws, all environmental, health and safety permits, licenses and other authorizations necessary for its operations and will maintain such authorizations in full force and effect. No Restricted Person will do anything or permit anything to be done that will subject any of the properties of any Restricted Person to any remedial obligations under, or result in noncompliance with applicable permits and licenses issued under, any applicable Environmental Laws, assuming disclosure to the applicable governmental authorities of all relevant facts, conditions and circumstances. Upon Administrative Agent’s reasonable request, at any time and from time to time, Company will provide at its own expense an environmental inspection of any of its and the other Restricted Persons’ material real properties and audit of their environmental compliance procedures and practices, in each case from an engineering or consulting firm approved by Administrative Agent.

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(b) Company will promptly furnish to Administrative Agent all written notices of violation, orders, claims, citations, complaints, penalty assessments, suits or other proceedings received by any Restricted Person, or of which any Restricted Person otherwise has notice, with respect to any alleged violation of or non-compliance with any Environmental Laws, with respect to the properties or operations of Company and its Subsidiaries, or with respect to any permits, licenses or authorizations in connection with the ownership or use of such properties or in connection with any such operations.

(c) Company will promptly furnish to Administrative Agent all requests for information, notices of claim, demand letters, and other notifications, received by any Restricted Person in connection with the ownership or use of any of its properties or the conduct of its business, relating to potential responsibility with respect to any investigation or clean-up of Hazardous Material at any location.

Section 7.14. Evidence of Compliance. Each Restricted Person will furnish to each Holder at such Restricted Person’s or Company’s expense all evidence which Administrative Agent from time to time reasonably requests in writing as to the accuracy and validity of or compliance with all representations, warranties and covenants made by any Restricted Person in the Note Documents, the satisfaction of all conditions contained therein, and all other matters pertaining thereto.

Section 7.15. Bank Accounts; Offset. To secure the repayment of the Obligations Company hereby grants to each Holder a security interest, a lien, and a right of offset, each of which shall be in addition to all other interests, liens, and rights of any Holder at common Law, under the Note Documents, or otherwise, and each of which shall be upon and against (a) any and all moneys, securities or other property (and the proceeds therefrom) of Company now or hereafter held or received by or in transit to any Holder from or for the account of Company, whether for safekeeping, custody, pledge, transmission, collection or otherwise, (b) any and all deposits (general or special, time or demand, provisional or final) of Company with any Holder, and (c) any other credits and claims of Company at any time existing against any Holder, including claims under certificates of deposit. At any time and from time to time after the occurrence of any Default, each Holder is hereby authorized to foreclose upon, or to offset against the Obligations then due and payable (in either case without notice to Company), any and all items hereinabove referred to. The remedies of foreclosure and offset are separate and cumulative, and either may be exercised independently of the other without regard to procedures or restrictions applicable to the other.

Section 7.16. Guaranties of Company’s Subsidiaries. Each Subsidiary of ECO (other than Company) now existing or created, acquired or coming into existence after the date hereof shall, promptly upon request by Administrative Agent, execute and deliver to Administrative Agent an absolute and unconditional guaranty of the timely repayment of the Obligations and the due and punctual performance of the obligations of Company hereunder, which guaranty shall be satisfactory to Administrative Agent in form and substance. ECO and Company will cause each such Person to deliver to Administrative Agent, simultaneously with its delivery of such a guaranty, written evidence satisfactory to Administrative Agent and its counsel that such Person has taken all company action necessary to duly approve and authorize its execution, delivery and performance of such guaranty and any other documents which it is required to execute.

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Section 7.17. Agreement to Deliver Security Documents. Company agrees to deliver and to cause each other Restricted Person to deliver, to further secure the Obligations whenever requested by Administrative Agent in its sole and absolute discretion, deeds of trust, mortgages, chattel mortgages, security agreements, financing statements and other Security Documents in form and substance satisfactory to Administrative Agent for the purpose of granting, confirming, and perfecting first and prior liens or security interests in any real or personal property now owned or hereafter acquired by any Restricted Person. Company agrees to deliver and to cause each other Restricted Person to deliver, whenever requested by Administrative Agent, in its sole and absolute discretion, transfer orders or letters in lieu thereof with respect to the production and proceeds of production from the Collateral, in form and substance satisfactory to Administrative Agent. Company also agrees to deliver, whenever requested by Administrative Agent in its sole and absolute discretion, favorable title opinions from legal counsel acceptable to Administrative Agent with respect to any Restricted Person’s properties and interests designated by Administrative Agent, based upon abstract or record examinations to dates acceptable to Administrative Agent and (a) stating that such Restricted Person has good and defensible title to such properties and interests, free and clear of all Liens other than Permitted Liens, (b) confirming that such properties and interests are subject to Security Documents securing the Obligations that constitute and create legal, valid and duly perfected first deed of trust or mortgage liens in such properties and interests and first priority assignments of and security interests in the oil and gas attributable to such properties and interests and the proceeds thereof, and (c) covering such other matters as Administrative Agent may request. Company shall deliver duly executed control agreements from each institution holding any Restricted Person’s Deposit Accounts pursuant to which such institution recognizes Administrative Agent’s Lien in such Deposit Accounts and, upon the occurrence and during the continuance of an Event of Default, agrees to transfer collected balances in all such Deposit Accounts to Administrative Agent pursuant to its instructions from time to time; provided that no such control agreement shall be required with respect to Deposit Accounts that are designated solely as (a) payroll funding accounts or (b) royalty or joint interest owner accounts. Each Restricted Person shall (a) cause any Security Documents required to be filed with an Indian tribe, the Bureau of Indian Affairs, or the U.S. Bureau of Land Management to be so filed, (b) shall diligently attempt to obtain all consents from such Persons that are necessary or desirable in connection with such Note Documents, and (c) shall provide monthly updates to Administrative Agent with respect to the foregoing filings and consents until they are obtained.

Section 7.18. Production Proceeds. Notwithstanding that, by the terms of the various Security Documents, Restricted Persons are and will be assigning to Administrative Agent and Holders all of the “Production Proceeds” (as defined therein) accruing to the property covered thereby, so long as no Default has occurred Restricted Persons may continue to receive from the purchasers of production all such Production Proceeds, subject, however, to the Liens created under the Security Documents, which Liens are hereby affirmed and ratified. Upon the occurrence of a Default, Administrative Agent and Holders may exercise all rights and remedies granted under the Security Documents, including the right to obtain possession of all production proceeds then held by Restricted Persons or to receive directly from the purchasers of production all other Production Proceeds. In no case shall any failure, whether purposed or inadvertent, by Administrative Agent or Holders to collect directly any such Production Proceeds constitute in any way a waiver, remission or release of any of their rights under the Security Documents, nor shall any release of any Production Proceeds by Administrative Agent or Holders to Restricted Persons constitute a waiver, remission, or release of any other Production Proceeds or of any rights of Administrative Agent or Holders to collect other Production Proceeds thereafter.

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Section 7.19. Leases and Contracts; Performance of Obligations. Each Restricted Person will maintain in full force and effect all oil, gas or mineral leases, contracts, servitudes and other agreements forming a part of any Oil and Gas Property, to the extent the same cover or otherwise relate to such Oil and Gas Property, and each Restricted Person will timely perform all of its obligations thereunder. Each Restricted Person will properly and timely pay all rents, royalties and other payments due and payable under any such leases, contracts, servitudes and other agreements, or under the Permitted Liens, or otherwise attendant to its ownership or operation of any Oil and Gas Property. Each Restricted Person will promptly notify Administrative Agent of any claim (or any conclusion by such Restricted Person) that such Restricted Person is obligated to account for any royalties, or overriding royalties or other payments out of production, on a basis (other than delivery in kind) less favorable to such Restricted Person than proceeds received by Restricted Person (calculated at the well) from sale of production.

Section 7.20. Approved Plan of Development; Project Area. Restricted Persons will (a) timely develop the Oil and Gas Properties, and make capital expenditures on the Oil and Gas Properties, in accordance with the Approved Plan of Development, and (b) except to the extent regulatory approval has not yet been obtained, have each producing and injection well which is hereafter completed put into normal operation. Company, GO, and MV Pipeline will be the only Subsidiaries of Parent that now or hereafter own any Oil and Gas Property of any kind within the Project Area, and neither GO nor MV Pipeline will hereafter acquire any Oil and Gas Property within the Project Area in addition to the pipeline Oil and Gas Properties it acquired on the Acquisition Closing Date. Parent will not acquire, and will not allow any of its Subsidiaries or Affiliates other than Company to acquire, any Oil and Gas Property in the Project Area, and if any of them now or hereafter acquires any Oil and Gas Property within the Project Area, Parent and/or the other applicable Subsidiaries of Parent will cause such Oil and Gas Property to be promptly transferred to Company as a capital contribution.

Section 7.21. Hedging Contracts. Upon Administrative Agent’s request from time to time, Company shall enter into Hedging Contracts upon terms and conditions acceptable to Administrative Agent in its sole and absolute discretion such that, when combined with Company’s then existing Hedging Contracts, the percentage (not to exceed 75%) from time to time specified by Administrative Agent of Company’s aggregate Projected PDP Oil and Gas Production through the date that is three years from the date of Administrative Agent’s request will be subject to Hedging Contracts with the purpose and effect of fixing prices on such production.

Section 7.22. Other Information and Inspections. Each Restricted Person will promptly furnish to each Holder as soon as reasonably possible any information which Administrative Agent may from time to time request concerning any provision of the Note Documents, any Collateral, or any matter in connection with the businesses, properties, prospects, financial condition and operations of any Restricted Person, including all evidence which Administrative Agent from time to time reasonably requests in writing as to the accuracy and validity of or compliance with all representations, warranties and covenants made by any Restricted Person in the Note Documents, the satisfaction of all conditions contained therein, and all other matters pertaining thereto.

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Each Restricted Person will permit representatives appointed by Administrative Agent (including independent accountants, auditors, agents, attorneys, appraisers and any other Persons) to visit and inspect during normal business hours any of such Restricted Person’s property, including its books of account, other books and records, and any facilities or other business assets, and to make extra copies therefrom and photocopies and photographs thereof, and to write down and record any information such representatives obtain, and each Restricted Person shall permit Administrative Agent or its representatives to investigate and verify the accuracy of the information furnished to Administrative Agent or any Holder in connection with the Note Documents and to discuss all such matters with its officers, employees and representatives.

Section 7.23. Post Closing Items. Company shall cause the post closing items identified below to be completed on or before the due dates reflected below:

(a) Within ten Business Days after the date hereof, Company shall establish the Collateral Account with a depositary institution satisfactory to Administrative Agent and shall delivery a duly executed control agreement from such institution in form and substance satisfactory to Administrative Agent pursuant to which such institution recognizes Administrative Agent’s Lien in such account and agrees to comply with instructions originated by Administrative Agent directing disposition of funds in such account without further consent by Company.

(b) Not later than ten Business Days after the date hereof, Restricted Persons shall send a notice, in form satisfactory to Administrative Agent, to all existing purchasers of Hydrocarbons produced from the Eligible Mortgaged Properties and/or other Persons making payments to Restricted Persons in respect of their oil and gas business, directing them to forward all amounts payable to Restricted Persons directly to the Collateral Account at the mailing address of the depositary bank for deposit into the Collateral Account (or alternatively, by wire transfer directly into the Collateral Account).

(c) Company shall use its best efforts, to obtain the following title curative documents (all in form and substance satisfactory to Administrative Agent) as promptly as possible after Closing:

(i) a release of the Lis Pendens Notice filed by Gene Stipe and Eddie Harper against the Collateral acquired by Company from Existing Borrower,

(ii) Quitclaim assignments from Gene Stipe (and related trusts) and Eddie Harper relating to their prior conveyances to Existing Borrower and Penny Petroleum, and

(iii) copies of the trust documents relating to the formation of the Gene Stipe Trust IV and any curative documents relating to assignments from the trust.

(d) Within sixty days after the date hereof, Company shall obtain an assignment from the Department of Army Corps of Engineers for its permit on the MV Pipeline system which is currently held in the name of Venture Pipeline Company, and any required consents to assignment from Ozark Gas Gathering LLC (or its successors and assigns) relating to the GO, LLC pipeline system, in each case in form and substance satisfactory to Administrative Agent.

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(e) Within ten Business Days after the date hereof, Company will deliver to each Holder true, correct and complete copies of the Initial Pro Forma Financial Statements.

ARTICLE VIII — Negative Covenants of Company

To conform with the terms and conditions under which each Holder is willing to have credit outstanding to Company, and to induce each Holder to enter into this Agreement and make the Loans, Company warrants, covenants and agrees that until the full and final payment of the Obligations and the termination of this Agreement, unless Required Holders have previously agreed otherwise:

Section 8.1. Indebtedness. No Restricted Person will in any manner owe or be liable for Indebtedness except:

(a) the Obligations.

(b) unsecured intercompany Indebtedness arising in the ordinary course of business among Company and any future Subsidiary of Company that is in compliance with Section 7.17.

(c) Indebtedness arising under Hedging Contracts permitted under Section 8.3.

Section 8.2. Limitation on Liens. Except for Permitted Liens, no Restricted Person will create, assume or permit to exist any Lien upon any of the properties or assets which it now owns or hereafter acquires.

Section 8.3. Limitation on Hedging Contracts. No Restricted Person will be a party to or in any manner be liable on any Hedging Contract, except for (a) the Hedging Contracts described in Section 7.21, and (b) other Hedging Contracts approved in writing by Administrative Agent from time to time in its sole and absolute discretion.

Section 8.4. Limitation on Mergers, Issuances of Securities. No Restricted Person shall create or own any Subsidiary other than those listed in the Disclosure Schedule or hereafter consented to by Administrative Agent in writing. No Restricted Person will merge or consolidate with or into any other Person, except for the Merger pursuant to the terms of the Merger Documents. Company will not issue any Equity other than shares of its common capital stock and any options or warrants giving the holders thereof only the right to acquire such shares. No Subsidiary of Company will issue any additional Equity except to Company and only to the extent not otherwise forbidden under the terms hereof. No Subsidiary of Company which is a partnership will allow any diminution of Company’s interest (direct or indirect) therein.

Section 8.5. Limitation on Dispositions of Property. No Restricted Person will sell, transfer, lease, exchange, alienate or dispose of any of its material assets or properties or any material interest therein, or discount, sell, pledge or assign any notes payable to it, accounts receivable or future income, except, to the extent not otherwise forbidden under the Security Documents:

(a) equipment which is worthless or obsolete or which is replaced by equipment of equal suitability and value; and

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(b) inventory (including oil and gas sold as produced and seismic data) which is sold in the ordinary course of business on ordinary trade terms.

No Restricted Person will abandon or consent to the abandonment of, any oil or gas well constituting Collateral so long as such well is capable (or is subject to being made capable through drilling, reworking or other operations which it would be commercially feasible to conduct) of producing oil, gas, or other hydrocarbons or other minerals in commercial quantities (as determined without considering the effect of any Mortgage). No Restricted Person will elect not to participate in a proposed operation on any oil and gas property constituting Collateral where the effect of such election would be the forfeiture either temporarily (e.g., until a certain sum of money is received out of the forfeited interest) or permanently of any interest in the Collateral. No Restricted Person will discount, sell, pledge or assign any notes payable to it, accounts receivable or future income except to the extent expressly permitted under the Note Documents.

Section 8.6. Limitation on Dividends and Redemptions.

(a) No Restricted Person will declare or make any Distribution, other than (i) Distributions payable to Company or to Guarantors that are Subsidiaries of ECO, to the extent not in violation of the investment restrictions of Section 8.7; (ii) Distributions by a Restricted Person payable only in such Restricted Person’s common stock or common equity, so long as Penny’s interest in any of its Subsidiaries is not thereby reduced; and (iii) Permitted ANCF Distributions described in Section 8.6(b).

(b) In the event that ECO desires to make a quarterly Permitted ANCF Distribution, Company and ECO may deliver to Administrative Agent at its addresses for notices in Section 12.3 a certificate (in form and detail satisfactory to Administrative Agent) signed by the manager, president or chief executive officer of Company and ECO, respectively, at least 10 Business Days and no more than 20 Business Days prior to a Quarterly Payment Date (an “ANCF Distribution Certificate”) describing the amount of such proposed Permitted ANCF Distribution and certifying:

(i) that no Default or Event of Default has occurred and that is continuing on the date thereof or would result from the making of such proposed Permitted ANCF Distribution,

(ii) no Coverage Deficiency has occurred and that is continuing on the date thereof or would result from the making of such proposed Permitted ANCF Distribution,

(iii) that after giving effect to such Distribution, the PDP Collateral Coverage Ratio shall be greater than 1.5 and the Collateral Coverage Ratio shall be greater than 2.0 (together with the calculations showing such ratios based on an Engineering Report prepared by the Independent Engineer which Engineering Report shall not have an effective date older than six months prior to the proposed Permitted ANCF Distribution, as adjusted and updated by Company to reflect current operations in the field and production runs in a manner satisfactory to Administrative Agent), and

(iv) the calculations supporting such proposed Permitted ANCF Distribution.

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Upon receipt of an ANCF Distribution Certificate, Administrative Agent shall review such certificate and notify Company in writing on or before the applicable Quarterly Payment Date whether it has determined that ECO is eligible to make the proposed Permitted ANCF Distribution described in the applicable ANCF Distribution Certificate. If Administrative Agent has so determined that ECO is eligible to make such proposed Permitted ANCF Distribution, then ECO may make the quarterly Permitted ANCF Distribution as provided in this Section 8.6(b) on the applicable Quarterly Payment Date (“Permitted ANCF Distributions”). Each Permitted ANCF Distribution shall be calculated with respect to the ANCF Quarter most recently ended and shall not exceed an amount equal to seventy-five percent (75%) of (x) the Dedication Rate multiplied by ANCF for such ANCF Quarter, less (y) the Minimum Scheduled Quarterly Principal Payment; provided that no Permitted ANCF Distributions may be made with respect to ANCF Quarters ending on or before August 31, 2008.

Section 8.7. Limitation on Investments and New Businesses. No Restricted Person will (a) make any expenditure or commitment or incur any obligation or enter into or engage in any transaction except in the ordinary course of business, (b) engage directly or indirectly in any business or conduct any operations except in connection with or incidental to its present businesses and operations, or (c) make any acquisitions of or capital contributions to or other Investments in any Person or property, other than Permitted Investments. No Restricted Person will open or establish any “securities account” (as defined in the UCC) without the prior written consent of Administrative Agent.

Section 8.8. Limitation on Credit Extensions. Except for Permitted Investments, no Restricted Person will extend credit, make advances or make loans other than (a) normal and prudent extensions of credit to customers buying goods and services in the ordinary course of business, which extensions shall not be for longer periods than those extended by similar businesses operated in a normal and prudent manner, and (b) loans to Company.

Section 8.9. Transactions with Affiliates. Neither ECO nor any of its Subsidiaries will engage in any material transaction with any of its Affiliates on terms which are less favorable to it than those which would have been obtainable at the time in arm’s-length dealing with Persons other than such Affiliates, provided that such restriction shall not apply to transactions among ECO and its wholly owned Subsidiaries that are Guarantors.

Section 8.10. Prohibited Contracts. Except as expressly provided for in the Note Documents, no Restricted Person will, directly or indirectly, enter into, create, or otherwise allow to exist any contract or other consensual restriction on the ability of any Subsidiary of Company to: (a) pay dividends or make other distributions to Company, (b) to redeem equity interests held in it by Company, (c) to repay loans and other indebtedness owing by it to Company, or (d) to transfer any of its assets to Company. No Restricted Person will enter into any “take-or-pay” contract or other contract or arrangement for the purchase of goods or services which obligates it to pay for such goods or service regardless of whether they are delivered or furnished to it. No Restricted Person will amend or permit any amendment to any contract or lease which releases, qualifies, limits, makes contingent or otherwise detrimentally affects the rights and benefits of Administrative Agent or any Holder under or acquired pursuant to any Security Documents. No ERISA Affiliate will incur any obligation to contribute to any “multiemployer plan” as defined in Section 4001 of ERISA. Company will not permit the Equity of MV Pipeline being pledged pursuant to the Security Documents to at any time become subject to any restriction on the transfer, pledge, or voting of such Equity.

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Section 8.11. Coverage Ratio.

(a) Collateral Coverage Ratio. The Collateral Coverage Ratio of Company shall be calculated (i) as of the date of delivery of each Engineering Report and (ii) at such other times as Administrative Agent or Required Holders shall elect in their sole and absolute discretion. Company shall not permit the Collateral Coverage Ratio for any applicable period ending on the then most recent Fiscal Quarter to be less than 1.20, which shall be calculated using the then most recently delivered Engineering Report.

(b) Coverage Deficiency. If any Coverage Deficiency exists, Company shall as soon as practicable after obtaining knowledge thereof give notice thereof to Administrative Agent and shall within thirty (30) days after obtaining knowledge thereof cure such Coverage Deficiency, either by furnishing and mortgaging additional engineered producing oil and gas wells satisfactory to Required Holders in order to increase Modified NPV10 or by making payments in order to reduce its Indebtedness.

Section 8.12. Current Ratio. At the end of each Fiscal Quarter, beginning with the Fiscal Quarter ending December 31, 2007, ECO’s Current Ratio will not be less than 1.0.

Section 8.13. Amendments to Organizational Documents; Other Material Agreements. Company will not, and will not permit any of its Subsidiaries to, enter into or permit any modification of, or waive any material right or obligation of any Person under its, as the case may be, certificate or articles of incorporation, articles of organization, bylaws, regulations, operating agreement or other organizational documents other than amendments, modifications and waivers which could not, individually or in the aggregate, have a Material Adverse Change.

Section 8.14. Acquisition Documents. Company shall not (a) cancel or terminate any Acquisition Document (or consent to or accept any cancellation or termination thereof), or (b) amend or otherwise modify any Acquisition Document or give any consent, waiver or approval thereunder, or (c) waive any breach of or default under any Acquisition Document, in each case without the prior written consent of Administrative Agent.

Section 8.15. Excess Drilling & Completion Costs. No Restricted Person will use any proceeds of the Loans to pay for Excess Drilling & Completion Costs. In furtherance thereof, Company will monitor on a daily basis the drilling and completion costs associated with the wells drilled pursuant to the APOD and will immediately notify Administrative Agent of the incurrence (or anticipated incurrence) of any Excess Drilling & Completion Costs.

Section 8.16. General and Administrative Expenses. The Restricted Persons will not permit their monthly aggregate general and administrative expenses to exceed the Permitted G&A Expense Amount. The Restricted Persons will not incur or otherwise become liable for the payment of management or consulting fees.

Section 8.17. Capital Expenditures. Except for ANCF Capital Expenditures, the Restricted Persons will not incur or otherwise become liable for any capital expenditures.

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ARTICLE IX — Events of Default and Remedies

Section 9.1. Events of Default. Each of the following events constitutes an Event of Default under this Agreement:

(a) Any Restricted Person fails to pay any principal component of any Obligation when due and payable, whether at a date for the payment of a fixed installment or as a contingent or other payment becomes due and payable or as a result of acceleration or otherwise;

(b) Any Restricted Person fails to pay any Obligation (other than the Obligations in subsection (a) above) when due and payable, whether at a date for the payment of a fixed installment or as a contingent or other payment becomes due and payable or as a result of acceleration or otherwise, within three Business Days after the same becomes due;

(c) Any Restricted Person fails to duly observe, perform or comply with any covenant, agreement or provision of Section 7.4 or Article VIII;

(d) Any Restricted Person fails (other than as referred to in subsections (a), (b), or (c) above) to duly observe, perform or comply with any covenant, agreement, condition or provision of any Note Document to which it is a party, and such failure remains unremedied for a period of thirty (30) days after notice of such failure is given by Administrative Agent to Company;

(e) Any representation or warranty previously, presently or hereafter made in writing by or on behalf of any Restricted Person in connection with any Transaction Documents shall prove to have been false or incorrect in any material respect on any date on or as of which made, or any Transaction Documents at any time ceases to be valid, binding and enforceable as warranted in Section 5.5 for any reason other than its release by or subordination by Administrative Agent;

(f) Any Restricted Person fails to duly observe, perform or comply with any agreement with any Person or any term or condition of any instrument, if such agreement or instrument is materially significant to Company or to Company and its Subsidiaries on a Consolidated basis or materially significant to any Guarantor, and such failure is not remedied within the applicable period of grace (if any) provided in such agreement or instrument;

(g) Company or any Affiliate of any such Person fails to duly observe, perform or comply with any Acquisition Document, and such failure is not remedied within the applicable period of grace (if any) provided in such agreement or instrument;

(h) Any Restricted Person (i) fails to pay any portion, when such portion is due, of any of its Indebtedness in excess of $50,000, or (ii) breaches or defaults in the performance of any agreement or instrument by which any such Indebtedness is issued, evidenced, governed, or secured, and any such failure, breach or default continues beyond any applicable period of grace provided therefor;

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(i) Either (i) any “accumulated funding deficiency” (as defined in Section 412(a) of the Internal Revenue Code) in excess of $50,000 exists with respect to any ERISA Plan, whether or not waived by the Secretary of the Treasury or his delegate, or (ii) any Termination Event occurs with respect to any ERISA Plan and the then current value of such ERISA Plan’s benefit liabilities exceeds the then current value of such ERISA Plan’s assets available for the payment of such benefit liabilities by more than $50,000 (or in the case of a Termination Event involving the withdrawal of a substantial employer, the withdrawing employer’s proportionate share of such excess exceeds such amount);

(j) The occurrence of any Change of Control;

(k) Any Restricted Person, Parent, General Partner or Northport:

(i) suffers the entry against it of a judgment, decree or order for relief by a Governmental Authority of competent jurisdiction in an involuntary proceeding commenced under any applicable bankruptcy, insolvency or other similar Law of any jurisdiction now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended, or has any such proceeding commenced against it which remains undismissed for a period of thirty days; or

(ii) commences a voluntary case under any applicable bankruptcy, insolvency or similar Law now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended; or applies for or consents to the entry of an order for relief in an involuntary case under any such Law; or makes a general assignment for the benefit of creditors; or is generally not paying (or admits in writing its inability to pay) its debts as such debts become due; or takes corporate or other action authorizing any of the foregoing; or

(iii) suffers the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of all or a substantial part of its assets or of any part of the Collateral in a proceeding brought against or initiated by it, and such appointment or taking possession is neither made ineffective nor discharged within thirty days after the making thereof, or such appointment or taking possession is at any time consented to, requested by, or acquiesced to by it; or

(iv) suffers the entry against it of a final judgment for the payment of money in excess of $50,000 (not covered by insurance satisfactory to Administrative Agent in its discretion), unless the same is discharged within thirty days after the date of entry thereof or an appeal or appropriate proceeding for review thereof is taken within such period and a stay of execution pending such appeal is obtained; or

(v) suffers a writ or warrant of attachment or any similar process to be issued by any Governmental Authority against all or any substantial part of its assets or any part of the Collateral, and such writ or warrant of attachment or any similar process is not stayed or released within thirty days after the entry or levy thereof or after any stay is vacated or set aside;

(l) The occurrence of any Material Adverse Change;

(m) The occurrence of any Coverage Default; and

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(n) The occurrence of any AMI Violation.

Upon the occurrence of an Event of Default described in subsection (k)(i), (k)(ii) or (k)(iii) of this section with respect to a Restricted Person, all of the Obligations shall thereupon be immediately due and payable, without demand, presentment, notice of demand or of dishonor and nonpayment, protest, notice of protest, notice of intention to accelerate, declaration or notice of acceleration, or any other notice or declaration of any kind, all of which are hereby expressly waived by Company and each Restricted Person who at any time ratifies or approves this Agreement. Upon any such acceleration, any obligation of any Holder to make any further Loans hereunder shall be permanently terminated. During the continuance of any other Event of Default, Administrative Agent at any time and from time to time may (and upon written instructions from Required Holders, Administrative Agent shall), without notice to Company or any other Restricted Person, do either or both of the following: (1) terminate any obligation of Holders to make Loans hereunder, and (2) declare any or all of the Obligations immediately due and payable, and all such Obligations shall thereupon be immediately due and payable, without demand, presentment, notice of demand or of dishonor and nonpayment, protest, notice of protest, notice of intention to accelerate, declaration or notice of acceleration, or any other notice or declaration of any kind, all of which are hereby expressly waived by Company and each Restricted Person who at any time ratifies or approves this Agreement.

Section 9.2. Remedies. If any Default shall occur and be continuing, Required Holders, or Administrative Agent at the direction of Required Holders, may protect and enforce its rights under the Note Documents by any appropriate proceedings, including proceedings for specific performance of any covenant or agreement contained in any Note Document. All rights, remedies and powers conferred upon Holder Parties under the Note Documents shall be deemed cumulative and not exclusive of any other rights, remedies or powers available under the Note Documents or at Law or in equity.

ARTICLE X — TRANSFERABILITY OF SECURITIES

Section 10.1. Restrictive Legend. Each note, certificate or other instrument evidencing the Notes issued by Company shall be stamped or otherwise imprinted with a legend in substantially the following forms:

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.

THE SECURITIES EVIDENCED BY THIS INSTRUMENT ARE SUBJECT TO THE TERMS OF A CERTAIN NOTE PURCHASE AGREEMENT DATED AS OF NOVEMBER 19, 2007 AMONG RIO VISTA PENNY LLC AND THE HOLDERS IDENTIFIED THEREIN, AND TCW ASSET MANAGEMENT COMPANY, AS ADMINISTRATIVE AGENT, A COPY OF WHICH IS ON FILE AT THE OFFICES OF TCW ASSET MANAGEMENT COMPANY AND WILL BE FURNISHED BY TCW ASSET MANAGEMENT COMPANY TO THE HOLDER HEREOF UPON REQUEST.”

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Notwithstanding the foregoing, the restrictive legend set forth above shall not be required after the date on which the securities evidenced by such note, certificate or other instrument bearing such restrictive legend no longer constitute Restricted Notes, and upon the request of the Holder of such Notes, Company, without expense to the Holder, shall issue a new note, certificate or other instrument as applicable not bearing the restrictive legend otherwise required to be borne thereby.

ARTICLE XI — Administrative Agent

Section 11.1. Appointment and Authority. Each Holder Party hereby irrevocably authorizes Administrative Agent, and Administrative Agent hereby undertakes, to receive payments of principal, interest and other amounts due hereunder as specified herein and to take all other actions and to exercise such powers under the Note Documents as are specifically delegated to Administrative Agent by the terms hereof or thereof, together with all other powers reasonably incidental thereto. With respect to any matters not expressly provided for in the Note Documents and any matters which the Note Documents place within the discretion of Administrative Agent, Administrative Agent shall not be required to exercise any discretion or take any action, and it may request instructions from Holders with respect to any such matter, in which case it shall be required to act or to refrain from acting (and shall be fully protected and free from liability to all Holder Parties in so acting or refraining from acting) upon the instructions of Required Holders (including itself), provided, however, that Administrative Agent shall not be required to take any action which exposes it to a risk of personal liability that it considers unreasonable or which is contrary to the Note Documents or to applicable Law. Such appointment of TAMCO as Administrative Agent shall not, however, impair or modify any rights, obligations or duties which TAMCO or any Affiliate of TAMCO otherwise has with respect to any Holder. In its administration of this Agreement and the other Note Documents, except to the extent to which another standard applies to TAMCO by reason of any other document between TAMCO and another Holder, Administrative Agent will exercise the same care that it exercises in the administration or handling of transactions for its own account, subject, however, to Section 11.12 below. The duties undertaken by TAMCO, as Administrative Agent, have been undertaken as an accommodation to Holders and, accordingly, TAMCO shall not be compensated for its services hereunder except as provided in the TCW Governing Documents.

Section 11.2. Exculpation, Administrative Agent’s Reliance, Etc. Neither Administrative Agent nor any of its directors, officers, agents, attorneys, or employees shall be liable for any action taken or omitted to be taken by any of them under or in connection with the Note Documents, including their negligence of any kind, except that each shall be liable for its own gross negligence or willful misconduct. Without limiting the generality of the foregoing, Administrative Agent (a) may treat the Person whose name is set forth on the Register as the holder of any Obligation as the holder thereof until Administrative Agent receives written notice of the assignment or transfer thereof in accordance with this Agreement, signed by such Person and in form satisfactory to Administrative Agent; (b) may consult with legal counsel (including counsel for Company), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts;

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(c) makes no warranty or representation to any other Holder and shall not be responsible to any other Holder Party for any statements, warranties or representations made in or in connection with the Note Documents; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of the Note Documents on the part of any Restricted Person or to inspect the property (including the books and records) of any Restricted Person; (e) shall not be responsible to any other Holder for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of any Note Document or any instrument or document furnished in connection therewith; (f) may rely upon the representations and warranties of each Restricted Person or Holder Party in exercising its powers hereunder; and (g) shall incur no liability under or in respect of the Note Documents by acting upon any notice, consent, certificate or other instrument or writing (including any facsimile, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper Person or Persons.

Section 11.3. Credit Decisions. Each Holder Party acknowledges that it has, independently and without reliance upon any other Holder Party, made its own analysis of Restricted Persons and the transactions contemplated hereby and its own independent decision to enter into this Agreement and the other Note Documents. Each Holder Party also acknowledges that it will, independently and without reliance upon any other Holder Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Note Documents.

Section 11.4. Indemnification. Each Holder agrees to indemnify Administrative Agent (to the extent not reimbursed by Company within ten (10) days after demand) from and against such Holder’s Percentage Share of any and all liabilities, obligations, claims, losses, damages, penalties, fines, actions, judgments, suits, settlements, costs, expenses or disbursements (including reasonable fees of attorneys, accountants, experts and advisors) of any kind or nature whatsoever (in this section collectively called “liabilities and costs”) which to any extent (in whole or in part) may be imposed on, incurred by, or asserted against Administrative Agent growing out of, resulting from or in any other way associated with any of the Collateral, the Note Documents and the transactions and events (including the enforcement thereof) at any time associated therewith or contemplated therein (whether arising in contract or in tort or otherwise and including any violation or noncompliance with any Environmental Laws by any Person or any liabilities or duties of any Person with respect to Hazardous Materials found in or released into the environment).

The foregoing indemnification shall apply whether or not such liabilities and costs are in any way or to any extent owed, in whole or in part, under any claim or theory of strict liability, or are caused, in whole or in part, by any negligent act or omission of any kind by Administrative Agent,

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provided only that no Holder shall be obligated under this section to indemnify Administrative Agent for that portion, if any, of any liabilities and costs which is proximately caused by Administrative Agent’s own individual gross negligence or willful misconduct, as determined in a final judgment. Cumulative of the foregoing, each Holder agrees to reimburse Administrative Agent promptly upon demand for such Holder’s Percentage Share of any costs and expenses to be paid to Administrative Agent by Company under Section 12.4(a) to the extent that Administrative Agent is not timely reimbursed for such expenses by Company as provided in such section. As used in this section the term “Administrative Agent” shall refer not only to the Person designated as such in Section 1.1 but also to each director, officer, agent, attorney, employee, representative and Affiliate of such Person.

Section 11.5. Rights as Holder. In its capacity as a Holder, Administrative Agent shall have the same rights and obligations as any Holder and may exercise such rights as though it were not Administrative Agent. Administrative Agent may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with any Restricted Person or their Affiliates, all as if it were not Administrative Agent hereunder and without any duty to account therefor to any other Holder.

Section 11.6. Sharing of Set-Offs and Other Payments. Each Holder Party agrees that if it shall, whether through the exercise of rights under Security Documents or rights of banker’s lien, set off, or counterclaim against Company or otherwise, obtain payment of a portion of the aggregate Obligations owed to it which, taking into account all distributions made by Administrative Agent under Section 3.1, causes such Holder Party to have received more than it would have received had such payment been received by Administrative Agent and distributed pursuant to Section 3.1, then (a) it shall be deemed to have simultaneously purchased and shall be obligated to purchase interests in the Obligations as necessary to cause all Holder Parties to share all payments as provided for in Section 3.1, and (b) such other adjustments shall be made from time to time as shall be equitable to ensure that Administrative Agent and all Holder Parties share all payments of Obligations as provided in Section 3.1; provided, however, that nothing herein contained shall in any way affect the right of any Holder Party to obtain payment (whether by exercise of rights of banker’s lien, set-off or counterclaim or otherwise) of indebtedness other than the Obligations. Company expressly consents to the foregoing arrangements and agrees that any holder of any such interest or other participation in the Obligations, whether or not acquired pursuant to the foregoing arrangements, may to the fullest extent permitted by Law exercise any and all rights of banker’s lien, set-off, or counterclaim as fully as if such holder were a holder of the Obligations in the amount of such interest or other participation. If all or any part of any funds transferred pursuant to this section is thereafter recovered from the seller under this section which received the same, the purchase provided for in this section shall be deemed to have been rescinded to the extent of such recovery, together with interest, if any, if interest is required pursuant to the order of a Governmental Authority order to be paid on account of the possession of such funds prior to such recovery.

Section 11.7. Investments. Whenever Administrative Agent in good faith determines that it is uncertain about how to distribute to Holder Parties any funds which it has received, or whenever Administrative Agent in good faith determines that there is any dispute among Holder Parties about how such funds should be distributed, Administrative Agent may choose to defer distribution of the funds which are the subject of such uncertainty or dispute. If Administrative Agent in good faith believes that the uncertainty or dispute will not be promptly resolved, or if Administrative Agent is otherwise required to invest funds pending distribution to Holder Parties, Administrative Agent shall invest such funds pending distribution; all interest on any such Investment shall be distributed upon the distribution of such Investment and in the same proportion and to the same Persons as such Investment. All moneys received by Administrative Agent for distribution to Holder Parties (other than to the Person who is Administrative Agent in its separate capacity as a Holder Party) shall be held by Administrative Agent pending such distribution solely as Administrative Agent for such Holder Parties, and Administrative Agent shall have no equitable title to any portion thereof.

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Section 11.8. Benefit of Article XI. The provisions of this Article (other than the following Section 11.9) are intended solely for the benefit of Holder Parties, and no Restricted Person shall be entitled to rely on any such provision or assert any such provision in a claim or defense against any Holder. Holder Parties may waive or amend such provisions as they desire without any notice to or consent of Company or any Restricted Person.

Section 11.9. Resignation. Administrative Agent may resign at any time by giving written notice thereof to Holders and Company. Each such notice shall set forth the date of such resignation. Upon any such resignation, Required Holders shall have the right to appoint (with, unless an Event of Default shall have occurred and be continuing, the consent of Company, such consent not to be unreasonably withheld or delayed) a successor Administrative Agent. A successor must be appointed for any retiring Administrative Agent, and such Administrative Agent’s resignation shall become effective only when such successor accepts such appointment. If, within thirty days after the date of the retiring Administrative Agent’s resignation, no successor Administrative Agent has been appointed and has accepted such appointment, then the retiring Administrative Agent may appoint (with, unless an Event of Default shall have occurred and be continuing, the consent of Company, such consent not to be unreasonably withheld or delayed) a successor Administrative Agent. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Note Documents, subject, however, in the case of TAMCO, to its rights and duties under any other agreements with any Holder. After any retiring Administrative Agent’s resignation hereunder the provisions of this Article IX shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under the Note Documents.

Section 11.10. Notice of Default. Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to Administrative Agent for the account of Holders, unless Administrative Agent shall have received written notice from a Holder or Company referring to this Agreement, describing such Default and stating that such notice is a “notice of default.” Administrative Agent will notify Holders of its receipt of any such notice. Administrative Agent shall take such action with respect to such Default as may be directed by Required Holders in accordance with Article IX; provided, however, that unless and until Administrative Agent has received any such direction, Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable or in the best interest of Holders.

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Section 11.11. Limitation of Duties and Fiduciary Relationship. Administrative Agent shall not have any duties or responsibilities, except those expressly set forth in:

(a) this Agreement;

(b) the Security Documents; and

(c) the other documents entered into between TCW and TAMCO described in the definition of “Holders” (such other documents, collectively the “TCW Governing Documents”),

nor shall Administrative Agent have any additional fiduciary relationship with any Holder arising under this Article XI and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or the other Note Documents against Administrative Agent.

Section 11.12. Limitation of Liability. Administrative Agent and its respective officers, directors, employees, agents, attorneys-in-fact and affiliates shall not: (a) be liable for any action taken or omitted to be taken by any of such Persons or for any error in judgment under or in connection with this Agreement, the Notes and the Security Documents, except for any such Person’s gross negligence or willful misconduct; or (b) be responsible in any manner to any Holder or any other Person for any failure of any other party to perform its obligations under this Agreement, the Notes and the Security Documents. Nothing in this Article XI, however, shall be deemed to limit or restrict any liability, fiduciary duty or responsibility of TAMCO in any capacity other than as Administrative Agent, including any liability, fiduciary duty or responsibility under the TCW Governing Documents.

Section 11.13. Reliance upon Documentation. Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or any telephone conversation believed by Administrative Agent to be genuine and correct and to have been signed, sent, made or spoken by the proper person or persons, and upon the advice and statements of legal counsel, independent accountants and other experts selected by Administrative Agent.

Section 11.14. Reliance by Company. Each of the Holders agrees that, prior to the delivery to Company of a notice of the removal or termination of TAMCO as Administrative Agent as set forth above, Company shall be entitled to rely on TAMCO’s or any subsequent Administrative Agent’s authority to act on behalf of each of the Holders in all dealings with TAMCO (or any such subsequent Administrative Agent) with respect to the Notes and the Note Documents; Company shall be protected in relying on actions, communications, notices and terminations relating thereto or required or permitted thereunder by Administrative Agent; and Company shall discharge its obligations under this Agreement and the Note Documents by delivering payments, notices and other information to Administrative Agent. In the event of the removal of Administrative Agent and the appointment of a successor Administrative Agent by Holders, Company shall not be required to recognize any such removal or appointment unless and until Company shall have received a writing setting forth such removal and appointment executed by the Required Holders, and Company shall be entitled to rely on such writing as being genuine and what it purports to be without any necessity of any investigation whatsoever. Company shall be entitled to rely upon the actions, communications and notices of TAMCO with respect to the Collateral until Company receives notice in writing from either TAMCO or Required Holders that TAMCO has resigned or been replaced as Administrative Agent.

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ARTICLE XII — Miscellaneous

Section 12.1. Waivers and Amendments; Acknowledgments.

(a) Waivers and Amendments. No failure or delay (whether by course of conduct or otherwise) by any Holder in exercising any right, power or remedy which such Holder Party may have under any of the Note Documents shall operate as a waiver thereof or of any other right, power or remedy, nor shall any single or partial exercise by any Holder Party of any such right, power or remedy preclude any other or further exercise thereof or of any other right, power or remedy. No waiver of any provision of any Note Document and no consent to any departure therefrom shall ever be effective unless it is in writing and signed as provided below in this section, and then such waiver or consent shall be effective only in the specific instances and for the purposes for which given and to the extent specified in such writing. No notice to or demand on any Restricted Person shall in any case of itself entitle any Restricted Person to any other or further notice or demand in similar or other circumstances. This Agreement and the other Note Documents set forth the entire understanding between the parties hereto with respect to the transactions contemplated herein and therein and supersede all prior discussions and understandings with respect to the subject matter hereof and thereof, and no waiver, consent, release, modification or amendment of or supplement to this Agreement or the other Note Documents (other than the Warrants, which are governed by the provisions thereof) shall be valid or effective against any party hereto unless the same is in writing and signed by (i) if such party is Company, by Company, (ii) if such party is Administrative Agent, by Administrative Agent, and (iii) if such party is a Holder, by such Holder or by Administrative Agent on behalf of Holders with the written consent of Required Holders (which consent has already been given as to the termination of the Note Documents as provided in Section 12.9). Notwithstanding the foregoing or anything to the contrary herein, Administrative Agent shall not, without the prior consent of each individual Holder, execute and deliver on behalf of such Holder any waiver or amendment which would: (1) waive any of the conditions specified in Article IV (provided that Administrative Agent may in its discretion withdraw any request it has made under Section 4.2(h)), (2) increase the maximum amount which such Holder is committed hereunder to lend, (3) reduce any fees payable to such Holder hereunder, or the principal of, or interest on, such Holder’s Note, (4) extend the Maturity Date, or postpone any date fixed for any payment of any such fees, principal or interest, (5) amend the definition herein of “Required Holders” or otherwise change the aggregate amount of Percentage Shares which is required for Administrative Agent, Holders or any of them to take any particular action under the Note Documents, (6) release Company from its obligation to pay such Holder’s Obligations or any Guarantor from its guaranty of such payment, (7) release all or substantially all of the Collateral, except for such releases relating to sales or dispositions of property permitted by the Note Documents, or (8) amend this Section 12.1(a).

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(b) Acknowledgements and Admissions. Company hereby represents, warrants, acknowledges and admits that:

(i) Company has been advised by counsel in the negotiation, execution and delivery of the Note Documents to which it is a party,

(ii) Company has made an independent decision to enter into this Agreement and the other Note Documents to which it is a party, without reliance on any representation, warranty, covenant or undertaking by Administrative Agent or any Holder, whether written, oral or implicit, other than as expressly set out in this Agreement or in another Note Document delivered on or after the date hereof,

(iii) there are no representations, warranties, covenants, undertakings or agreements by any Holder as to the Note Documents except as expressly set out in this Agreement or in another Note Document delivered on or after the date hereof,

(iv) no Holder has any fiduciary obligation toward Company with respect to any Note Document or the transactions contemplated thereby,

(v) the relationship pursuant to the Note Documents between Company and the other Restricted Persons, on one hand, and each Holder, on the other hand, is and shall be solely that of debtor and creditor, respectively, provided that, solely for purposes of Section 12.6(a) Administrative Agent shall act as Administrative Agent of Company in maintaining the Register as set forth therein,

(vi) no partnership or joint venture exists with respect to the Note Documents between any Restricted Person and any Holder,

(vii) Administrative Agent is not Company’s Administrative Agent, but Administrative Agent for Holders, provided that, solely for purposes of Section 12.6(a) Administrative Agent shall act as Administrative Agent of Company in maintaining the Register as set forth therein,

(viii) should an Event of Default or Default occur or exist, each Holder will determine in its sole and absolute discretion and for its own reasons what remedies and actions it will or will not exercise or take at that time,

(ix) without limiting any of the foregoing, Company is not relying upon any representation or covenant by any Holder, or any representative thereof, and no such representation or covenant has been made, that any Holder will, at the time of an Event of Default or Default, or at any other time, waive, negotiate, discuss, or take or refrain from taking any action permitted under the Note Documents with respect to any such Event of Default or Default or any other provision of the Note Documents, and

(x) all Holder Parties have relied upon the truthfulness of the acknowledgments in this section in deciding to execute and deliver this Agreement and to become obligated hereunder.

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(c) Retirement of Notes. Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, offer to purchase or otherwise acquire any outstanding Notes, except for an offer to purchase the Notes that (i) is made in writing and is pro rata to all of the Holders on identical terms and (ii) remains open for a period of at least 15 Business Days. In addition, if Holders holding more than 10% of the outstanding principal amount of all of the Notes accepts any such offer within such 15 Business Day period, then Company shall be required to notify the other Holders of such acceptance(s), and shall be required to remake such offer and leave it open for an additional 10 Business Days. All acquisitions of Notes pursuant to the foregoing offers shall be closed concurrently on a pro rata basis with all Holders who accept such offers.

(d) Amendment Consideration. None of Company or any of its Affiliates or any other party to any Note Documents will, directly or indirectly, request or negotiate for, or offer or pay any remuneration or grant any security as an inducement for, any proposed amendment or waiver of any of the provisions of this Agreement or any of the other Note Documents unless each Holder of the Notes (irrespective of the kind and amount of Notes then owned by it) shall be informed thereof by Company and, if such Holder is entitled to the benefit of any such provision proposed to be amended or waived, shall be afforded the opportunity of considering the same, shall be supplied by Company and any other party hereto with sufficient information to enable it to make an informed decision with respect thereto and shall be offered and paid such remuneration and granted such security on the same terms.

(e) Notes Disregarded. In determining whether the requisite Holders of Notes have given any authorization, consent or waiver under any Closing Document, any Notes owned by Issuer or any of its Affiliates shall be disregarded and deemed not to be outstanding.

(f) Joint Acknowledgment. This written Agreement and the other Note Documents represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties.

There are no unwritten oral agreements between the parties.

Section 12.2. Survival of Agreements; Cumulative Nature. All of Restricted Persons’ various representations, warranties, covenants and agreements in the Note Documents shall survive the execution and delivery of this Agreement and the other Note Documents and the performance hereof and thereof, including the making or granting of the Loans and the delivery of the Notes and the other Note Documents, and shall further survive until all of the Obligations are paid in full to each Holder Party and all of Holder Parties’ obligations to Company are terminated. All statements and agreements contained in any certificate or other instrument delivered by any Restricted Person to any Holder Party under any Note Document shall be deemed representations and warranties by Company or agreements and covenants of Company under this Agreement. The representations, warranties, indemnities, and covenants made by Restricted Persons in the Note Documents, and the rights, powers, and privileges granted to Holder Parties in the Note Documents, are cumulative, and, except for expressly specified waivers and consents, no Note Document shall be construed in the context of another to diminish, nullify, or otherwise reduce the benefit to any Holder Party of any such representation, warranty, indemnity, covenant, right, power or privilege. In particular and without limitation, no exception set out in this Agreement to any representation, warranty, indemnity, or covenant herein contained shall apply to any similar representation, warranty, indemnity, or covenant contained in any other Note Document, and each such similar representation, warranty, indemnity, or covenant shall be subject only to those exceptions which are expressly made applicable to it by the terms of the various Note Documents.

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Section 12.3. Notices. All notices, requests, consents, demands and other communications required or permitted under any Note Document shall be in writing, unless otherwise specifically provided in such Note Document (provided that Administrative Agent may give telephonic notices to the other Holder Parties), and shall be deemed sufficiently given or furnished if delivered by personal delivery, by facsimile, by delivery service with proof of delivery, or by registered or certified United States mail, postage prepaid, to Company and Restricted Persons at the address of Company specified below and to each Holder Party, c/o TAMCO, at the address specified below (unless changed by similar notice in writing given by the particular Person whose address is to be changed). Any such notice or communication shall be deemed to have been given (a) in the case of personal delivery or delivery service, as of the date of first attempted delivery during normal business hours at the address provided herein, (b) in the case of facsimile, upon receipt, or (c) in the case of registered or certified United States mail, three days after deposit in the mail; provided, however, that no Borrowing Notice shall become effective until actually received by Administrative Agent. Electronic mail and internet and intranet websites may be used only to distribute routine communications, such as financial statements and other information as provided in Section 7.2, and to distribute Note Documents for execution by the parties thereto, and may not be used for any other purpose.

If to Company:	Rio Vista Penny LLC
	2601 Northwest Expressway #902E
	Oklahoma City, Oklahoma 93112
	Attention: Ian Bothwell Telephone: (310) 563-1828
	Facsimile: (310) 563-6255
With copy to:	Kevin W. Finck
	100 Spear Street, Suite 700
	San Francisco, California 94111
	Telephone: (415) 296-9100
	Facsimile: (415) 394-6446
If to Holders:	TCW Asset Management Company
	333 Clay Street, Suite 4150
	Houston, TX 77002 Attention: Patrick Hickey
	Telephone: (713) 615-7413
	Facsimile: (713) 615-7460

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With copies to:	TCW Asset Management Company
	865 South Figueroa Street, Suite 1800
	Los Angeles, CA 90017 Attention: R. Blair Thomas
	Telephone: (213) 244-0044
	Facsimile: (213) 244-0604
	and
	Thompson & Knight LLP 1700 Pacific Avenue
	Suite 3300
	Dallas, Texas 75201
	Attention: Shad E. Sumrow
	Telephone: (214) 969-1552
	Facsimile: (214) 880-3150

Section 12.4. Payment of Expenses: Indemnity.

(a) Payment of Expenses. Whether or not the transactions contemplated by this Agreement are consummated, Company will promptly (and in any event, within 30 days after any invoice or other statement or notice) pay: (i) all transfer, stamp, mortgage, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement or any of the other Note Documents or any other document or transaction referred to herein or therein, (ii) all reasonable costs and expenses incurred by or on behalf of Administrative Agent, Royalty Owner, and Warrant Owner (including attorneys’ fees, consultants’ fees and engineering fees, travel costs and miscellaneous expenses) in connection with (1) the negotiation, preparation, execution and delivery of the Note Documents, and any and all consents, waivers or other documents or instruments relating thereto, (2) the filing, recording, refiling and re-recording of any Note Documents and any other documents or instruments or further assurances required to be filed or recorded or refiled or re-recorded by the terms of any Note Document, (3) the borrowings hereunder and other action reasonably required in the course of administration hereof, or (4) monitoring or confirming (or preparation or negotiation of any document related to) any Restricted Person’s compliance with any covenants or conditions contained in this Agreement or in any Note Document, and (iii) all reasonable costs and expenses incurred by or on behalf of any Holder Party, Royalty Owner, or Warrant Owner (including without limitation attorneys’ fees, consultants’ fees and accounting fees) in connection with the preservation of any rights under the Note Documents or the defense or enforcement of any of the Note Documents (including this section), any attempt to cure any breach thereunder by any Restricted Person, or the defense of any Holder Party’s, Royalty Owner’s, or Warrant Owner’s exercise of its rights thereunder. In addition to the foregoing, until all Obligations have been paid in full, Company will also pay or reimburse Administrative Agent for all reasonable out-of-pocket costs and expenses of Administrative Agent or its agents or employees in connection with the continuing administration of the Loans and the related due diligence of Administrative Agent, including travel and miscellaneous expenses and fees and expenses of Administrative Agent’s outside counsel, reserve engineers and consultants engaged in connection with the Note Documents.

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(b) Indemnity. Company agrees to indemnify Royalty Owner, Warrant Owner, and each Holder Party (each, an “Indemnitee”), upon demand, from and against any and all liabilities, obligations, broker’s fees, claims, losses, damages, penalties, fines, actions, judgments, suits, settlements, costs, expenses or disbursements (including reasonable fees of attorneys, accountants, experts and advisors) of any kind or nature whatsoever (in this section collectively called “liabilities and costs”) which to any extent (in whole or in part) may be imposed on, incurred by, or asserted against such Indemnitee growing out of, resulting from or in any other way associated with any of the ORRI, the Collateral, the Note Documents and the transactions and events (including the enforcement or defense thereof) at any time associated therewith or contemplated therein (whether arising in contract or in tort or otherwise). Among other things, the foregoing indemnification covers all liabilities and costs incurred by any Indemnitee related to any breach of a Note Document by a Restricted Person, any bodily injury to any Person or damage to any Person’s property, or any violation or noncompliance with any Environmental Laws by any Indemnitee or any other Person or any liabilities or duties of any Indemnitee or any other Person with respect to Hazardous Materials found in or released into the environment.

THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY OR CAUSED, IN WHOLE OR IN PART BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY INDEMNITEE (IN EACH CASE WHETHER ALLEGED, ARISING OR IMPOSED IN A LEGAL PROCEEDING BROUGHT BY OR AGAINST ANY RESTRICTED PERSON, ANY INDEMNITEE, OR ANY OTHER PERSON),

provided only that no Indemnitee shall be entitled under this section to receive indemnification for that portion, if any, of any liabilities and costs which is proximately caused by its own individual gross negligence or willful misconduct, as determined in a final judgment. If any Person (including Company or any of its Affiliates) ever alleges such gross negligence or willful misconduct by any Indemnitee, the indemnification provided for in this section shall nonetheless be paid upon demand, subject to later adjustment or reimbursement, until such time as a court of competent jurisdiction enters a final judgment as to the extent and effect of the alleged gross negligence or willful misconduct. As used in this section the term “Indemnitee” shall refer not only to Royalty Owner, Warrant Owner and each Holder Party designated as such in Section 1.1 but also to each director, officer, agent, trustee, attorney, employee, representative and Affiliate of or for such Person.

Section 12.5. Joint and Several Liability. All Obligations which are incurred by two or more Restricted Persons shall be their joint and several obligations and liabilities. All grants, covenants and agreements contained in the Note Documents shall bind and inure to the benefit of the parties thereto and their respective successors and assigns; provided, however, that no Restricted Person may assign or transfer any of its rights or delegate any of its duties or obligations under any Note Document without the prior consent of Required Holders. Neither Company nor any Affiliates of Company shall directly or indirectly purchase or otherwise retire any Obligations owed to any Holder nor will any Holder accept any offer to do so, unless each Holder shall have received substantially the same offer with respect to the same Percentage Share of the Obligations owed to it. If Company or any Affiliate of Company at any time purchases some but less than all of the Obligations owed to all Holder Parties, such Holder shall not be entitled to any rights of any Holder under the Note Documents unless and until Company or its Affiliates have purchased all of the Obligations.

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Section 12.6. Registration, Transfer, Exchange, Substitution of Notes.

(a) Registration of Notes. Administrative Agent shall keep at its principal office a register for the registration and registration of transfers of the Notes (the “Register”). The name and address of each Holder, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such Register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and Holder thereof for all purposes hereof, and Company shall not be affected by any notice or knowledge to the contrary. Administrative Agent shall give to any Holder, promptly upon request therefor, a complete and correct copy of the names and addresses of all registered Holders of Notes.

(b) Transfer and Exchange of Notes. Upon surrender of any Note at the principal office of Administrative Agent for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered Holder or its attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), and an assignment agreement in form and substance acceptable to Administrative Agent whereby the assignee Holder agrees to be bound by the terms hereof that are applicable to Holders, Company shall execute and deliver, at Company’s expense, one or more new Notes (as requested by the Holder thereof) of the same series in exchange therefore and, in the case of any Note, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note; provided, however, that no transfer of any Note may be made (i) to a transferee who is not an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act or a Qualified Institutional Buyer (as defined in Rule 144A promulgated under the Securities Act) and (ii) unless such transfer is made pursuant to an exemption from registration under the securities laws of the United States including, without limitation, any resale of any Note under Rule 144A of the Securities Act. Any purported transfer of a Note or an interest therein which is prohibited hereby shall be null and void ab initio and of no force or effect whatever. In the case of a transfer of Notes, each such new Note and shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit A. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. Notes shall not be transferred in denominations of less than $1,000,000, provided, that if necessary to enable the registration of transfer by a Holder of its entire holding of Notes, one Note may be in a denomination of less than $1,000,000; provided, further, that transfers by a Holder and its Affiliates shall be aggregated for purposes of determining whether or not such $ 1,000,000 threshold has been reached. If any Holder shall request that the restrictive legend on a Note be removed, such Holder, if requested by Company, will have the obligation in connection with such request, as applicable, at such Holder’s expense, of delivering an opinion of counsel in form and substance reasonably satisfactory to Company, in connection with such request to the effect that the removal of such restrictive legend would not be in violation of the Securities Act or any applicable state securities laws.

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(c) Replacement of Notes. Upon receipt by Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note, and (i) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the Holder of such Note is, or is a nominee for, another Holder with a minimum net worth of at least $5,000,000, such Person’s own unsecured agreement of indemnity shall be deemed to be satisfactory), or (ii) in the case of mutilation, upon surrender and cancellation thereof, Company at its own expense shall execute and deliver, in lieu thereof, a new Note of the same series, dated and, in the case of a Note, bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon.

Section 12.7. Confidentiality.

(a) Notwithstanding the termination of this Agreement and except as otherwise provided herein or in this subsection (a) or subsection (c) below, Company shall, and shall cause its Subsidiaries and Affiliates to, maintain the confidentiality of the identities of (i) any Holder (or any holder of any Obligation other than the Notes); and (ii) any owner of a beneficial interest in the Notes (collectively, “Holder Confidential Information”) and shall not, without the prior written consent of the Required Holders, as applicable, disclose any such information to another Person or use such information for purposes other than those contemplated herein.

(b) Notwithstanding the termination of this Agreement and except as otherwise provided herein or in this subsection (b) or subsection (c) below, each Holder Party shall maintain the confidentiality of any information delivered to a Holder Party by or on behalf of Company or any other Restricted Person in connection with the transactions contemplated by or otherwise pursuant to the Note Documents that is (a) proprietary or confidential in nature and (b) is clearly marked “Confidential — Subject to Confidentiality and Disclosure Restrictions” (collectively, the “Company Confidential Information”) and shall not, without the prior written consent of Company, disclose any such information to another Person or use such information for purposes other than those contemplated herein.

(c) Subject to Section 12.7(d), each Restricted Person may disclose Holder Confidential Information to its directors, officers, members, partners, employees, and agents (including attorneys, accountants, and consultants) to whom such disclosure is reasonably necessary for the execution or effectuation hereof, provided such Restricted Person notifies all such Persons that the Holder Confidential Information disclosed to them is subject to this Agreement and requires them not to disclose or use such information in breach of this Agreement. Subject to Section 12.7(d), each Holder Party may disclose Company Confidential Information to its respective directors, officers, members, partners, separate account participants, employees, and agents (including attorneys, accountants, and consultants) to whom such disclosure is reasonably necessary for the execution or effectuation hereof, provided such Persons are obligated to hold such Company Confidential Information in confidence as contemplated in this Agreement. Each Restricted Person may also disclose Holder Confidential Information in filings with the Securities and Exchange Commission to the extent required to be disclosed therein or to any Person that purchases any security of Company or Parent, provided that the sale of such security must be permitted hereunder and that such Person has agreed in writing prior to its receipt of such Holder Confidential Information to be bound by the provisions of this Section 12.7.

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Subject to Section 12.7(d), each Holder Party may also disclose Company Confidential Information to (i) any other Holder Party or holder of any participation in Notes, (ii) any Person to which it sells or offers to sell such Notes or any part thereof or any participation therein (if such Person has agreed prior to its receipt of such Company Confidential Information to be bound by the provisions of this Section 12.7), (iii) any federal or state regulatory authority having jurisdiction over it, (iv) the National Association of Insurance Commissioners, the National Association of Securities Dealers or any similar organization, or any nationally recognized rating agency that requires access to information about its investment portfolio, (v) to effect compliance with any Law applicable to it, (vi) in response to any subpoena or other legal process, (vii) in connection with any litigation to which it is a party or (viii) if an Event of Default has occurred and is continuing, to the extent it may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under the Note Documents.

(d) If a Restricted Person or a Holder Party is requested or required by legal process (including law or regulation, oral questions, interrogatories, request for information or documents, subpoena, and civil investigative demand) to disclose any Holder Confidential Information or Company Confidential Information, then, to the extent legally permitted to do so, such Restricted Person or such Holder Party (as applicable) shall promptly notify Company and Administrative Agent, as applicable, of such request prior to complying with such process so that the Restricted Persons and the Holder Parties (as applicable) may seek an appropriate protective order or waive the respondent’s compliance with this Section. If, after a Restricted Person gives such notice to Administrative Agent or a Holder Party gives such notice to Company and after providing the Restricted Persons and the Holder Parties a reasonable opportunity to obtain a protective order or to grant such waiver (so long as the granting of such time does not put such Restricted Person or Holder Party in breach of its obligations to disclose), a Restricted Person or a Holder Party is nonetheless legally compelled to disclose such information, such Restricted Person or Holder Party may do so without violating this section.

(e) Any Holder Confidential Information or Company Confidential Information that becomes publicly available through no breach by the relevant party hereunder or a breach by a third party of a confidential obligation to the relevant party hereunder shall no longer be deemed to be Holder Confidential Information or Company Confidential Information.

Section 12.8. Governing Law; Submission to Process.

(a) Except to the extent that the Law of another jurisdiction is expressly elected in a Note Document, this Agreement and the other Note Documents shall be governed by and construed in accordance with the Laws of the State of New York.

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(b) Company hereby irrevocably (i) submits itself to the non-exclusive jurisdiction of the state and federal courts sitting in the State and County of New York, (ii) agrees and consents that service of process may be made upon it and any of its Subsidiaries in any legal proceeding relating to the Note Documents or the Obligations by any means allowed under New York or federal law, and (iii) waives any objection that it may now or hereafter have to the venue of any such proceeding being in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.

(c) Company hereby makes the foregoing submissions, agreements, consents and waivers on behalf of and with respect to each of its Subsidiaries, and each Guarantor (by its execution of a guaranty of this Agreement) hereby also makes such submissions, agreements, consents and waivers for itself.

Section 12.9. Limitation on Interest. Holder Parties, Restricted Persons and the other parties to the Note Documents intend to contract in strict compliance with applicable usury Law from time to time in effect. In furtherance thereof such persons stipulate and agree that none of the terms and provisions contained in the Note Documents shall ever be construed to provide for interest in excess of the maximum amount of interest permitted to be contracted for, charged, or received by applicable Law from time to time in effect. Neither any Restricted Person nor any present or future guarantors, endorsers, or other Persons hereafter becoming liable for payment of any Obligation shall ever be liable for unearned interest thereon or shall ever be required to pay interest thereon in excess of the maximum amount that may be lawfully contracted for, charged, or received under applicable Law from time to time in effect, and the provisions of this section shall control over all other provisions of the Note Documents which may be in conflict or apparent conflict herewith.

Section 12.10. Termination; Limited Survival. In its discretion Company may at any time that no Obligations are owing (other than indemnity obligations and similar obligations that survive the termination of this Agreement for which no notice of a claim has been received by Company and other than Obligations under the Warrants that arise after the Notes have been paid in full) elect in a written notice delivered to Administrative Agent to terminate this Agreement. Upon receipt by Administrative Agent of such a notice, if no such Obligations are then owing this Agreement and all other Note Documents (other than the Warrant) shall thereupon be terminated and the parties thereto released from all prospective obligations thereunder, provided that, notwithstanding the foregoing or anything in any Note Agreement to the contrary, all of the following shall survive any termination of this Agreement or any other Note Document: (a) any waivers or admissions made by any Restricted Person in any Note Document, (b) any obligations that any Person may have to indemnify or compensate any Holder Party, and (c) the provisions of Sections 2.10 and this Section 12.10. At the request and expense of Company, Administrative Agent shall prepare and execute all necessary instruments to reflect and effect such termination of the Note Documents. Administrative Agent is hereby authorized to execute all such instruments on behalf of all Holders, without the joinder of or further action by any Holder. In particular, and without limitation of any other provision of a Note Document, the obligations of the Restricted Persons under the Warrant and under Sections 2.10, 3.4, 3.5, 12.4, 12.8, 12.9 and 12.15 of this Agreement shall survive the termination of this Agreement and the release of the Collateral.

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Section 12.11. Severability. If any term or provision of any Note Document shall be determined to be illegal or unenforceable all other terms and provisions of the Note Documents shall nevertheless remain effective and shall be enforced to the fullest extent permitted by applicable Law.

Section 12.12. Counterparts; Fax. This Agreement may be separately executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Agreement. This Agreement and the Note Documents may be validly executed and delivered by facsimile or other electronic transmission.

Section 12.13. Third Party Beneficiaries. The Restricted Persons agree that each Indemnitee that is not a signatory to this Agreement (collectively, the “Third Party Beneficiaries”) is an express and intended third party beneficiary of the representations, agreements and promises made in this Agreement, which are made for the benefit of Holders, Administrative Agent and each Third Party Beneficiary (which benefits are immediate and not incidental). Except as stated above in this section, there are no third party beneficiaries of this Agreement.

Section 12.14. USA PATRIOT Act Notice. Pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001), and as from time to time amended, herein called the “Patriot Act”), each Holder Party that is subject to the Patriot Act hereby notifies Company that it is required to obtain, verify and record information that identifies Company, which information includes the name and address of Company and other information that will allow such Holder Party to identify Company in accordance with the Patriot Act.

Section 12.15. Waiver of Jury Trial, Punitive Damages, etc. Each Restricted Person and each Holder Party that is a party to this Agreement hereby knowingly, voluntarily, intentionally, and irrevocably:

(a)  waives, to the maximum extent not prohibited by Law, any right it may have to a trial by jury in respect of any litigation based hereon, or directly or indirectly at any time arising out of, under or in connection with the Note Documents or any transaction contemplated thereby or associated therewith, before or after maturity;

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(b) waives, to the maximum extent not prohibited by Law, any right it may have to claim or recover in any such litigation any “Special Damages” as defined below,

(c) certifies that no party hereto and no representative or agent or counsel for any party hereto has represented, expressly or otherwise, or implied that such party would not, in the event of litigation, seek to enforce the foregoing waivers, and

(d) acknowledges that it has been induced to enter into this Agreement, the other Note Documents and the transactions contemplated hereby and thereby by, among other things, the mutual waivers and certifications contained in this section.

As used in this section, “Special Damages” includes all special, consequential, exemplary, or punitive damages (regardless of how named), but does not include any payments or funds that any party hereto has expressly promised to pay or deliver to any other party hereto.

Section 12.16. Amendment and Reconveyance Fee. In consideration for Administrative Agent and Holders entering into this Agreement and the reconveyance by Royalty Owner of the ORRIs, Company shall pay to Administrative Agent a non-refundable $1,950,000 amendment and reconveyance fee (the “Amendment and Reconveyance Fee”), which Amendment and Reconveyance Fee has been fully earned as of the date hereof and shall be due and payable on the date hereof.

Section 12.17. Amendment and Restatement. This Agreement and the Notes amend and restate in their entirety (but do not novate or extinguish) the Existing Note Purchase Agreement and the promissory notes included in the Existing Credit Documents, and from and after the date hereof, the terms and provisions of such loan agreements and promissory notes shall be superseded by the terms and provisions hereof and of the Notes, respectively. Company hereby agrees that (a) the Existing Obligations, and all accrued and unpaid interest thereon, shall be Indebtedness of Company outstanding under and governed by this Agreement and evidenced by the Notes, and (b) all Liens securing the Existing Obligations shall continue in full force and effect to secure the Obligations and be evidenced and governed by the Security Documents.

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IN WITNESS WHEREOF, this Agreement is executed as of the date first written above.

COMPANY: RIO VISTA PENNY LLC
By:	/s/ Ian Bothwell
	Ian Bothwell
	Manager

[Note Purchase Agreement]

ADMINISTRATIVE AGENT:
TCW ASSET MANAGEMENT COMPANY, Administrative Agent
By:	/s/ [ILLEGIBLE]
	Name:
	Title:
By:	/s/ [ILLEGIBLE]
	Name:
	Title:
HOLDERS:
TCW ENERGY FUND X — NL, L.P., a California limited partnership
By:	TCW (ENERGY X) LLC, its General Partner:
	By:	TCW Asset Management Company, its Managing Member
		By:	/s/ [ILLEGIBLE]
			Name:
			Title:
		By:	/s/ [ILLEGIBLE]
			Name:
			Title:

[Note Purchase Agreement]

TCW ENERGY FUND XB — NL, L.P., a California limited partnership
By:	TCW (ENERGY X) LLC, its General Partner:
	By:	TCW Asset Management Company, its Managing Member
		By:	/s/ [ILLEGIBLE]
			Name:
			Title:
		By:	/s/ [ILLEGIBLE]
			Name:
			Title:
TCW ENERGY FUND XC — NL, L.P., a California limited partnership
By:	TCW (ENERGY X) LLC, its General Partner:
	By:	TCW Asset Management Company, its Managing Member
		By:	/s/ [ILLEGIBLE]
			Name:
			Title:
		By:	/s/ [ILLEGIBLE]
			Name:
			Title:

[Note Purchase Agreement]

TCW ENERGY FUND XD — NL, L.P., a California limited partnership
By:	TCW (ENERGY X) LLC, its General Partner:
	By:	TCW Asset Management Company, its Managing Member
		By:	/s/ [ILLEGIBLE]
			Name:
			Title:
		By:	/s/ [ILLEGIBLE]
			Name:
			Title:
TCW ASSET MANAGEMENT COMPANY, a California corporation, as Investment Manager under the Amended and Restated Investment Management and Custody Agreement dated as of December 3, 2003 among Ensign Peak Advisors, Inc., TCW Asset Management Company and Trust Company of the West, a California trust company, as Sub-Custodian
By:	/s/ [ILLEGIBLE]
	Name:
	Title:
By:	/s/ [ILLEGIBLE]
	Name:
	Title:

[Note Purchase Agreement]

TCW ASSET MANAGEMENT COMPANY, a California corporation, as Investment Manager under the Amended and Restated Investment Management and Custody Agreement dated as of December 11, 2003 among Harry L. Bradley, Jr. Partition Trust, Harry L. Bradley, Jr. Trust, Jane Bradley Uihlien Pettit Partition Trust, Jane Bradley Uihlien Trust, TCW Asset Management Company and Trust Company of the West, a California trust company, as Sub-Custodian
By:	/s/ [ILLEGIBLE] Name:
	Title:
By:	/s/ [ILLEGIBLE] Name:
	Title:
TCW ASSET MANAGEMENT COMPANY, a California corporation, as Investment Manager under the Amended and Restated Investment Management and Custody Agreement dated as of March 18, 2004 among ING Life Insurance and Annuity Company, TCW Asset Management Company and Trust Company of the West, a California trust company, as Sub-Custodian
By:	/s/ [ILLEGIBLE] Name:
	Title:
By:	/s/ [ILLEGIBLE] Name:
	Title:

[Note Purchase Agreement]

SCHEDULE 1

DISCLOSURE SCHEDULE

To supplement the following sections of the Agreement of which this Schedule is a part, Company hereby makes the following disclosures:

Section 5.7.	Other Obligations and Restrictions:
	None.
Section 5.9.	Litigation:
	None.
Section 5.10.	Labor Disputes and Acts of God:
	None.
Section 5.11.	ERISA Plans and Liabilities:
	None.
Section 5.12.	Environmental and Other Laws:
	None.
Section 5.14.	Names and Places of Business:
	None.
Section 5.15.	Company’s Subsidiaries:
	MV Pipeline Company
Section 5.21.	Marketing Arrangements:
	None.
Section 5.22.	Right to Receive Payment for Future Production:
	None.

[Note Purchase Agreement]

SCHEDULE 2

SECURITY SCHEDULE

1.	Restated and Amended Mortgage, Assignment, Security Agreement, Fixture Filing and Financing Statement by Company in favor of Administrative Agent.
2.	Mortgage, Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement by GO LLC in favor of Administrative Agent.
3.	Mortgage, Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement by MV Pipeline in favor of Administrative Agent.
4.	Security Agreement executed by Restricted Persons in favor of Administrative Agent, as secured party.
5.	Guaranty by Restricted Persons (other than Company) in favor of Administrative Agent.

[Note Purchase Agreement]

SCHEDULE 3

INSURANCE SCHEDULE

(A) Insurance by Company:

Company shall procure (or cause to be procured by Operator) and maintain in full force and effect at all times on and after the Closing Date (unless otherwise specified below) and continuing throughout the term of this Agreement, insurance policies with insurance companies authorized to do business where operations are conducted (if required by law or regulation) with (i) a A.M. Best rating of “A-” or better and an financial size category of “IX” or higher, (ii) a S&P financial strength rating of “A-” or higher, or (iii) other companies acceptable to TCW Asset management Company (“TCW”), with limits and coverage provisions sufficient to satisfy the Company’s material contracts, but in no event less than provisions set forth below.

(1)	Workers’ Compensation Insurance: Workers’ compensation insurance as required by applicable Laws. A maximum deductible or self-insured retention of $25,000 per occurrence or as approved by TCW shall be allowed.
(2)	Employer’s Liability Insurance: Employer’s liability insurance for Company’s liability arising out of injury to or death of employees of Company in the amount of $1,000,000 per accident. A maximum deductible or self-insured retention of $25,000 per occurrence or as approved by TCW shall be allowed.
(3)	General Liability Insurance: Liability insurance on an occurrence basis against claims for Company’s liability arising out of claims for personal injury (including bodily injury and death) and property damage. Such insurance shall provide coverage for products-completed operations, liability assumed under contract, broad form property damage, personal injury, underground resources and equipment and independent contractors with a $1,000,000 minimum limit per occurrence for combined bodily injury and property damage. The policy shall not exclude coverage for action over claims without limitations as respects the sole negligence of Additional Insured. A maximum deductible or self-insured retention of $25,000 per occurrence or as approved by TCW shall be allowed.
(4)	Automobile Liability Insurance: Automobile liability insurance for Company’s liability arising out of claims for bodily injury and property damage covering all owned (if any), leased, non-owned and hired vehicles of Company, including loading and unloading, with a $1,000,000 minimum limit per accident for combined bodily injury and property damage and containing appropriate no-fault insurance provisions wherever applicable. A maximum deductible or self-insured retention of $25,000 per occurrence or as approved by TCW shall be allowed.

[Note Purchase Agreement]

(5)	Pollution Liability Insurance: Pollution legal liability insurance, in an amount not less that $ 1,000,000 per occurrence insuring for (i) bodily injury or property damage arising out of sudden and accidental pollution, and (ii) cleanup of pollutants on Company’s premises or which have migrated beyond Company’s premises. A maximum deductible or self-insured retention of $25,000 per occurrence or as approved by TCW shall be allowed. The Pollution Liability may be part of the General Liability coverage.
(6)	Excess Liability Insurance: Excess liability insurance on an occurrence basis covering claims (on at least a following form basis) in excess of the underlying insurance described in the foregoing subsections (2), (3), (4) and (5), with a $10,000,000 minimum limit per occurrence. Such excess liability shall also include coverage for bodily injury or property damage to third parties arising out of sudden and accidental off-site pollution. The policy shall drop down to cover exhausted primary policies with a self-insured retention not to exceed $25,000.
	The amounts of insurance required in the foregoing subsections (2), (3), (4), and this subsection (6) may be satisfied by Company purchasing coverage in the amounts specified or by any combination of primary and excess insurance, so long as the total amount of insurance meets the requirements specified above.
	For properties in which Company is a non-operator, and the operator is providing insurance for the joint account, Company may use the operator’s coverage; however, if the limits the operator provides are less than the limits required by this agreement, Company will procure excess insurance to bring the limits to the required amounts.
(7)	Aircraft Liability Insurance: If Company uses an aircraft (fixed or rotary wing) that is owned, operated or chartered by Company, Aircraft liability insurance for liability arising out of the operation of such aircraft. The insurance shall be provided for a combined single limit not less than $10,000,000 each occurrence and such limit shall apply to bodily injury (including passengers) and property damage liability. Such insurance shall (i) name TCW as additional insured, (ii) include an insurer’s waiver of subrogation in favor of the additional insureds, (iii) state that it is primary insurance as regards the additional insureds and (iv) contain a cross-liability or severability of interest clause. In the event the aircraft hull is insured such insurance shall provide for an insurer’s waiver of subrogation rights in favor of Company. In the event Company charters aircraft, the foregoing insurance and evidence of insurance may be furnished by the owner of the aircraft.
(8)	Operators Excess Expense Insurance (Control of Well): Company is required to maintain this with limits of no less than 5 times the Dry Hole Cost of the well(s). Coverage shall include Well Control, Sudden & Accidental Pollution, Evacuation Expenses, Replacement Cost Redrill. The policy shall provide Care, Custody and Control limits of no less than $1,000,000, and shall include coverage for damage to drilling/workover rigs caused by “unsound locations” The policy will have a Priority of Payments Clause, and claims shall be paid in the following order; (1) Well Control, (2) Restoration and Redrill, and (3) Pollution. Deductible / Retention shall not exceed $200,000 for 100% interest.

[Note Purchase Agreement]

Schedule 3 — Page 2

(9) Property Damage Insurance / Business Interruption: Property damage insurance on an “all risk” basis, including coverage against damage or loss caused by earth movement (including but not limited to earthquake, landslide, subsidence and volcanic eruption), flood, and windstorm.

(a)	Property Insured: The property damage insurance shall provide coverage for all property owned by or in the care, custody or control of Company, or in which Company has any interest, and shall include coverage while in transit to jobsites and while operational.
(b)	Additional Coverages: The property damage insurance shall insure (i) when actual exposure exceed the applicable property deductibles, transit and off-site repair, including marine and air transit with sub-limits sufficient to insure the full replacement value of the property or equipment prior to its being moved to or from the locations where operations are conducted and while located away from the locations where operations are conducted, (ii) salvage expenses with a minimum limit of 25% of the loss (iii) the cost of preventive measures to reduce or prevent a loss (sue & labor), (v) property in the course of construction or installation.
(c)	Sum Insured: The property damage policy shall (i) value losses at their repair or replacement cost, or stated value, (ii) provide a limit not less than the actual cash value of the property insured.
(d)	Deductibles: The property damage deductibles shall not exceed $25,000 unless previously approved by TCW.

For properties in which Company is a non-operator, and the operator is providing insurance for the joint account, Company may use the operator’s coverage; however, if the limits the operator provides are less than the limits required by this agreement, Company will procure excess insurance to bring the limits to the required amounts. If the operator is providing insurance coverage Company shall request Certificates of Insurance from operator evidencing coverages, and providing Company with Additional Insured status and Waivers of Subrogation.

(B) Amendment of Requirements:

(1) Amendment by TCW: TCW may at any time amend the requirements and approved insurance companies of this Section due to (i) new information not known by the TCW on the Closing Date which poses a material risk to Company’s assets or business, (ii) changed circumstances after the Closing Date which in the reasonable judgment of TCW renders such coverage materially inadequate, or (iii) inflationary factors and other changes in valuations. Promptly following the receipt of a notice from TCW, Company will from time to time make such modifications to the amounts of any insurance policy as TCW specifies in that notice to take account of the foregoing.

[Note Purchase Agreement]

Schedule 3 — Page 3

(C) Company Conditions and Requirements:

(1)	Loss Notification: Company shall promptly notify TCW of any single loss or event likely to give rise to a claim against an insurer for an amount in excess of $100,000 covered by any insurance maintained pursuant to this schedule
(2)	Loss Adjustment and Settlement: A loss under the insurance policies providing property damage or business interruption shall be adjusted with the insurance companies, including the filing in a timely manner of appropriate proceedings, by Company, subject to the approval of TCW if such loss is in excess of $500,000. In addition Company may in its reasonable judgment consent to the settlement of any loss, provided that in the event that the amount of the loss exceeds $500,000 the terms of such settlement is concurred with by TCW.
(3)	Compliance With Policy Requirements: Company shall not violate or permit to be violated any of the conditions, provisions or requirements of any insurance policy required by this Section, and Company shall perform, satisfy and comply with, or cause to be performed, satisfied and complied with, all conditions, provisions and requirements of all insurance policies.
(4)	Waiver of Subrogation: Company hereby waives any and every claim for recovery from TCW for any and all loss or damage covered by any of the insurance policies to be maintained under this Agreement to the extent that such loss or damage is recovered under any such policy. If the foregoing waiver will preclude the assignment of any such claim to the extent of such recovery, by subrogation (or otherwise), to an insurance company (or other person), Company shall give written notice of the terms of such waiver to each insurance company which has issued, or which may issue in the future, any such policy of insurance (if such notice is required by the insurance policy) and shall cause each such insurance policy to be properly endorsed by Company thereof to, or to otherwise contain one or more provisions that, prevent the invalidation of the insurance coverage provided thereby by reason of such waiver.
(5)	Evidence of Insurance: Prior to the Closing Date and on an annual basis at least 10 days prior to each policy anniversary, Company shall furnish TCW with (1) certificates of insurance or binders, in a form acceptable to TCW, evidencing all of the insurance required by the provisions of this Section and (2) a schedule of the insurance policies held by or for the benefit of Company and required to be in force by the provisions of this Section. Upon request, Company will promptly furnish TCW with copies of all insurance policies, binders and cover notes or other evidence of such insurance relating to the insurance required to be maintained by Company.
(6)	Reports: Concurrently with the furnishing of the certification referred to in Section (5), Company shall furnish TCW with a report of Company’s insurance broker, signed by an officer of the broker, stating that in the opinion of such broker, the insurance then carried or to be renewed is in accordance with the terms of this Section and attaching an updated copy of the schedule of insurance required by Section (5) above.

[Note Purchase Agreement]

Schedule 3 — Page 4

In addition Company will advise TCW in writing promptly of (1) any material changes in the coverage or limits provided under any policy required by this Section and (2) any default in the payment of any premium and of any other act or omission on the part of Company which may invalidate or render unenforceable, in whole or in part, any insurance being maintained by Company pursuant to this Section.

(D) Insurance Policy Conditions and Requirements

(1)	Policy Cancellation and Change: All policies of insurance required to be maintained pursuant to this Section shall be endorsed so that if at any time they are canceled, or their coverage is reduced (by any party including the insured) so as to affect the interests of the TCW, such cancellation or reduction shall not be effective as to TCW for 60 days, except for non-payment of premium which shall be for 10 days, after receipt by TCW of written notice from such insurer of such cancellation or reduction.
(2)	Separation of Interests: All policies (other than in respect to workers compensation insurance) shall insure the interests of TCW regardless of any breach or violation by Company or any other Person of warranties, declarations or conditions contained in such policies, any action or inaction of Company’s or others, or any foreclosure relating to the business or assets of Company or any change in ownership of all or any portion of such business or assets.
(3)	Waiver of Subrogation: All policies of insurance to be maintained by the provisions of this Section shall provide for waivers of subrogation in favor of TCW and its respective officers and employees.
(4)	Endorsements: All policies of insurance referred to in this Schedule shall be endorsed to name TCW and its respective officers and employees as Additional Insureds.
	All policies of Liability insurance referred to in this Agreement shall be endorsed as follows:

(a)	To provide a severability of interests and cross liability clause;
(b)	That the insurance shall be primary and non-contributory as respects Additional Insureds.

(5) Payment of Loss Proceeds: All policies providing insurance on property mortgaged to TCW shall be endorsed to include TCW Asset Management Company as a Loss Payee, as its interests may appear.

(E) Acceptable Policy Terms and Conditions:

All policies of insurance required to be maintained pursuant to this Section shall contain terms and conditions reasonably acceptable to TCW after consultation with the Insurance Advisor.

[Note Purchase Agreement]

Schedule 3 — Page 5

SCHEDULE 4

HOLDERS SCHEDULE

	Allocation					Maximum
Note Holder	%			Commitment		Credit Amount
TCW Energy Fund X-NL, L.P., a California limited partnership		23.03872	%	$	5,471,696.00	$	6,911,616
TCW Energy Fund XB-NL, L.P., a California limited partnership		28.62534	%	$	6,798,518.24	$	8,587,602
TCW Energy Fund XC-NL, L.P., a California limited partnership		9.48725	%	$	2,253,221.88	$	2,846,175
TCW Energy Fund XD-NL, L.P., a California limited partnership		21.12823	%	$	5,017,954.63	$	6,338,469
Trust Company of the West as Sub-Custodian under the Amended and Restated Investment Management and Custody Agreement dated as of December 3, 2003 among Ensign Peak Advisors, Inc., TCW Asset Management Company and Trust Company of the West		6.81556	%	$	1,618,695.50	$	2,044,668
ING Life Insurance and Annuity Company		6.81556	%	$	1,618,695.50	$	2,044,668
Trust Company of the West as Sub-Custodian under the Amended and Restated Investment Management and Custody Agreement dated as of December 11, 2003 among Harry L. Bradley, Jr. Partition Trust, Harry L. Bradley, Jr. Trust, Jane Bradley Uihlien Pettit Partition Trust, Jane Bradley Uihlien Trust, TCW Asset Management Company and Trust Company of the West		4.08934	%	$	971,218.25	$	1,226,802
Total		100.00000	%	$	23,750,000	$	30,000,000

[Note Purchase Agreement]

SCHEDULE 5

ORGANIZATIONAL STRUCTURE

[Note Purchase Agreement]

SCHEDULE 6

APPROVED PLAN OF DEVELOPMENT

								AFE Gross				AFE Net
								Drilling &				Drilling &
	Project or		Target		Target		Current	Completion		Current		Completion
	Well	Description	Depth		Formation	Pipeline	Operator	Cost		WI		Cost
1	2nd Realty	Drill		1,900	Hartshome	Brooken	GM		175,000		0.4003		70,044
2	Ace 2-36	Drill		5,500	H/Hartshome	PetroQuest	GM		550,000		0.5100		280,500
3	Ace 3-36	Drill		5,500	H/Hartshome	PetroQuest	GM		550,000		0.5100		280,500
4	Berry 3A-32	Drill		1,900	Hartshome	Brooken	GM		175,000		0.4668		81,694
5	Daniel 2A-1	Drill		1,900	Hartshome	Brooken	GM		175,000		0.3780		66,150
6	Daniel 3A-7 Hunton	Drill		2,100	Hartshome	Brooken	GM		190,000		0.7997		151,943
7	Season 2-7	Drill		5,500	Hartshome	Sem Gas	GM		550,000		0.8495		467,225
8	Kindred 1D-26	Drill		4,500	Arbuckle	MV Pipeline	GM		300,000		0.3333		99,990
9	Mason 3H-31	Drill		5,500	H/Booch	Brooken	GM		550,000		0.6914		380,270
10	Peoples Bank 1-31	Drill		4,000	Wilcox	MV Pipeline	GM		400,000		0.5100		204,000
11	Phillips 2A-1	Drill		1,900	Hartshome	Brooken	GM		175,000		0.6119		107,083
12	Twylla 1D-31	Drill		4,500	Arbuckle	MV Pipeline	GM		300,000		0.3333		99,990
13	Urquart 2-29	Drill		1,700	Hartshome	MV Pipeline	GM		150,000		0.6000		90,000
14	Urquart 1-29	Re-Work			Cromwell	MV Pipeline	GM		25,000		0.6000		15,000
15	Canadian 2H	Re-Work			H/Hartshome	PetroQuest	GM		100,000		0.3076		30,760
16	Canadian 3H	Re-Work			H/Hartshome	PetroQuest	GM		100,000		0.3076		30,760
17	Canadian 2H	Re-Work			Union Valley	PetroQuest	GM		25,000		0.3076		7,690
	Total												2,463,598

[Note Purchase Agreement]

EXHIBIT A

FORM OF PROMISSORY NOTE

$                                         , 20 _____ 

FOR VALUE RECEIVED, Rio Vista Penny LLC, an Oklahoma limited liability company (the “Company”), hereby promises to pay to [                    ] or its registered assigns (the “Holder”), in the manner provided in the Note Purchase Agreement referred to below, the principal sum of [                    ] or, if less, the amount paid or lent by the Holder under the Note Purchase Agreement, in lawful money of the United States of America and in immediately available funds, on or before the Maturity Date. The undersigned also promises to pay to the Holder hereof interest on the unpaid principal amount of this Promissory Note, in like money, at the rate set forth in, and payable in accordance with that certain Note Purchase Agreement, as amended, modified or supplemented from time to time, dated as of November 19,  2007 (as amended, supplemented, or restated from time to time, the “Note Purchase Agreement”) (capitalized terms used but not defined herein shall have the meanings ascribed to them in the Note Purchase Agreement), among Company, TCW Asset Management Company, as Administrative Agent, and certain Holders identified therein.

This Promissory Note is one of the “Notes” issued pursuant to the Note Purchase Agreement. Payments of interest shall be computed in accordance with the Note Purchase Agreement, and payments of interest and principal shall be payable at the times and in the amounts provided in the Note Purchase Agreement, until this Promissory Note shall be paid in full. Payments of interest are to be made in lawful money of the United States of America. This Note is given in partial renewal and extension of (but does not novate or extinguish) the Existing Obligations.

The Note Purchase Agreement provides for the acceleration of the maturity of this Promissory Note upon the occurrence of certain events and for prepayments of this Promissory Note upon the terms and conditions specified therein.

This Promissory Note is entitled to the benefits provided in the Note Documents to the extent provided in said agreements.

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.

THE SECURITIES EVIDENCED BY THIS INSTRUMENT ARE SUBJECT TO THE TERMS OF A CERTAIN NOTE PURCHASE AGREEMENT DATED AS OF NOVEMBER 19,  2007 AMONG RIO VISTA PENNY LLC, THE HOLDERS IDENTIFIED THEREIN, AND TCW ASSET MANAGEMENT COMPANY, AS ADMINISTRATIVE AGENT, A COPY OF WHICH IS ON FILE AT THE OFFICES OF STEADFAST RESOURCES, INC. AND WILL BE FURNISHED BY RIO VISTA PENNY LLC TO THE HOLDER HEREOF UPON REQUEST.

[Note Purchase Agreement]

This Promissory Note is a registered Promissory Note and, as provided in the Note Purchase Agreement, upon surrender of this Promissory Note for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered Holder of this Promissory Note or such Holder’s attorney duly authorized in writing pursuant to Section 12.6(b) of the Note Purchase Agreement), one or more new Promissory Notes for a like aggregate principal amount will be issued to, and registered in the name of, the transferee. Prior to the due presentment for registration and transfer, Company may treat the Person in whose name this Promissory Note is registered as the Holder and the owner of this Promissory Note for the purpose of receiving payment and for all other purposes of this Promissory Note and the Note Purchase Agreement. Notwithstanding anything to the contrary herein, the right to receive payments of interest and principal under this Promissory Note shall be transferable only upon surrender for cancellation of this Promissory Note, and the issuance of a new Promissory Note registered in the name of the transferee. In addition, the Administrative Agent shall maintain a register in which it shall record the name of the Holder or any transferee, and no transfer shall be valid unless so registered.

[Remainder of page intentionally left blank.]

[Note Purchase Agreement]

Exhibit A — Page 2

This Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York.

RIO VISTA PENNY LLC
By:
	Name:
	Title:

[Note Purchase Agreement]

Exhibit A — Page 3

EXHIBIT B

FORM OF BORROWING NOTICE

Reference is made to that certain Note Purchase Agreement, as amended, modified or supplemented from time to time, dated as of November 19, 2007 (the “Note Purchase Agreement”) (capitalized terms used but not defined herein shall have the meanings ascribed to them in the Note Purchase Agreement), among Rio Vista Penny LLC, an Oklahoma limited liability company (the “Company”), certain Holders identified therein, and TCW Asset Management Company, as Administrative Agent.

1.	Company hereby requests a Borrowing on [                    ] in an amount equal to $                     in accordance with the provisions of Section 2.3 of the Note Purchase Agreement. The proceeds of this Borrowing shall be initially applied to the Up-Front Payment described in Section 2.6(d) of the Note Purchase Agreement and all expenses payable pursuant to Section 12.4 of the Note Purchase Agreement, and then the net remaining balance (the “Net Balance”) of this Borrowing shall be applied to the Company’s account, as detailed below:
	You are requested to pay the Net Balance to Account No.                      at [name of bank].
2.	Company hereby certifies as follows:

(a)	All representations and warranties made by any Person in any Note Document are true in all respects on and as of the date of the requested Borrowing as if such representations and warranties had been made as of the date of such Borrowing, except to the extent that such representation or warranty was made as of a specific date or updated, modified or supplemented as of a subsequent date with the consent of Required Holders and Administrative Agent.
(b)	All representations and warranties made by Seller in the Acquisition Documents are true in all respects as of the Closing Date.
(c)	All of the conditions set forth in Sections 4.1 and 4.2 of the Note Purchase Agreement have been satisfied.
(d)	The Borrowing is to be used solely for the purposes described in Section 2.5 of the Note Purchase Agreement.
(e)	There does not exist on the date hereof any condition or event which constitutes a Default which has not been waived in writing as provided in Section 12.1(a) of the Note Purchase Agreement; nor will any such Default exist upon Company’s receipt and application of the Borrowing requested hereby.
(f)	The Note Documents have not been modified, amended or supplemented by any unwritten representations or promises, by any course of dealing, or by any other means not provided for in Section 12.1 of the Note Purchase Agreement. The Note Purchase Agreement and the other Note Documents are hereby ratified, approved, and confirmed in all respects.

[Note Purchase Agreement]

3. The above certifications are effective as of the date of this request for Borrowing and will continue to be effective as of the date of the Borrowing. If any of the aforementioned certifications shall no longer be valid as of or prior to the date of the Borrowing requested hereby, Company will immediately notify the Administrative Agent and will repay the amount disbursed upon demand by the Administrative Agent if the Borrowing is made prior to the receipt of such notice.

RIO VISTA PENNY LLC
By:
	Name:
	Title:

[Note Purchase Agreement]

Exhibit B — Page 2

EXHIBIT C

FORM OF PREPAYMENT NOTICE

[LETTERHEAD OF COMPANY]

[Administrative Agent]
[Address]

Re:     Prepayment Notice

Ladies and Gentlemen:

We, Rio Vista Penny LLC, an Oklahoma limited liability company (the “Company”), make reference to the Note Purchase Agreement, as amended, modified or supplemented from time to time, dated as of November 19, 2007 (the “Note Purchase Agreement”) (capitalized terms used but not defined herein shall have the meanings ascribed to them in the Note Purchase Agreement), among the Company, certain Holders identified therein, and the Administrative Agent.

The Company hereby provides notice to you in accordance with Section 2.9 to the Note Purchase Agreement that the Company shall repay the principal amount of $                     on                      [which date must be at least thirty business days after the date of this notice].

This prepayment notice is irrevocable.

Very truly yours, RIO VISTA PENNY LLC
By:
	Name:
	Title:

[Note Purchase Agreement]

EXHIBIT D

CERTIFICATE ACCOMPANYING
FINANCIAL STATEMENTS

Reference is made to that certain Note Purchase Agreement dated as of November 19, 2007 (as amended or supplemented, the “Agreement”), by and among Rio Vista Penny LLC, an Oklahoma limited liability company (“Company”), TCW Asset Management Company, as Administrative Agent, and certain financial institutions (“Holders”), which Agreement is in full force and effect on the date hereof. Terms which are defined in the Agreement are used herein with the meanings given them in the Agreement.

This Certificate is furnished pursuant to Section 7.2(b) of the Agreement. Together herewith Company is furnishing to Administrative Agent and each Holder Company’s * [audited/unaudited] financial statements (the “Financial Statements”) as at                      (the “Reporting Date”). Company hereby represents, warrants, and acknowledges to Administrative Agent and each Holder that:

(a) The officer of Company signing this instrument is the duly elected, qualified and acting                      of Company and as such is Company’s chief financial officer.

(b) The Financial Statements are accurate and complete and satisfy the requirements of the Agreement.

(c) Attached hereto is a schedule of calculations showing Company’s compliance as of the Reporting Date with the requirements of Section(s) *[8.11 and 8.12] of the Agreement *[and Company’s non-compliance as of such date with the requirements of Section(s)                      of the Agreement].

(d) On the Reporting Date Company was, and on the date hereof Company is, in full compliance with the disclosure requirements of Section 7.4 of the Agreement, and no Default otherwise existed on the Reporting Date or otherwise exists on the date of this instrument * [except for Default(s) under Section(s)                      of the Agreement, which * [is/are] more fully described on a schedule attached hereto].

(e) No Restricted Person has changed (i) its name, (ii) its chief executive office, (iii) principal place of business, (iv) the type of entity it is, or (v) its state of incorporation or organization without having given the Administrative Agent the notice required by Section 7.4 of the Agreement.

(f) * [Unless otherwise disclosed on a schedule attached hereto,] all representations and warranties made by any Person in any Note Document are true in all respects on and as of the Reporting Date and the date hereof as if such representations and warranties had been made as of such dates, except to the extent that such representation or warranty was made as of a specific date or updated, modified or supplemented as of a subsequent date with the consent of Required Holders and Administrative Agent.

[Note Purchase Agreement]

The officer of Company signing this instrument hereby certifies that he has reviewed the Note Documents and the Financial Statements and has otherwise undertaken such inquiry as is in his opinion necessary to enable him to express an informed opinion with respect to the above representations, warranties and acknowledgments of Company and, to the best of his knowledge, such representations, warranties, and acknowledgments are true, correct and complete.

IN WITNESS WHEREOF, this instrument is executed as of                                         , 20       .

RIO VISTA PENNY LLC
By:
	Name:
	Title:

[Note Purchase Agreement]

Exhibit D — Page 2

EXHIBIT E

FORM OF OPINION

[Note Purchase Agreement]

	Sprouse Shrader Smith p.c. ATTORNEYS AT LAW
	MICHELLE L. SIBLEY (806) 468-3387

November 19, 2007

TCW Asset Management Company
865 South Figueroa Street, Suite 1800
Los Angeles, CA 90017

Re: The Note Purchase Agreement dated as of November 14, 2007 by and among Rio Vista Penny LLC, an Oklahoma limited liability company (“Borrower”), TCW Asset Management Company, a California corporation (“Administrative Agent”), and the holders party thereto from time to time (“Holders”)

Gentlemen:

We have acted as counsel to the Borrower, Rio Vista ECO LLC (“ECO”), an Oklahoma limited liability company, Rio Vista GO LLC (“RVG”), an Oklahoma limited liability company), GO, LLC (“GO”), an Oklahoma limited liability company, and MV Pipeline Company (“MV), an Oklahoma corporation, in connection with the certain Note Purchase Agreement. Borrower, ECO, RVG, GO and MV are sometimes herein referred to as the “Entities”.

This opinion is being furnished to you in connection with the Note Purchase Agreement. All capitalized terms herein defined shall have the same meanings assigned to them in the Note Purchase Agreement. In connection with the opinions set forth herein, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the following documents (the “Loan Documents”).

(A)	the Note Purchase Agreement;
(B)	the Assumption Agreement;
(C)	the Notes;

701 S. TAYLOR, SUITE 500 • P.O. BOX 15008 • AMARILLO, TEXAS 79105-5008
michelle.sibley@sprouselaw.com • PHONE (806) 468-3387 • FAX (806) 373-3454 • sprouselaw.com

TCW Asset Management Company
November 19, 2007
Page 2 of 10

(D)	the Guaranty by Restricted Persons (other than Company) in favor of Administrative Agent;
(E)	the Amended and Restated Mortgage, Assignment, Security Agreement, Fixture Filing and Financing Statement by Borrower in favor of Administrative Agent;
(F)	Mortgage, Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement by GO, LLC in favor of Administrative Agent;
(G)	Mortgage, Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement by MV Pipeline Company in favor of Administrative Agent;
(H)	Management Services Agreement;
(I)	Security Agreement by Restricted Persons in favor of Administrative Agent; and
(J)	Financing Statements as follows:

a.	UCC-1 Financing Statement naming Rio Vista ECO LLC as Debtor and Administrative Agent as secured party covering all assets;
b.	UCC-1 Financing Statement naming Borrower as Debtor and Administrative Agent as secured party covering all assets;
c.	UCC-1 Financing Statement naming GO, LLC as Debtor and Administrative Agent as secured party covering all assets;
d.	UCC-1 Financing Statement naming MV Pipeline Company as Debtor and Administrative Agent as secured party covering all assets;
e.	UCC-1 Financing Statement naming Rio Vista GO LLC as Debtor and Administrative Agent as secured party covering all assets;
f.	UCC-1 Transmitting Utility Financing Statement naming GO, LLC as Debtor and Administrative Agent as secured party;
g.	UCC-1 Transmitting Utility Financing Statement naming MV Pipeline Company as Debtor and Administrative Agent as secured party.

(E), (F) and (G) are sometimes herein referred to as the “Mortgages.” (K)a., (K)b., (K)c., (K)d. and (K)e. are sometimes herein referred to as the “Financing Statements.” (K)f. and (K)g. are sometimes herein referred to as the “Transmitting Utility Financing Statements.”

We are admitted to practice law in the State of Oklahoma. This opinion is limited to the existing laws of the State of Oklahoma, and the federal law of the United States of America. We express no opinion as to whether the laws of any particular jurisdiction apply, and express no opinion to the extent that the laws of any jurisdiction other than those identified above are applicable to the subject matter hereof. We disclaim any opinion as to any statute, rule, regulation, ordinance, order or other promulgation of any regional or local governmental body. We render no opinion as to the enforceability of any of the Agreements under any law other than the above-mentioned laws of the State of Oklahoma.

TCW Asset Management Company
November 19, 2007
Page 3 of 10

As used in this opinion, the phrases “our actual knowledge,” “to the best of our knowledge,” “to our knowledge,” “we are not aware,” “known to us” or words of similar import refer only to the actual knowledge of the attorneys currently in this firm who have rendered legal services to the Entities and mean that, although such attorneys have not been informed by Entities that the matters stated are factually incorrect, we have made no independent investigation of such matters. No inference as to our knowledge of any matters bearing on the accuracy of any such statement should be drawn from the fact of our representation of the Entities for purposes of this transaction.

In rendering the opinions set forth herein, we have relied upon certificates or statements of officers or managers of the Entities, certificates of public officials and such other documents, records and information as we have deemed necessary or appropriate. We have assumed that all signatures are genuine; that all documents submitted to us as originals are authentic; that all documents submitted to us as copies conform to the originals; and that the facts stated in all such documents are true and correct. In rendering this opinion, we have not made any independent investigation as to accuracy or completeness of any facts or representations, warranties, data or other information, whether written or oral, that may have been made by or on behalf of the parties, except as specifically set forth herein.

Based upon the foregoing, and subject to the qualifications set forth herein, it is our opinion that:

1. The Entities are organized as follows:

(a) Borrower is an Oklahoma limited liability company duly organized, validly existing and in good standing under the laws of Oklahoma.

(b) ECO is an Oklahoma limited liability company duly organized, validly existing and in good standing under the laws of Oklahoma.

(c) RVG is an Oklahoma limited liability company duly organized, validly existing and in good standing under the laws of Oklahoma.

(d) GO is an Oklahoma limited liability company duly organized, validly existing and in good standing under the laws of Oklahoma.

(e) MV is an Oklahoma corporation duly organized, validly existing and in good standing under the laws of Oklahoma.

The Entities have the power to own their own assets, to conduct their own business as now conducted and to enter into and carry out the provisions of the Loan Documents.

TCW Asset Management Company
November 19, 2007
Page 4 of 10

2. The forms of the Mortgages comply with the laws of the State of Oklahoma, including all applicable recording, filing and registration laws and regulations, and are adequate and legally sufficient for the purposes intended to be accomplished thereby.

3. The Loan Documents constitute legal, valid and binding obligations of the Entities who are parties thereto enforceable against them in accordance with their terms except as limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws of general application relating to or affecting creditors’ rights generally and to general principles of equity.

4. The Security Agreement and the Real Estate Mortgages effective to create in favor of the Administrative Agent, for the payment of the obligations described therein, valid Liens on each Entity’s right, title and interest in and to the Collateral described therein.

5. The Transmitting Utility Financing Statements should be filed for record among the financing statement records of the Secretary of State in the State of Oklahoma. The Financing Statements should be filed for record among the financing statement records of the Oklahoma County Clerk.

6. After the recordings and filings specified in paragraph 5 have occurred, the Liens, as to personalty covered thereby, created by the Security Agreement and the Real Estate Mortgages will be perfected.

7. After the recordings and filings specified in paragraph 5 have occurred, no instruments need be recorded, registered or filed or re-recorded, re-registered or re-filed in any public office in connection with the Financing Statements or the Transmitting Utility Financing Statements in order to maintain the perfection and priority of the Liens created thereby after the date of recordation, other than continuation statements as required by the Uniform Commercial Code as in effect in Oklahoma.

8. No state or local recording tax, stamp tax or other similar fee, tax or governmental charge (other than statutory filing and recording fees to be paid upon the filing of the Financing Statements and the Transmitting Utility Financing Statements) is required to be paid in connection with the filing and recording of the Financing Statements or the Transmitting Utility Financing Statements.

9. Each of the Real Estate Mortgages constitutes a legal, valid and binding obligation of the Entities enforceable against it in accordance with their terms except as limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws of general application relating to or affecting creditors’ rights generally and to general principles of equity.

TCW Asset Management Company
November 19, 2007
Page 5 of 10

10. Each of the Real Estate Mortgages is effective to create in favor of the Administrative Agent for the benefit of the Holders, for the payment of the obligations described therein, valid mortgage liens on all of each Entity’s right, title and interest in and to the real property described in the Real Estate Mortgages as being mortgaged thereby and all fixtures located on the real property described in the Real Estate Mortgages.

11. Fully executed counterparts of the Real Estate Mortgages should be filed for record in the tract index of each county in the State of Oklahoma where any portion of the real estate described in the Real Estate Mortgages is located. Other than the foregoing, no authorization, consent, approval, license or exemption of, or filing or registration with, any governmental authority of the State of Oklahoma is necessary for either the due execution and delivery by the Entities of the Real Estate Mortgages, to receive the benefit of the Oklahoma recording statutes or with respect to the holding and enforcement by the Administrative Agent of the Real Estate Mortgages or the obligations secured thereby.

12. The execution, delivery and performance by the Entities of their obligations under the Loan Documents to which each is party, the consummation of the transactions contemplated thereunder and the use of the proceeds of any loans (i) have been duly authorized by all necessary action of the Entities, and (ii) to our knowledge, do not, and will not, contravene any provision of (x) any existing law, rule or regulation (excluding usury laws), or (y) any judgment, injunction, order, or decree known to us applicable to the Entities, or (z) any agreement or instrument set forth on Schedule 12 attached hereto and to which the Entities are a party or to which the Entities or any of their assets are subject or any provision of their organizational documents, except for such agreements and instruments referenced in the Agreements.

13. To our knowledge, there are no actions, suits or proceedings or governmental investigations pending or threatened against or affecting the Entities.

14. An Oklahoma state court of competent jurisdiction or a federal court sitting in the State of Oklahoma of competent jurisdiction and applying conflicts of laws principles of the State of Oklahoma presented with a choice of law issue, will honor the choice of New York law to govern the Loan Documents; provided, however, that the Real Estate Mortgages state that such documents shall be governed by the laws of the State of Oklahoma.

The foregoing opinions are expressly subject to the following limitations, qualifications and assumptions:

A. In rendering the opinions set forth above, we have assumed the following:

a. the compliance by the parties to the Loan Documents with the precise terms thereof;

TCW Asset Management Company
November 19, 2007
Page 6 of 10

b.	the receipt by Borrower of the consideration provided for in the Loan Documents;
c.	that the indebtedness secured by the Security Agreement and Real Estate Mortgages exists;
d.	that the Administrative Agent will properly implement all applicable constitutional, legislative, judicial and administrative provisions, statutes, regulations, decisions, rulings and other laws and the specific language of the Loan Documents that provide for the application of payments and prepayments made by Borrower of all sums under the Loan Documents and any loan commitments between the Administrative Agent and Borrower that would (absent these laws, statutes and the savings and interest limitation and spreading provisions of the Loan Documents) constitute charging of, payments of, receipt of, or contracting for, compensation for the use, forbearance or detention of money in excess of the maximum nonusurious amount permitted under applicable constitutional, legislative, judicial and administrative provisions, statutes, regulations, decisions, rulings and other laws;
e.	that the Loan Documents comprise the entire agreement of the parties with respect to the Loan and that none of the parties upon whom we have relied in preparation of this opinion has perpetrated a fraud upon us or upon any other party in any way related to the Loan;
f.	that any individual executing a document or instrument on behalf of a party other than the Entities possesses the legal contractual capacity and authority to do so;
g.	that all signatures not witnessed by us are genuine, all documents submitted to us, including documents with certificates issued by any public authority are authentic and were duly and validly executed or issued, and that copies of any documents or instruments furnished to us conform to the originals thereof; and
h.	the due execution and delivery of the Loan Documents by all parties thereto other than the Entities.

B. Our opinions are subject to the effects of the application of the principles of equity (regardless of whether enforcement is considered in proceedings at law or in equity) in regard to covenants or provisions in agreements where (a) the breach of such covenants or provisions imposes restrictions or burdens and it cannot be demonstrated that the enforcement of such restrictions or burdens is reasonably necessary for the Administrative Agent’s protection, or (b) the Administrative Agent’s enforcement of such covenants or restrictions under the circumstances or in the manner requested would violate the Administrative Agent’s implied covenant of good faith and fair dealing under the Oklahoma Uniform Commercial Code, or would be commercially unreasonable.

TCW Asset Management Company
November 19, 2007
Page 7 of 10

C.	We express no opinion as to whether a court would grant specific performance or any other equitable remedy with respect to the enforcement of any of the Loan Documents, or whether a court would grant a particular remedy provided therein or at law or in equity.
D.	We express no opinion (a) as to the actual legal descriptions of the property set forth in the Loan Documents or the exhibits or the actual legal descriptions attached to the Loan Documents (in each case, except as to sufficiency as to form), or (b) with respect to compliance with any environmental statutes, laws, rules or regulations.
E.	The enforceability of any “dragnet,” “other indebtedness” or “security for future advances” provisions contained in the Loan Documents is subject to the assumption that any indebtedness to be secured by such provisions was within the contemplation of Borrower and the Administrative Agent at the time the Loan Documents were executed.
F.	All opinions contained herein which relate to the issue of usury are expressly limited to an analysis of whether the Loan Documents as written, will be subject to a defense, claim or setoff as a result of the Administrative Agent’s contracting for a usurious rate of interest. Each and every opinion given herein is expressly limited to issues relating to the contracting for, as opposed to the charging or receiving of, usurious amounts of interest.
G.	The opinions expressed herein relate only to federal law and the laws of the State of Oklahoma, and we express no opinion with regard to any matter that may be governed or affected by the laws of any other state or jurisdiction, except where otherwise specifically noted.
H.	The opinions expressed herein are limited to the matters stated herein and no opinion may be implied or inferred beyond the matters expressly stated herein.
I.	We express no opinion with respect to:

a.	The past or present financial condition of the Borrower or the financial ability of Borrower to meet its respective obligations under the Loan Documents;
b.	Except as otherwise stated herein, the validity, binding effect or enforceability of any documents or any other aspect of any contractual obligations of the Entities applicable to it other than the Loan Documents; or

TCW Asset Management Company
November 19, 2007
Page 8 of 10

c. The truthfulness or accuracy of any applications, reports, plans, documents, financial statements or other matters furnished to the Administrative Agent by (or on behalf of) the Entities.

J. No examination of an appraisal of any of the Collateral has been undertaken, and no opinion is expressed with respect thereto or with respect to the value of the Collateral.

K. We render no opinion regarding nor otherwise assuming responsibility for the accuracy of any representation or warranty by the Entities in or made pursuant to any of the Loan Documents.

L. We express no opinion as to the perfection or consequences of non-perfection of any security interest created by the Loan Documents in any patents, trademarks, copyrights or other property subject to a statute of the United States which provides for national registration or filing of all security interests in such property must be perfected in part by compliance with the requirements or procedures of the relevant statute. Furthermore, we must limit our opinion as to the Financing Statements and the Transmitting Utility Financing Statements to the fact that they will lapse five years from the date of filing unless continuation statements are properly filed.

M. The foregoing opinions are subject to the qualification that certain remedies, waivers and other provisions of the Loan Documents may not be enforceable, but such unenforceability will not render the Loan Documents invalid as a whole, make them legally inadequate for the practical realization of the benefits provided thereby, or preclude (a) the judicial enforcement of the obligation of the Borrower to repay the principal, together with interest as provided in the Loan Documents, (b) the acceleration of the due date for the Borrower to pay such indebtedness, together with interest due thereon in the event of default by the Borrower under the Loan Documents, or (c) the foreclosure of any security agreement.

N. In rendering the opinion expressed in Paragraphs 13 and 14 above, we have not caused the search of any docket of any court, tribunal, agency or similar authority.

O. In rendering the opinion expressed in Paragraph 1 regarding the good standing of the Entities, we have relied solely on the certification of each Entity’s good standing issued by the Secretary of State of Oklahoma, dated as follows:

a.	Borrower, dated November 8, 2007;
b.	ECO, dated November 9, 2007;
c.	RVG, dated November 8, 2007;

TCW Asset Management Company
November 19, 2007
Page 9 of 10

d. GO, dated November 8, 2007; and

e. MV, dated November 6, 2007.

This opinion is solely for the benefit of the Administrative Agent (its successors or assigns), its counsel, and subsequent holders of an interest in the Loan Documents and may not be relied on by any other party without the express written consent of the undersigned law firm. This opinion may not be quoted, circulated or published, in whole or in part, or furnished or relied upon by any other party, without our prior written consent. The opinions herein are expressed as of the date hereof only and not as of some future date. We undertake no responsibility to update this letter for events occurring after the date hereof.

Very truly yours,

SPROUSE SHRADER SMITH P.C.

Michelle L. Sibley

TCW Asset Management Company
November 19, 2007
Page 10 of 10

Schedule 12

• Management Agreement by and between GO, Inc. and Clearwater Enterprises dated August 1, 2006.

• Service and Purchase Agreement by and between GO, Inc. and Brooken Production LLC dated August 1, 2006.

• Service and Purchase Agreement by and between GO, Inc. and Dyne Exploration Company dated August 1, 2006.

• Service and Purchase Agreement by and between GO, Inc. and Wildcard Oil and Gas Company dated August 1, 2006.

• Service and Purchase Agreement by and between GO, Inc. and XTO Energy Inc. dated August 1, 2006.

• Service and Purchase Agreement by and between GO, Inc. and G.M. Oil Properties, Inc. dated August 1, 2006.

• Service and Purchase Agreement by and between GO, Inc. and C dated August 1, 2006.

• Schedule A to that certain Master Agreement between Hanover Compression Limited Partnership and GO, Inc., dated September 18, 2006.

• Management Services Agreement by and between GM Oil Properties, Inc. and MV Pipeline Company dated January 1, 2004.

November 19, 2007

TCW Asset Management Company
865 South Figuera Street, Suite 1800
Los Angeles, CA 90017
Attn.: R. Blair Thomas

Dear Mr. Thomas,

We have acted as counsel to Rio Vista GP LLC, a Delaware limited liability company (“RVGP”), and Rio Vista Energy Partners L.P., a Delaware limited partnership (“RVEP”), in connection with the attached Rio Vista Energy Partners L.P., Common Unit Purchase Warrant and the Management Services Agreement, dated November 19, 2007 the (“Agreements”). RVGP and RVEP are sometimes herein referred to as the “RV Entities.” This opinion is furnished to you pursuant to the Agreements. Unless otherwise indicated in this letter, all capitalized terms used herein have the meanings given to those terms in the Agreements.

We are admitted to practice law only in the State of California. This opinion is limited to the existing laws of the State of California, and the federal law of the United States of America. We express no opinion as to whether the laws of any particular jurisdiction apply, and express no opinion to the extent that the laws of any jurisdiction other than those identified above are applicable to the subject matter hereof. We disclaim any opinion as to any statute, rule, regulation, ordinance, order or other promulgation of any regional or local governmental body. We render no opinion as to the enforceability of any of the Agreements under any law other than the above-mentioned laws of the State of California and the federal law of the United States of America.

We express no opinion as to title to, or any other interest of RVGP or RVEP, in any collateral. We express no opinion as to the attachment, creation, validity or perfection of any security interest under any state law or federal law.

We assume that neither RVGP nor RVEP is insolvent and by executing and delivering the Agreements will not become insolvent.

In our examination of the Agreements for purposes of this opinion, we have assumed, and express no opinion as to, (a) the genuineness of all signatures on original documents other than RV Entities, (b) the authenticity and completeness of all documents submitted to us as originals, (c) the conformity to originals and completeness of all documents submitted to us as copies, and (d) the lack of any undisclosed termination, modification, waiver or amendment to any document reviewed by us.

As used in this opinion, the phrases “our actual knowledge,” “to the best of our knowledge,” “to our knowledge,” “we are not aware,” “known to us” or words of similar import refer only to the actual knowledge of the attorneys currently in this firm who have rendered legal services to RVGP and RVEP and mean that, although such attorneys have not been informed by RVGP and RVEP that the matters stated are factually incorrect, we have made no independent investigation of such matters and have relied solely on the Management Certificate issued by each of RVGP and RVEP. No inference as to our knowledge of any matters bearing on the accuracy of any such statement should be drawn from the fact of our representation of RVGP and RVEP for purposes of this transaction.

As to the enforceability of the Agreements, this opinion is qualified by, and is subject to, and we render no opinion with respect to:

(a) the effect of bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent conveyance and other similar laws relating to or affecting the rights of creditors generally;

(b) the effect of general principles of equity and similar principles, including, without limitation, concepts of materiality, reasonableness, public policy and unconscionability and the possible unavailability of specific performance, injunctive relief or other equitable remedies, regardless of whether considered in a proceeding in equity or at law;

(c) the effect of California, federal or other laws relating to usury or permissible rates of interest for loans, forbearances or the use of money;

(d) the effect of any California or federal law or court decisions that requires a lender to enforce its remedies in a commercially reasonable manner; and

(e) the enforceability of any consent to service, jurisdiction or forum for any claim, suit, demand, action or cause of action arising under or related to the Agreements, or the transactions contemplated therein, or any provision providing for the exclusive jurisdiction of a particular court or purporting to waive rights to trial by jury, service of process or objections to the laying of venue or to forum on the basis of forum non conveniens in connection with any litigation arising out of or pertaining to the Loan Documents.

In rendering the opinion expressed in paragraphs 1 and 2 below regarding the good standing of RVGP’s and RVEP’s qualification to do business, we have relied solely on the certification of RVGP’s and RVEP’s existence and good standing issued by the Secretary of State of the State of Delaware, dated as of November 6, 2007.

In rendering the opinion expressed in paragraphs 2 and 5 below, we have not caused the search of any docket of any court, tribunal, agency or similar authority.

We also call your attention to the fact that under various reports published by committees of the State Bar of California, certain assumptions, qualifications and exceptions are implicit in opinions of lawyers. Although we have expressly set forth some assumptions, qualifications and exceptions herein, we are not limiting or omitting any others set forth in the various reports or otherwise deemed standard practice for lawyers in California.

Based upon the foregoing, subject to the assumptions, exceptions, and qualifications referred to herein, the following are our opinions as of the date of this letter.

1. RVGP is a Delaware limited liability company duly organized, validly existing and in good standing under the laws of Delaware. RVEP is a Delaware limited partnership duly organized, validly existing and in good standing under the laws of Delaware. The RV Entities have the power to own their own assets, to conduct their own business as now conducted and to enter into and carry out the provisions of the Agreements.

2. The execution, delivery and performance by the RV Entities of the Agreements to which each is party, the consummation of the transactions contemplated thereunder and the use of the proceeds of any loans (i) have been duly authorized by all necessary corporate and limited partnership actions, as the case maybe, of the RV Entities, (ii) do not constitute a material breach by the RV Entities under the RZB Loan Agreements, as such term is defined under Schedule A (attached hereto and incorporated by reference (copies of such contracts have been furnished to you)); and (iii) to our knowledge, do not, and will not, contravene any provision of (x) any existing law, rule or regulation (excluding usury laws), or (y) any judgment, injunction, order, or decree known to us applicable to the RV Entities, or (z) any agreement or instrument known to us to which the RV Entities are a party or to which the RV Entities or any of their assets are subject or any provision of their organizational documents, except for such agreements and instruments referenced in the Agreements.

3. The Agreements have been duly executed and delivered by the RV Entities, and are the legal, valid and binding obligations of the RV Entities, enforceable in accordance with their respective terms subject, as to enforceability, to applicable bankruptcy, insolvency, reorganization and similar laws affecting the enforcement of creditors’ rights generally and to general principles of equity (regardless of whether such enforcement is considered in a proceeding in equity or at law).

4. To our actual knowledge, no order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any court, administrative agency or commission or other governmental or public body or authority, or any subdivision thereof, domestic or foreign, or any other person or entity, is required to authorize, or is required in connection with the execution, delivery, performance and enforcement of the Agreements or any of the documents, agreements or instruments referred to therein by or against the RV Entities except such as have been obtained and furnished to the RV Entities.

5. To our knowledge, there are no actions, suits or proceedings or governmental investigations pending or threatened against or affecting the RV Entities other than as listed on Schedule B to this opinion or as disclosed in RVEP’s filings with the Securities Exchange Commission.

6. To our knowledge, the RV Entities are not engaged, principally, or as one of their important activities, in the business of extending credit for the purpose of purchasing or carrying any margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System).

7. None of the RV Entities is an “Investment Company” or an “Affiliated Person” of, or a “Promotor” or “Principal Underwriter” for, an “Investment Company,” as such terms are defined in the Investment Company Act of 1940, as amended.

In rendering the opinions above, we are opining only as to the specific legal issues expressly set forth herein, and no opinion shall be inferred as to other matters. This opinion is intended solely for Trust Company of the West and the Holders under the Notes Purchase Agreement described in the Agreement, together with their respective successors and assigns, use for the purpose of the Agreements, and is not to be made available to or relied upon for any other purpose or by any other person or entity, without our prior written consent. We assume no obligation to advise you of any fact, circumstance, event or change in the law or the facts that may hereafter be brought to our attention whether or not they would affect or modify the opinions expressed herein.

Very truly yours,
Law Offices of Kevin W. Finck

SCHEDULE A

In connection with our opinion under Paragraph 2 above, we have solely reviewed the following agreements (“RZB Loan Agreements”), and we have not examined any other documents (including those documents referenced in the following agreements) or made any independent factual investigation:

1. Amended & Restated Line Letter of September 15, 2004, entered into by Penn Octane Corporation and RZB Finance LLC, as amended by the Second Amendment to Line Letter of even date herewith.

2. Loan Agreement of July 26, 2007, entered into by RVEP and RZB Finance LLC, as amended by the First Amendment to Loan Agreement of even date herewith.

SCHEDULE B

Pending or Threatened Actions and Proceedings

None.

EXHIBIT F

FORM OF APPROVAL LETTER

Reference is made to the Note Purchase Agreement, dated as of November 19, 2007 (as it may be amended, supplemented or otherwise modified, the “Note Purchase Agreement”; the terms defined therein and not otherwise defined herein being used herein as therein defined), by and among Rio Vista Penny LLC, an Oklahoma limited liability company (“Company”), the Holders party thereto from time to time, and TCW Asset Management Company, as Administrative Agent. Reference is hereby made to the Note Purchase Agreement for all purposes, and terms defined therein shall have the same meanings when used herein.

The Agreement contemplates that certain Approval Letters may be given from time to time in connection therewith in order to specify certain ANCF Capital Expenditures, ANCF LOE, ANCF Overhead Costs or ANCF Transportation Costs. This letter is such an Approval Letter and is given by the undersigned in order so to approve the ANCF                                         which are specified in the schedule attached hereto. This letter [is in addition to/supersedes] all previous Approval Letters dealing with ANCF                                        .

This letter is a Note Document, and all provisions of the Note Purchase Agreement which apply to Note Documents shall apply hereto.

This letter may be separately executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Approval Letter.

Please execute a counterpart of this letter in the place provided below to evidence your agreement to the foregoing and your continuing ratification of the Note Purchase Agreement and the other Note Documents in consideration of the approval herein contained.

Yours truly, TCW ASSET MANAGEMENT COMPANY, as Administrative Agent
By:
	Name:
	Title:
* [OTHER HOLDERS CONSTITUTING REQUISITE HOLDERS]

Accepted and agreed to as of the date first written above

RIO VISTA PENNY LLC

By:
	Name:
	Title:

[Note Purchase Agreement]

EX-10.53

Exhibit 10.53

GUARANTY

THIS GUARANTY is made as of November 19, 2007 by each party named on the signature pages hereto and the Additional Guarantors (as hereinafter defined) (such Persons so listed and the Additional Guarantors individually and collectively herein called “Guarantor”) in favor of TCW ASSET MANAGEMENT COMPANY, as administrative agent for Holders, as such term is defined in the Note Purchase Agreement described below.

RECITALS:

1. Rio Vista Penny LLC, an Oklahoma limited liability company (“Company”), has executed in favor of Holders those certain promissory notes dated of even date herewith, payable to the order of Holders in the aggregate principal amount of $30,000,000 (such promissory notes, as from time to time amended, and all promissory notes given in substitution, renewal or extension therefor or thereof, in whole or in part, being herein collectively called the “Notes”).

2. The Notes were executed pursuant to a Note Purchase Agreement dated of even date herewith (herein, as from time to time amended, supplemented or restated, called the “Note Purchase Agreement”), by and among Company, Agent and Holders, pursuant to which Holders have agreed to advance funds to Company under the Notes.

3. It is a condition precedent to Holders’ obligations to advance funds pursuant to the Note Purchase Agreement that Guarantor shall execute and deliver to Agent a satisfactory guaranty of Company’s obligations under the Notes and the Note Purchase Agreement.

4. Rio Vista ECO LLC, an Oklahoma limited liability company (“ECO”), owns all of the outstanding equity interests of Company and GO (as each are defined below).

5. Rio Vista GO LLC, an Oklahoma limited liability company (“GO”), has executed in favor of Company that certain promissory note dated as of November 19, 2007, payable to the order of Company in the aggregate principal amount of $2,200,000 (such promissory note, as from time to time amended, and all promissory notes given in substitution, renewal or extension therefor or thereof, in whole or in part, being herein collectively called the “GO Note”).

6. As part of the consideration of Company’s advancing funds under the GO Note to GO, GO agreed to execute and deliver to Agent a satisfactory guaranty of Company’s obligations under the Notes and the Note Purchase Agreement.

7. GO owns all of the outstanding equity interests of GO, LLC, an Oklahoma limited liability company (“GO LLC”).

8. Company owns all of the outstanding equity interests of MV Pipeline Company, an Oklahoma corporation (“MV”).

[Guaranty]

9. Company, ECO, GO, GO LLC, MV, and the other direct and indirect subsidiaries of Company are mutually dependent on each other in the conduct of their respective businesses under a holding company structure, with the credit needed from time to time by each often being provided by another or by means of financing obtained by one such affiliate with the support of the others for their mutual benefit and the ability of each to obtain such financing being dependent on the successful operations of the others.

10. Each Guarantor has determined that such Guarantor’s execution, delivery and performance of this Guaranty may reasonably be expected to benefit such Guarantor, directly or indirectly, and are in the best interests of such Guarantor.

NOW, THEREFORE, in consideration of the premises, of the benefits which will inure to each Guarantor from Holders’ advances of funds to Company under the Note Purchase Agreement, and of Ten Dollars and other good and valuable consideration, the receipt and sufficiency of all of which are hereby acknowledged, and in order to induce Holders to advance funds under the Note Purchase Agreement, each Guarantor hereby agrees with Agent, for the benefit of Agent and Holders as follows:

AGREEMENTS:

Section 1. Definitions. Reference is hereby made to the Note Purchase Agreement for all purposes. All terms used in this Guaranty which are defined in the Note Purchase Agreement and not otherwise defined herein shall have the same meanings when used herein. All references herein to any Obligation Document, Note Document, or other document or instrument refer to the same as from time to time amended, supplemented or restated. As used herein the following terms shall have the following meanings:

“Additional Guarantor” has the meaning given to such term in Section 11.

“Agent” means the Person who, at the time in question, is the “Administrative Agent” under the Note Purchase Agreement.

“Holders” means all who at any time are “Holders” under the Note Purchase Agreement.

“Obligations” means collectively all of the indebtedness, obligations, and undertakings which are guaranteed by each Guarantor and described in subsections (a) and (b) of Section 2.

“Obligation Documents” means this Guaranty, the Notes, the Note Purchase Agreement, the Note Documents, all other documents and instruments under, by reason of which, or pursuant to which any or all of the Obligations are evidenced, governed, secured, or otherwise dealt with, and all other documents, instruments, agreements, certificates, legal opinions and other writings heretofore or hereafter delivered in connection herewith or therewith.

“Obligors” means Company, Guarantors and any other endorsers, guarantors or obligors, primary or secondary, of any or all of the Obligations.

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“Security” means any rights, properties, or interests of Agent or Holders, under the Obligation Documents or otherwise, which provide recourse or other benefits to Agent or Holders in connection with the Obligations or the non-payment or non-performance thereof, including collateral (whether real or personal, tangible or intangible) in which Agent or Holders have rights under or pursuant to any Obligation Documents, guaranties of the payment or performance of any Obligation, bonds, surety agreements, keep-well agreements, letters of credit, rights of subrogation, rights of offset, and rights pursuant to which other claims are subordinated to the Obligations.

Section 2. Guaranty.

(a) Each Guarantor hereby irrevocably, absolutely, and unconditionally guarantees to Agent and each Holder the prompt, complete, and full payment when due, and no matter how the same shall become due, of:

(i) the Notes, including all principal, all interest thereon and all other sums payable thereunder;

(ii) all obligations or liabilities of any Obligor owing to Administrative Agent or any Holder Party under the Security Documents;

(iii) all other sums payable under the other Note Documents, whether for principal, interest, fees or otherwise; and

(iv) any and all other indebtedness or liabilities which may at any time be owed to any Holder Party, whether incurred heretofore or hereafter or concurrently herewith, voluntarily or involuntarily, whether owed alone or with others, whether fixed, contingent, absolute, inchoate, liquidated or unliquidated, whether such liability arises by notes, discounts, overdrafts, open account indebtedness or in any other manner whatsoever, and including interest, attorneys’ fees and collection costs as may be provided by law or in any instrument or agreement evidencing any such indebtedness or liability.

Without limiting the generality of the foregoing, each Guarantor’s liability hereunder shall extend to and include all post-petition interest, expenses, and other duties and liabilities of Company described above in this subsection (a), or below in the following subsection (b), which would be owed by Company but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization, or similar proceeding involving Company.

(b) Each Guarantor hereby irrevocably, absolutely, and unconditionally guarantees to Agent and each Holder the prompt, complete and full performance, when due, and no matter how the same shall become due, of all obligations and undertakings of Company to Agent or such Holder under, by reason of, or pursuant to any of the Obligation Documents.

(c) If Company shall for any reason fail to pay any Obligation, as and when such Obligation shall become due and payable, whether at its stated maturity, as a result of the exercise of any power to accelerate, or otherwise, each Guarantor will, upon demand by Agent, pay such Obligation in full to Agent for the benefit of Agent or the Holder to whom such Obligation is owed. If Company shall for any reason fail to perform promptly any Obligation, each Guarantor will, upon demand by Agent, cause such Obligation to be performed or, if specified by Agent, provide sufficient funds, in such amount and manner as Agent shall in good faith determine, for the prompt, full and faithful performance of such Obligation by Agent or such other Person as Agent shall designate.

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(d) If either Company or any Guarantor fail to pay or perform any Obligation as described in the immediately preceding subsections (a), (b), or (c) each Guarantor will incur the additional obligation to pay to Agent, and each Guarantor will forthwith upon demand by Agent pay to Agent, the amount of any and all expenses, including fees and disbursements of Agent’s counsel and of any experts or agents retained by Agent, which Agent may incur as a result of such failure.

(e) As between Guarantors and Agent or Holders, this Guaranty shall be considered a primary and liquidated liability of each Guarantor.

(f) The liability of each Guarantor (other than ECO) hereunder shall be limited to the maximum amount of liability that can be incurred without rendering this Guaranty, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount.

Section 3. Unconditional Guaranty.

(a) No action which Agent or any Holder may take or omit to take in connection with any of the Obligation Documents, any of the Obligations (or any other indebtedness owing by Company to Agent or any Holder), or any Security, and no course of dealing of Agent or any Holder with any Obligor or any other Person, shall release or diminish any Guarantor’s obligations, liabilities, agreements or duties hereunder, affect this Guaranty in any way, or afford any Guarantor any recourse against Agent or any Holder, regardless of whether any such action or inaction may increase any risks to or liabilities of Agent or any Holder or any Obligor or increase any risk to or diminish any safeguard of any Security. Without limiting the foregoing, each Guarantor hereby expressly agrees that Agent and Holders may, from time to time, without notice to or the consent of any Guarantor, do any or all of the following:

(i) Amend, change or modify, in whole or in part, any one or more of the Obligation Documents and give or refuse to give any waivers or other indulgences with respect thereto.

(ii) Neglect, delay, fail, or refuse to take or prosecute any action for the collection or enforcement of any of the Obligations, to foreclose or take or prosecute any action in connection with any Security or Obligation Document, to bring suit against any Obligor or any other Person, or to take any other action concerning the Obligations or the Obligation Documents.

(iii) Accelerate, change, rearrange, extend, or renew the time, rate, terms, or manner for payment or performance of any one or more of the Obligations (whether for principal, interest, fees, expenses, indemnifications, affirmative or negative covenants, or otherwise).

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(iv) Compromise or settle any unpaid or unperformed Obligation or any other obligation or amount due or owing, or claimed to be due or owing, under any one or more of the Obligation Documents.

(v) Take, exchange, amend, eliminate, surrender, release, or subordinate any or all Security for any or all of the Obligations, accept additional or substituted Security therefor, and perfect or fail to perfect Agent’s or Holders’ rights in any or all Security.

(vi) Discharge, release, substitute or add Obligors.

(vii) Apply all monies received from Obligors or others, or from any Security for any of the Obligations, as Agent or Holders may determine to be in their best interest, without in any way being required to marshal Security or assets or to apply all or any part of such monies upon any particular Obligations.

(b) No action or inaction of any Obligor or any other Person, and no change of law or circumstances, shall release or diminish any Guarantor’s obligations, liabilities, agreements, or duties hereunder, affect this Guaranty in any way, or afford any Guarantor any recourse against Agent or any Holder. Without limiting the foregoing, the obligations, liabilities, agreements, and duties of Guarantors under this Guaranty shall not be released, diminished, impaired, reduced, or affected by the occurrence of any or all of the following from time to time, even if occurring without notice to or without the consent of any Guarantor:

(i) Any voluntary or involuntary liquidation, dissolution, sale of all or substantially all assets, marshalling of assets or liabilities, receivership, conservatorship, assignment for the benefit of creditors, insolvency, bankruptcy, reorganization, arrangement, or composition of any Obligor or any other proceedings involving any Obligor or any of the assets of any Obligor under laws for the protection of debtors, or any discharge, impairment, modification, release, or limitation of the liability of, or stay of actions or lien enforcement proceedings against, any Obligor, any properties of any Obligor, or the estate in bankruptcy of any Obligor in the course of or resulting from any such proceedings.

(ii) The failure by Agent or any Holder to file or enforce a claim in any proceeding described in the immediately preceding subsection (i) or to take any other action in any proceeding to which any Obligor is a party.

(iii) The release by operation of law of any Obligor from any of the Obligations or any other obligations to Agent or any Holder.

(iv) The invalidity, deficiency, illegality, or unenforceability of any of the Obligations or the Obligation Documents, in whole or in part, any bar by any statute of limitations or other law of recovery on any of the Obligations, or any defense or excuse for failure to perform on account of force majeure, act of God, casualty, impossibility, impracticability, or other defense or excuse whatsoever.

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(v) The failure of any Obligor or any other Person to sign any guaranty or other instrument or agreement within the contemplation of any Obligor, Agent or any Holder.

(vi) The fact that Guarantors may have incurred directly part of the Obligations or is otherwise primarily liable therefor.

(vii) Without limiting any of the foregoing, any fact or event (whether or not similar to any of the foregoing) which in the absence of this provision would or might constitute or afford a legal or equitable discharge or release of or defense to a guarantor or surety other than the actual payment and performance by Guarantors under this Guaranty.

(c) Agent and Holders may invoke the benefits of this Guaranty before pursuing any remedies against any Obligor or any other Person and before proceeding against any Security now or hereafter existing for the payment or performance of any of the Obligations. Agent and Holders may maintain an action against any Guarantor on this Guaranty without joining any other Obligor therein and without bringing a separate action against any other Obligor.

(d) If any payment to Agent or any Holder by any Obligor is held to constitute a preference or a voidable transfer under applicable state or federal laws, or if for any other reason Agent or any Holder is required to refund such payment to the payor thereof or to pay the amount thereof to any other Person, such payment to Agent or such Holder shall not constitute a release of any Guarantor from any liability hereunder, and each Guarantor agrees to pay such amount to Agent or such Holder on demand and agrees and acknowledges that this Guaranty shall continue to be effective or shall be reinstated, as the case may be, to the extent of any such payment or payments. Any transfer by subrogation which is made as contemplated in Section 6 prior to any such payment or payments shall (regardless of the terms of such transfer) be automatically voided upon the making of any such payment or payments, and all rights so transferred shall thereupon revert to and be vested in Agent and Holders.

(e) This is a continuing guaranty and shall apply to and cover all Obligations and renewals and extensions thereof and substitutions therefor from time to time.

Section 4. Waiver. Each Guarantor hereby waives, with respect to the Obligations, this Guaranty, and the other Obligation Documents:

(a) notice of the incurrence of any Obligation by Company, and notice of any kind concerning the assets, liabilities, financial condition, creditworthiness, businesses, prospects, or other affairs of Company (it being understood and agreed that: (i) each Guarantor shall take full responsibility for informing itself of such matters, (ii) neither Agent nor any Holder shall have any responsibility of any kind to inform any Guarantor of such matters, and (iii) Agent and Holders are hereby authorized to assume that each Guarantor, by virtue of its relationships with Company which are independent of this Guaranty, has full and complete knowledge of such matters whenever Holders extend credit to Company or take any other action which may change or increase any Guarantor’s liabilities or losses hereunder).

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(b) notice that Agent, any Holder, any Obligor, or any other Person has taken or omitted to take any action under any Obligation Document or any other agreement or instrument relating thereto or relating to any Obligation.

(c) notice of acceptance of this Guaranty and all rights of each Guarantor under any statute or law discharging such Guarantor from liability hereunder for failure to sue on this Guaranty.

(d) default, demand, presentment for payment, and notice of default, demand, dishonor, nonpayment, or nonperformance.

(e) notice of intention to accelerate, notice of acceleration, protest, notice of protest, notice of any exercise of remedies (as described in the following Section 5 or otherwise), and all other notices of any kind whatsoever.

Section 5. Exercise of Remedies. Agent and each Holder shall have the right to enforce, from time to time, in any order and at Agent’s or such Holder’s sole discretion, any rights, powers and remedies which Agent or such Holder may have under the Obligation Documents or otherwise, including judicial foreclosure, the exercise of rights of power of sale, the taking of a deed or assignment in lieu of foreclosure, the appointment of a receiver to collect rents, issues and profits, the exercise of remedies against personal property, or the enforcement of any assignment of leases, rentals, oil or gas production, or other properties or rights, whether real or personal, tangible or intangible; and each Guarantor shall be liable to Agent and each Holder hereunder for any deficiency resulting from the exercise by Agent or any Holder of any such right or remedy even though any rights which any Guarantor may have against Company or others may be destroyed or diminished by exercise of any such right or remedy. No failure on the part of Agent or any Holder to exercise, and no delay in exercising, any right hereunder or under any other Obligation Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right preclude any other or further exercise thereof or the exercise of any other right. The rights, powers and remedies of Agent and each Holder provided herein and in the other Obligation Documents are cumulative and are in addition to, and not exclusive of, any other rights, powers or remedies provided by law or in equity. The rights of Agent and each Holder hereunder are not conditional or contingent on any attempt by Agent or any Holder to exercise any of its rights under any other Obligation Document against any Obligor or any other Person.

Section 6. Limited Subrogation and Setoff.

(a) Until all of the Obligations have been paid and performed in full no Guarantor shall have any right to exercise any right of subrogation, reimbursement, indemnity, exoneration, contribution or any other claim which it may now or hereafter have against or to any Obligor or any Security in connection with this Guaranty (including any right of subrogation under any statute or other law), and each Guarantor hereby waives any rights to enforce any remedy which such Guarantor may have against Company and any right to participate in any Security until such time. If any amount shall be paid to any Guarantor on account of any such subrogation or other rights, any such other remedy, or any Security at any time when all of the Obligations and all other expenses guaranteed pursuant hereto shall not have been paid in full, such amount shall be held in trust for the benefit of Agent, shall be segregated from the other funds of such Guarantor and shall forthwith be paid over to Agent to be held by Agent as collateral for, or then or at any time thereafter applied in whole or in part by Agent against, all or any portion of the Obligations, whether matured or unmatured, in such order as Agent shall elect.

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(b) If any Guarantor shall make payment to Agent of all or any portion of the Obligations and if all of the Obligations shall be finally paid in full, Agent will, at such Guarantor’s request and expense, execute and deliver to such Guarantor (without recourse, representation or warranty) appropriate documents necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Obligations resulting from such payment by such Guarantor; provided that such transfer shall be subject to Section 3(d) above and that without the consent of Agent (which Agent may withhold in its discretion) such Guarantor shall not have the right to be subrogated to any claim or right against any Obligor which has become owned by Agent or any Holder, whose ownership has otherwise changed in the course of enforcement of the Obligation Documents, or which Agent otherwise has released or wishes to release from its Obligations.

(c) Upon full and final payment of the Obligations, each Guarantor which has made payments upon the Obligations shall be entitled to contribution from each other Guarantor hereunder, to the end that all such payments upon the Obligations shall be shared among all Guarantors in proportion to their respective Net Worths, provided that the contribution obligations of each Guarantor shall be limited to the maximum amount that it can pay at such time without rendering its contribution obligations voidable under applicable law relating to fraudulent conveyances or fraudulent transfers. As used in this subsection, the “Net Worth” of each Guarantor means, at any time, the remainder of (i) the fair value of such Guarantor’s assets (other than such right of contribution), minus (ii) the fair value of such Guarantor’s liabilities (other than its liabilities under its guaranty of the Obligations).

(d) To the extent, and only to the extent, that GO shall make payment to Agent of all or any portion of the Obligations (a “GO Guaranty Payment”), GO shall be entitled to setoff the amount of such GO Guaranty Payment against amounts owing by GO to Company under the GO Note. Except as expressly provided by the immediately preceding sentence, GO shall not have any right to exercise any right of subrogation, reimbursement, indemnity, exoneration, contribution or any other claim which it may now or hereafter have against or to any Obligor or any Security in connection with such GO Guaranty Payment.

Section 7. Successors and Assigns. Guarantor’s rights or obligations hereunder may not be assigned or delegated, but this Guaranty and such obligations shall pass to and be fully binding upon the successors of each Guarantor, as well as each Guarantor. This Guaranty shall apply to and inure to the benefit of Agent and Holders and their successors or assigns. Without limiting the generality of the immediately preceding sentence, Agent and each Holder may assign, grant a participation in, or otherwise transfer any Obligation held by it or any portion thereof, and Agent and each Holder may assign or otherwise transfer its rights or any portion thereof under any Obligation Document, to any other Person, and such other Person shall thereupon become entitled to all of the benefits in respect thereof granted to Agent or such Holder hereunder unless otherwise expressly provided by Agent or such Holder in connection with such assignment or transfer.

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Section 8. Subordination and Offset. Each Guarantor hereby subordinates and makes inferior to the Obligations any and all indebtedness now or at any time hereafter owed by Company to such Guarantor. Each Guarantor agrees that after the occurrence of any Default or Event of Default it will neither permit Company to repay such indebtedness or any part thereof nor accept payment from Company of such indebtedness or any part thereof without the prior written consent of Agent and Holders. If any Guarantor receives any such payment without the prior written consent of Agent and Holders, the amount so paid shall be held in trust for the benefit of Holders, shall be segregated from the other funds of such Guarantor, and shall forthwith be paid over to Agent to be held by Agent as collateral for, or then or at any time thereafter applied in whole or in part by Agent against, all or any portions of the Obligations, whether matured or unmatured, in such order as Agent shall elect. Each Guarantor hereby grants to Holders a right of offset to secure the payment of the Obligations and such Guarantor’s obligations and liabilities hereunder, which right of offset shall be upon any and all monies, securities and other property (and the proceeds therefrom) of such Guarantor now or hereafter held or received by or in transit to Agent or any Holder from or for the account of such Guarantor, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and also upon any and all deposits (general or special), credits and claims of such Guarantor at any time existing against Agent or any Holder. Upon the occurrence of any Default or Event of Default Agent and each Holder is hereby authorized at any time and from time to time, without notice to any Guarantor, to offset, appropriate and apply any and all items hereinabove referred to against the Obligations and Guarantors’ obligations and liabilities hereunder irrespective of whether or not Agent or such Holder shall have made any demand under this Guaranty and although such obligations and liabilities may be contingent or unmatured. Agent and each Holder agrees promptly to notify the applicable Guarantor after any such offset and application made by Agent or such Holder, provided that the failure to give such notice shall not affect the validity of such offset and application. The rights of Agent and each Holder under this section are in addition to, and shall not be limited by, any other rights and remedies (including other rights of offset) which Agent and Holders may have.

Section 9. Representations and Warranties. Each Guarantor hereby represents and warrants to Agent and each Holder as follows:

(a) The Recitals at the beginning of this Guaranty are true and correct in all respects.

(b) Each of the representations and warranties contained in Article V of the Note Purchase Agreement are true, insofar as they refer to each Guarantor, or to the assets, operations, conditions, agreements, business or actions of such Guarantor, as one of the Restricted Persons, or to the Note Documents to which such Guarantor is a party.

Section 10. Covenants. Each Guarantor hereby agrees to observe and comply with each of the covenants and agreements made in the Note Purchase Agreement, insofar as they refer to such Guarantor, or the assets, obligations, conditions, agreements, business, or actions of such Guarantor, as one of the Restricted Persons, or to the Note Documents to which such Guarantor is a party.

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Section 11. No Oral Change; Amendments; Guaranty Supplements. No amendment of any provision of this Guaranty shall be effective unless it is in writing and signed by Guarantors and Agent, and no waiver of any provision of this Guaranty, and no consent to any departure by any Guarantor therefrom, shall be effective unless it is in writing and signed by Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given and to the extent specified in such writing. In addition, all such amendments and waivers shall be effective only if given with the necessary approvals of Holders as required in Section 12.1 of the Note Purchase Agreement. Upon the execution and delivery by any Person of a guaranty supplement in substantially the form of Exhibit A hereto (each, a “Guaranty Supplement”), (i) such Person shall be referred to as an “Additional Guarantor” and shall become and be a Guarantor hereunder, and each reference in this Guaranty to a “Guarantor” shall also mean and be a reference to such Additional Guarantor, and each reference in any other Note Document to a “Guarantor” shall also mean and be a reference to such Additional Guarantor, and (ii) each reference herein to “this Guaranty,” “hereunder,” “hereof” or words of like import referring to this Guaranty, and each reference in any other Note Document to the “Guaranty,” “thereunder,” “thereof” or words of like import referring to this Guaranty, shall mean and be a reference to this Guaranty as supplemented by such Guaranty Supplement.

Section 12. Invalidity of Particular Provisions. If any term or provision of this Guaranty shall be determined to be illegal or unenforceable all other terms and provisions hereof shall nevertheless remain effective and shall be enforced to the fullest extent permitted by applicable law.

Section 13. Headings and References. The headings used herein are for purposes of convenience only and shall not be used in construing the provisions hereof. The words “this Guaranty,” “this instrument,” “herein,” “hereof,” “hereby” and words of similar import refer to this Guaranty as a whole and not to any particular subdivision unless expressly so limited. The phrases “this section” and “this subsection” and similar phrases refer only to the subdivisions hereof in which such phrases occur. The word “or” is not exclusive, and the word “including” (in its various forms) means “including without limitation”. Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires.

Section 14. Term. This Guaranty shall be irrevocable until all of the Obligations have been completely and finally paid and performed, and no Holder has any obligation to make any loans or other advances to Company, and all obligations and undertakings of Company under, by reason of, or pursuant to the Obligation Documents have been completely performed, and this Guaranty is thereafter subject to reinstatement as provided in Section 3(d). All extensions of credit and financial accommodations heretofore or hereafter made by Agent or Holders to Company shall be conclusively presumed to have been made in acceptance hereof and in reliance hereon.

Section 15. Notices. Any notice or communication required or permitted hereunder shall be given in writing, sent by personal delivery, by telecopy, by delivery service with proof of delivery, or by registered or certified United States mail, postage prepaid, addressed (a) to Agent at the address listed in the Note Purchase Agreement and (b) to Guarantor at the address listed on Guarantor’s signature page hereto or to such other address or to the attention of such other individual as hereafter shall be designated in writing by the applicable party sent in accordance herewith. Any such notice or communication shall be deemed to have been given (a) in the case of personal delivery or delivery service, as of the date of first attempted delivery at the address or in the manner provided herein, (b) in the case of telecopy, upon receipt, or (c) in the case of registered or certified United States mail, three days after deposit in the mail.

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Section 16. Limitation on Interest. Agent, Holders and Guarantors intend to contract in strict compliance with applicable usury law from time to time in effect, and the provisions of the Note Purchase Agreement limiting the interest for which any Guarantor is obligated are expressly incorporated herein by reference.

Section 17. Note Document. This Guaranty is a Note Document, as defined in the Note Purchase Agreement, and is subject to the provisions of the Note Purchase Agreement governing Note Documents. Each Guarantor hereby ratifies, confirms and approves the Note Purchase Agreement and the other Note Documents and, in particular, any provisions thereof which relate to such Guarantor.

Section 18. Counterparts; Fax. This Guaranty may be executed in any number of counterparts, each of which when so executed shall be deemed to constitute one and the same Guaranty. This Guaranty may be validly executed and delivered by facsimile or other electronic transmission.

Section 19. Indemnity. Each Guarantor agrees to indemnify each Holder Party, upon demand, from and against any and all liabilities, obligations, broker’s fees, claims, losses, damages, penalties, fines, actions, judgments, suits, settlements, costs, expenses or disbursements (including reasonable fees of attorneys, accountants, experts and advisors) of any kind or nature whatsoever (in this section collectively called “liabilities and costs”) which to any extent (in whole or in part) may be imposed on, incurred by, or asserted against such Person growing out of, resulting from or in any other way associated with this Guaranty, the other Note Documents and the transactions and events (including the enforcement or defense thereof) at any time associated herewith and therewith or contemplated herein or therein (whether arising in contract or in tort or otherwise). Among other things, the forgoing indemnification covers all liabilities and costs incurred by each Holder Party related to any breach of a Note Document by a Restricted Person, any bodily injury to any Person or damage to any Person’s property, or any violation or noncompliance with any Environmental Laws by any Holder Party or any other Person or any liabilities or duties of any Holder Party or any other Person with respect to Hazardous Materials found in or released into the environment.

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The foregoing indemnification shall apply whether or not such liabilities and costs are in any way or to any extent owed, in whole or in part, under any claim or theory of strict liability or caused, in whole or in part, by any negligent act or omission of any kind by any Holder Party (in each case whether alleged, arising or imposed in a legal proceeding brought by or against any Restricted Person, any Holder Party, or any other Person),

provided only that no Holder Party shall be entitled under this section to receive indemnification for that portion, if any, of any liabilities and costs which is proximately caused by its own individual gross negligence or willful misconduct, as determined in a final judgment. If any Person (including any Guarantor, Company or any of their Affiliates) ever alleges such gross negligence or willful misconduct by any Holder Party, the indemnification provided for in this section shall nonetheless be paid upon demand, subject to later adjustment or reimbursement, until such time as a court of competent jurisdiction enters a final judgment as to the extent and effect of the alleged gross negligence or willful misconduct. As used in this section the term “Holder Party” shall include each director, officer, agent, attorney, employee, representative and Affiliate of such Persons.

Section 20. Governing Law; Submission of Process. this Guaranty shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to principles of conflicts of laws. Each Guarantor hereby irrevocably (a) submits itself to the non-exclusive jurisdiction of the state and federal courts sitting in the State and County of New York, (b) agrees and consents that service of process may be made upon it in any legal proceeding relating to this Guaranty or the Obligations by any means allowed under New York or federal law, and (c) waives any objection that it may now or hereafter have to the venue of any such proceeding being in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Each Guarantor hereby makes the foregoing submissions, agreements, consents and waivers on behalf of and with respect to each of its subsidiaries.

Section 21. Waiver of Jury Trial, Punitive Damages, etc. each Guarantor hereby knowingly, voluntarily, intentionally, and irrevocably (a) waives, to the maximum extent not prohibited by Law, any right it may have to a trial by jury in respect of any litigation based hereon, or directly or indirectly at any time arising out of, under or in connection with this Guaranty or any transaction contemplated hereby or associated herewith, before or after maturity; (b) waives, to the maximum extent not prohibited by Law, any right it may have to claim or recover in any such litigation any “Special Damages” as defined below,

[Guaranty]

12

(c) certifies that no party hereto nor any representative or agent or counsel for any party hereto has represented, expressly or otherwise, or implied that such party would not, in the event of litigation, seek to enforce the foregoing waivers, and (d) acknowledges that it has been induced to enter into this Agreement, the other Note Documents and the transactions contemplated hereby and thereby by, among other things, the mutual waivers and certifications contained in this section. As used in this section, “Special Damages” includes all special, consequential, exemplary, or punitive damages (regardless of how named), but does not include any payments or funds which any party hereto has expressly promised to pay or deliver to any other party hereto.

Section 22. FINAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER NOTE DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[The remainder of this page is intentionally left blank.]

[Guaranty]

13

IN WITNESS WHEREOF, each Guarantor has executed and delivered this Guaranty as of the date first written above.

RIO VISTA ECO LLC
By:	/s/ Ian Bothwell
	Ian Bothwell
	Manager
RIO VISTA GO LLC
By:	/s/ Ian Bothwell
	Ian Bothwell
	Manager
GO, LLC
By:	/s/ Ian Bothwell
	Ian Bothwell
	Manager
MV PIPELINE COMPANY
By:	/s/ Ian Bothwell
	Ian Bothwell
	President

Address of each Guarantor:

2601 Northwest Expressway #902E
Oklahoma City, Oklahoma 73112-7217
Attn.: Ian Bothwell
Facsimile: (310) 563-6255

[Guaranty]

EXHIBIT A

FORM OF GUARANTY SUPPLEMENT

                                        , 20_____ 

THIS GUARANTY SUPPLEMENT is made as of [mm/dd/yy] (this “Supplement”) is delivered pursuant to that certain Guaranty, dated as of November 19, 2007 (as it may be amended, supplemented or otherwise modified, the “Guaranty”; the terms defined therein and not otherwise defined herein being used herein as therein defined), by Rio Vista ECO LLC, an Oklahoma limited liability company, Rio Vista GO LLC, an Oklahoma limited liability company, GO, LLC, an Oklahoma limited liability company, and MV Pipeline Company, an Oklahoma corporation, as the initial guarantors, in favor of TCW Asset Management Company, as administrative agent (“Agent”).

Section 1. Pursuant to Section 11 of the Guaranty, the undersigned hereby:

(a) agrees that this Supplement may be attached to the Guaranty and that by the execution and delivery hereof, the undersigned becomes a Guarantor under the Guaranty and the Note Documents and agrees to be bound by all of the terms thereof;

(b) represents and warrants that each of the representations and warranties set forth in the Guaranty, the Note Purchase Agreement and each other Note Document and applicable to the undersigned is true and correct both before and after giving effect to this Supplement, except to the extent that any such representation and warranty relates solely to any earlier date, in which case such representation and warranty is true and correct as of such earlier date;

(c) no event has occurred or is continuing as of the date hereof, or will result from the transactions contemplated hereby on the date hereof, that would constitute an Event of Default or a Default; and

(d) agrees to irrevocably, absolutely, and unconditionally guaranty the prompt, complete, and full payment and performance when due of all Obligations as provided by Section 2 of the Guaranty.

Section 2. The undersigned agrees from time to time, upon request of Agent, to take such additional actions and to execute and deliver such additional documents and instruments as Agent may request to effect the transactions contemplated by, and to carry out the intent of, this Agreement. Any notice or other communication herein required or permitted to be given shall be given pursuant to Section 15 of the Guaranty, and all for purposes thereof, the notice address of the undersigned shall be the address as set forth on the signature page hereof.

This Supplement shall be deemed a contract and instrument made under the laws of the State of New York and shall be construed and enforced in accordance with and governed by the Internal laws of the State of New York, without regard to the principles of conflicts of laws.

[Guaranty]

IN WITNESS WHEREOF, the undersigned has caused this Supplement to be duly executed and delivered by its duly authorized officer as of the date above first written.

[NAME OF SUBSIDIARY]
By:
	Name:
	Title:

Address for Notices:

Attention:

Telecopier:

ACKNOWLEDGED AND ACCEPTED,

as of the date above first written:

TCW ASSET MANAGEMENT COMPANY,
as Agent
By:
	Name:
	Title:

[Guaranty]

Exhibit A — Page 2

EX-10.54

Exhibit 10.54

SECURITY AGREEMENT

dated as of November 19, 2007

of

Rio Vista Penny LLC, each other Grantor listed on the signature pages hereof and each other
Grantor that otherwise may become a party hereto

in favor of

TCW Asset Management Company, as Administrative Agent

[Security Agreement]

TABLE OF CONTENTS

	Page
ARTICLE I Definitions and References		1
Section 1.1. Definitions in Note Purchase Agreement		1
Section 1.2. Definitions in the UCC, etc.		1
Section 1.3. Definitions in this Agreement		2
Section 1.4. Rules of Construction; References and Titles		3
ARTICLE II Security Interest		4
Section 2.1. Grant of Security Interest		4
Section 2.2. Secured Obligations Secured		5
ARTICLE III Representations and Warranties		6
Section 3.1. Representations and Warranties		6
ARTICLE IV Covenants		9
Section 4.1. General Covenants Applicable to Collateral		9
Section 4.2. Covenants for Specified Types of Collateral		10
ARTICLE V Voting and Distribution Rights in Respect Of Pledged Equity		12
Section 5.1. Voting Rights		12
Section 5.2. Dividend Rights While No Event of Default Exists		12
Section 5.3. Actions by Secured Party		13
Section 5.4. Rights While an Event of Default Exists		13
ARTICLE VI Remedies, Powers and Authorizations		13
Section 6.1. Normal Provisions Concerning the Collateral		13
Section 6.2. Event of Default Remedies		15
Section 6.3. Application of Proceeds		17
Section 6.4. Deficiency		18
Section 6.5. Private Sales of Investment Property and Other Pledged Equity		18
Section 6.6. Indemnity and Expenses		19
Section 6.7. Non-Judicial Remedies		19
Section 6.8. Limitation on Duty of the Secured Party in Respect of Collateral		19
Section 6.9. Appointment of Other Agents		20
ARTICLE VII Miscellaneous		20
Section 7.1. Notices		20

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	Page
Section 7.2. Amendments and Waivers		20
Section 7.3. Additional Grantors		20
Section 7.4. Preservation of Rights		21
Section 7.5. Severability		21
Section 7.6. Survival		21
Section 7.7. Binding Effect and Assignment		21
Section 7.8. Release of Collateral; Termination		21
Section 7.9. Limitation on Interest		22
Section 7.10. Governing Law		22
Section 7.11. Final Agreement		22
Section 7.12. Counterparts; Facsimile		22
Section 7.13. Acceptance by the Secured Party		22
Section 7.14. Jurisdiction, Etc.		23
Section 7.15. Restatement		23

Schedules
Schedule 1	Address for Notices and Jurisdiction of Organization
Schedule 2	Scheduled Collateral
Exhibits
Exhibit A	Form of Grantor Accession Agreement

ii

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Agreement”) is made as of November 19, 2007, by Rio Vista Penny LLC and each other Grantor listed on the signature pages hereof and that may become parties hereto pursuant to Section 7.3 in favor of TCW Asset Management Company, as administrative agent under the Note Purchase Agreement described below (the “Secured Party”), for the benefit of the Beneficiaries.

RECITALS

A. Company, the Secured Party, and certain holders (collectively, the “Holders”) are parties to that certain Note Purchase Agreement dated as of November 19, 2007 (as heretofore or hereafter amended, supplemented or restated from time to time, the “Note Purchase Agreement”).

B. Pursuant to the Note Purchase Agreement, the Holders have agreed to make senior secured term loans to Company.

C. In order to induce the Beneficiaries to extend such credit, each Grantor has agreed to grant to the Secured Party, for the benefit of the Beneficiaries, a security interest in the Collateral.

NOW, THEREFORE, in consideration of the premises and for other valuable consideration, the receipt and sufficiency of which the parties acknowledge, each Grantor agrees as follows:

ARTICLE I

Definitions and References

Section 1.1. Definitions in Note Purchase Agreement. Capitalized terms used herein and not otherwise defined have the respective meanings specified in the Note Purchase Agreement.

Section 1.2. Definitions in the UCC, etc. The following terms have the meanings specified in the UCC:

(a) Account.

(b) Chattel Paper.

(c) Commercial Tort Claim.

(d) Deposit Account.

(e) Document.

(f) Electronic Chattel Paper

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(g) Equipment.

(h) General Intangible.

(i) Instrument.

(j) Inventory.

(k) Investment Property.

(l) Letter of Credit Right.

(m) Payment Intangible.

(n) Proceeds.

(o) Securities Account.

(p) Security.

(q) Uncertificated Security.

Other terms used in this Agreement that are defined in the UCC and not otherwise defined herein or in the Note Purchase Agreement have the meanings specified in the UCC, unless the context otherwise requires.

Section 1.3. Definitions in this Agreement. The following terms have the following meanings:

“Beneficiaries” means the Secured Party, the Holders, and any other Person to which any Secured Obligation is owed.

“Collateral” means, with respect to any Grantor, all property described in Section 2.1 in which such Grantor has any right, title or interest. References to Collateral herein with respect to a Grantor are intended to refer to Collateral in which such Grantor has any right, title or interest and not to Collateral in which any other Grantor has any right, title or interest.

“Grantor” means each Person granting a security interest in any Collateral pursuant to this Agreement. References to “Grantor” in this Agreement are intended to refer to each such Person as if such Person were the only grantor pursuant to this Agreement, except:

(a) that references to “any Grantor” are meant to refer to each Person that is a Grantor,

(b) that references to “the Grantors” are meant to refer to collectively to all Persons that are Grantors and

(c) as otherwise may be specifically set forth herein.

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“Holders” has the meaning specified in Recital A.

“Note Purchase Agreement” has the meaning specified in Recital A.

“Pledged Debt” means all Investment Property and General Intangibles constituting or pertaining to Indebtedness owing by any Person to Grantor.

“Pledged Equity” means all Investment Property and General Intangibles constituting or pertaining to Equity in Persons.

“Secured Obligations” means all Obligations of all Restricted Persons now or hereafter arising under the Note Documents.

“Secured Party” has the meaning specified in the preamble.

“Securities Act” means the Securities Act of 1933.

“UCC” means the Uniform Commercial Code in effect in the State of New York from time to time; provided that, if perfection or the effect of perfection or non-perfection or the priority of any security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection or priority.

Section 1.4. Rules of Construction; References and Titles. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise:

(a) Any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein).

(b) Unless otherwise specified, any reference herein to any Person shall be construed to include such Person’s successors and assigns.

(c) The words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof.

(d) All references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement.

(e) Any reference to any Law herein shall, unless otherwise specified, refer to such law as amended, modified or supplemented from time to time.

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(f) The words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

(g) Except as specified otherwise, references to any document, instrument, or agreement shall include:

(i) all exhibits, schedules, and other attachments thereto, and

(ii) all documents, instruments, or agreements issued or executed in replacement thereof.

(h) A title appearing at the beginning of any subdivision is for convenience only, does not constitute any part of such subdivision and shall be disregarded in construing the language contained in such subdivision.

(i) The phrases “this Section” and “this subsection” and similar phrases refer only to the section or subsection hereof in which such phrases occur.

(j) The word “or” is not exclusive, and the word “including” (in all of its grammatical variations) means “including without limitation”.

ARTICLE II

Security Interest

Section 2.1. Grant of Security Interest. As collateral security for the payment and performance of all Secured Obligations, Grantor pledges, collaterally assigns and grants to the Secured Party for the benefit of the Beneficiaries a continuing security interest in all right, title and interest of Grantor in and to all of the following property, whether now owned or existing or hereafter acquired or arising, regardless of where located and howsoever Grantor’s interests therein arise, whether by ownership, security interest, claim or otherwise:

(a) Accounts.

(b) All Equity listed on Schedule 2, whether constituting General Intangibles or Investment Property.

(c) General Intangibles, including all Payment Intangibles.

(d) Documents.

(e) Instruments.

(f) Inventory.

(g) Equipment, including, all parts thereof, all accessions thereto, and all replacements therefor.

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(h) Deposit Accounts, including all Deposit Accounts listed on Schedule 2.

(i) Investment Property, and all dividends, distributions, return of capital, interest, distributions, value, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any investment property and all subscription warrants, rights or options issued thereon or with respect thereto, including Pledged Debt.

(j) Commercial Tort Claims that are listed opposite Grantor’s name on Schedule 2, as in effect on the date hereof or as hereafter modified pursuant to Section 4.2.

(k) Letter of Credit Rights.

(1) Chattel Paper.

(m) Books and records (including customer lists, marketing information, credit files, price lists, operating records, vendor and supplier price lists, land and title records, geological and geophysical records and data, reserve engineering records and data, computer software, computer hardware, computer disks and tapes and other storage media, printouts and other materials and records) pertaining to any Collateral or to any oil, gas or mineral properties and interests.

(n) Money and property of any kind from time to time in the possession or under the control of any Beneficiary.

(o) Proceeds of the foregoing.

Notwithstanding the foregoing, this Section 2.1 does not grant a security interest in any property to the extent that such grant is prohibited under any agreement relating to such property and the violation of such prohibition would cause Grantor to lose its interest in or rights with respect to such property, except to the extent that Part 5 of Article 9 of the UCC would render such prohibition ineffective.

Section 2.2. Secured Obligations Secured.

(a) The security interest created hereby in the Collateral secures the payment and performance of all Secured Obligations.

(b) Without limiting the generality of the foregoing, this Agreement secures, as to Grantor, the payment of all amounts that constitute part of the Secured Obligations and would be owed by any Restricted Person to any Beneficiary under the Note Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving a Restricted Person.

(c) Notwithstanding any other provision of this Agreement, with respect to any Grantor, the liability of such Grantor hereunder and under each other Note Document to which it is a party shall be limited to the maximum liability that such Grantor may incur without rendering this Agreement and such other Note Documents subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provision of any applicable state or federal law. This subsection (c) shall not apply to Company, or Rio Vista ECO LLC.

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ARTICLE III

Representations and Warranties

Section 3.1. Representations and Warranties. Grantor represents and warrants to the Beneficiaries as follows:

(a) If Grantor is not Company, each representation and warranty made by Company with respect to Grantor in any other Note Document is correct.

(b) Grantor has and will have at all times the right, power and authority to grant to the Secured Party as provided herein a security interest in the Collateral, free and clear of any Lien. This Agreement creates a valid and binding security interest in favor of the Secured Party in the Collateral, securing the Secured Obligations.

(c) None of the Collateral in which Grantor has granted a security interest that constitutes goods:

(i) is covered by any Document, except for Documents that are subject hereto and have been delivered to the Secured Party;

(ii) is subject to any landlord’s lien or similar Lien, except for Permitted Liens; or

(iii) is in the possession of any Person other than Grantor or the Secured Party, except for Collateral being transported in the ordinary course of business and Collateral subject to a joint operating agreement that is in the possession of the operator under the agreement.

(d) With respect to Pledged Equity:

(i) All units and other securities constituting Pledged Equity have been duly authorized and validly issued, are fully paid and non-assessable, and were not issued in violation of the preemptive rights of any Person or of any agreement by which Grantor or any issuer of Pledged Equity is bound.

(ii) The Pledged Equity listed on Schedule 2 constitutes all equity interests owned by Grantor in its Subsidiaries. All endorsements, deliveries, notifications, and other actions required by Section 4.2(d)(i) and (ii) have been taken with respect to such Pledged Equity and all other Pledged Equity.

(iii) All documentary, stamp or other taxes or fees owing in connection with the issuance, transfer or pledge of any Pledged Equity (or rights in respect thereof) have been paid.

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(iv) No restriction or condition exists with respect to the transfer, voting or capital of any Pledged Equity.

(v) Except as disclosed on Schedule 2, no Grantor or issuer of Pledged Equity has any outstanding subscription agreement, option, warrant or convertible security outstanding or any other right outstanding pursuant to which any Person would be entitled to have issued to it units of ownership interest in any issuer of Pledged Equity.

(vi) Grantor has taken or concurrently herewith is taking all actions necessary to perfect the Secured Party’s security interest in Pledged Equity, including any registration, filing or notice that may be necessary or advisable under Article 8 of the Uniform Commercial Code as in effect in the jurisdiction in which any issuer of such Pledged Equity was organized, and no other Person has any such registration, filing or notice in effect.

(vii) Schedule 2 correctly and completely reflects all Pledged Equity owned by Grantor as of the date hereof, and Schedule 2 accurately sets forth the percentage of each class or series of Equity issued by the issuer of such Pledged Equity that is held by Grantor.

(viii) Schedule 2 sets forth all agreements, including all operating, management, voting and shareholder agreements to which Grantor is a party or by which it is bound and that relate to Pledged Equity and a correct and complete copy of each such Agreement has been delivered to counsel for the Secured Party.

(ix) No issuer of Pledged Equity has made any call for capital that has not been fully paid by Grantor and each other holder of Equity of such issuer.

(x) Neither Grantor nor any other holder of equity issued by any issuer of Pledged Equity is in default under any agreement relating to Pledged Equity.

(xi) Neither the execution, delivery or performance of this Agreement nor the exercise of any right or remedy of the Secured Party hereunder will cause a default under any agreement in respect of Pledged Equity or otherwise adversely affect or diminish any Pledged Equity.

(xii) Grantor’s rights under any agreement in respect of Pledged Equity are enforceable in accordance with their terms, except as such enforcement may be limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors’ rights.

(e) To the full extent requested by the Secured Party, Grantor has delivered to the Secured Party all Instruments and other writings evidencing Pledged Debt in existence on the date hereof, in suitable form for transfer by delivery with any necessary endorsement or accompanied by fully executed instruments of transfer or assignment in blank.

(f) Grantor has no Deposit Account as of the date hereof other than those listed on Schedule 2.

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(g) Grantor has no Securities Account as of the date hereof.

(h) Grantor is the beneficiary of no Letter of Credit Right as of the date hereof other than those listed on Schedule 2.

(i) Grantor is not aware of any Commercial Tort Claim that it may have other than those listed on Schedule 2.

(j) Grantor is an entity of the type specified on Schedule 1 (or Schedule 1 to any security agreement supplement delivered by it pursuant to Section 7.3) opposite its name and is organized under the laws of the jurisdiction specified in such Schedule opposite its name, which is Grantor’s location pursuant to the UCC. Grantor has not conducted business under any name except the name in which it has executed this Agreement, which is the exact name that appears in Grantor’s Organizational Documents. Grantor’s organizational identification number, if any, is set forth in Schedule 1.

(k) Grantor has good and marketable title to the Collateral, free and clear of all Liens, except for the security interest created by this Agreement and any Permitted Liens. No effective financing statement or other registration or instrument similar in effect covering any Collateral is on file in any recording office except any that have been filed in favor of the Secured Party relating to this Agreement.

(1) There is no condition precedent to the effectiveness of this Agreement that has not been satisfied or waived.

(m) Grantor, if other than Company, has, independently and without reliance upon any Beneficiary and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and each other Note Document to which it is or is to be a party, and Grantor, if other than Company, has established adequate means of obtaining from each other Restricted Person on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of each other Restricted Person.

(n) The direct or indirect value of the consideration received and to be received by Grantor in connection herewith is reasonably worth at least as much as the liability of Grantor hereunder and under each other Note Document to which Grantor is a party, and the incurrence of such liability in return for such consideration may reasonably be expected to benefit Grantor, directly or indirectly. Grantor is not “insolvent” on the date hereof (that is, the sum of Grantor’s absolute and contingent liabilities, including its Obligations hereunder and under each other Note Document to which Grantor is a party, does not exceed the fair market value of Grantor’s assets). Grantor’s capital is adequate for the businesses in which Grantor is engaged and intends to be engaged. Grantor has not incurred (whether hereby or otherwise), nor does Grantor intend to incur or believe that it will incur, debts that will be beyond its ability to pay as such debts mature.

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All balance sheets, earning statements, financial data and other information concerning Grantor that have been furnished to Agent and each Holder to induce it to accept this Agreement (or otherwise furnished to Agent and each Holder in connection with the transactions contemplated hereby or associated herewith) fairly represent the financial condition of Grantor as of the dates and the results of Grantor’s operations for the periods for which the same are furnished. None of such balance sheets, earnings and cash flow statements, financial data and other information contains any untrue statement of a material fact or omits to state any material fact that is necessary to make any statements contained therein not misleading.

ARTICLE IV

Covenants

Section 4.1. General Covenants Applicable to Collateral. Grantor will at all times perform and observe the covenants contained in the Note Purchase Agreement that are applicable to Grantor (whether made by Grantor or made by Company with respect to Grantor) for so long as any Secured Obligation is outstanding. In addition, Grantor will, so long as this Agreement shall be in effect, perform and observe the following:

(a) Without limitation of any other covenant herein, Grantor shall not cause or permit any change in its name, identity or organizational structure, or any change to its jurisdiction of organization, unless Grantor shall have first:

(i) notified the Secured Party of such change at least 30 days prior to the effective date of such change (or such shorter notice as the Secured Party may approve),

(ii) taken all action requested by the Secured Party (under the following subsection (b) or otherwise) for the purpose of further confirming and protecting the Secured Party’s security interest and rights under this Agreement and the perfection and priority thereof, and

(iii) if requested by the Secured Party, provided to the Secured Party a legal opinion to the Secured Party’s satisfaction confirming that such change shall not adversely affect the Secured Party’s security interest and rights under this Agreement or the perfection or priority of such security interest.

In any notice delivered pursuant to this subsection, Grantor will expressly state that the notice is required by this Agreement and contains facts that may require additional filings of financing statements or other notices for the purposes of continuing perfection of the Secured Party’s security interest in the Collateral.

(b) Grantor will, at its expense and as from time to time requested by the Secured Party, promptly execute and deliver all further instruments, agreements, filings and registrations, and take all further action, in order:

(i) to confirm and validate this Agreement and the Secured Party’s rights and remedies hereunder;

(ii) to correct any error or omission in the description herein of the Secured Obligations or the Collateral or in any other provision hereof;

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(iii) to perfect, register and protect the security interest and rights created or purported to be created hereby or to maintain or upgrade in rank the priority of such security interests and rights;

(iv) to enable the Secured Party to exercise and enforce its rights and remedies hereunder; or

(v) otherwise to give the Secured Party the full benefits of the rights and remedies described in or granted under this Agreement.

In connection with the foregoing, Grantor will, whenever requested by the Secured Party:

(A) execute and file any financing statement, continuation statement or other filing or registration relating to the Secured Party’s security interest and rights hereunder, and any amendment thereto,

(B) mark its books and records relating to any Collateral to reflect that such Collateral is subject to this Agreement and the security interests hereunder, and

(C) whenever requested by Secured Party from time to time, Grantor will obtain from any account debtor or other obligor in respect of any property included in the Collateral an acknowledgment by such account debtor or obligor that such property is subject to this Agreement.

(c) Grantor shall not take any action that would, or fail to take any action if such failure would, impair the enforceability, perfection or priority of the Secured Party’s security interest in any Collateral.

Section 4.2. Covenants for Specified Types of Collateral. For so long as any Secured Obligation is outstanding:

(a) Grantor will, promptly upon request by the Secured Party, deliver to the Secured Party all Documents and Instruments included in the Collateral. All such Documents and Instruments shall be held by or on behalf of the Secured Party pursuant hereto and shall be delivered in suitable form for transfer by delivery with any necessary endorsement or shall be accompanied by fully executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Secured Party.

(b) If at any time there exists Collateral in which a security interest may be perfected by a notation on the certificate of title or similar evidence of ownership of such Collateral, Grantor will, promptly upon request by the Secured Party, deliver to the Secured Party all certificates of title and similar evidences of ownership, all applications therefor, and all other documents that are necessary or appropriate in order to register the Secured Party’s security interest in such Collateral on such certificate of title or other evidence of ownership or in otherwise perfecting the Secured Party’s security interest in such Collateral.

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(c) For each Deposit Account that Grantor at any time maintains, Grantor will, pursuant to an agreement in form and substance satisfactory to the Secured Party, at the Secured Party’s option, cause the depository bank that maintains such Deposit Account to agree to comply at any time with instructions from the Secured Party to such depository bank directing the disposition of funds from time to time credited to such Deposit Account, without further consent of Grantor, or take such other action as the Secured Party may approve in order to perfect the Secured Party’s security interest in such Deposit Account. This subsection shall not apply to any Deposit Account:

(i) for which the Secured Party is the depository bank, or

(ii) that is specially and exclusively used for payroll, payroll taxes, and other employee wage and benefit payments to or for the benefit of Grantor’s salaried employees.

(d) (i) If Grantor shall at any time hold or acquire any certificated security, Grantor will forthwith endorse, assign, and deliver the same to the Secured Party, accompanied by such instruments of transfer or assignment duly executed in blank as the Secured Party may from time to time specify.

(ii) If any security now or hereafter acquired by Grantor is uncertificated and is issued to Grantor or its nominee directly by the issuer thereof, Grantor will immediately notify the Secured Party of such issuance and, pursuant to an agreement in form and substance satisfactory to the Secured Party, cause the issuer thereof to agree to comply with instructions from the Secured Party as to such security, without further consent of Grantor or such nominee, or take such other action as the Secured Party may approve in order to perfect the Secured Party’s security interest in such security.

(iii) Grantor shall not permit any Pledged Equity to be held by a securities intermediary or held in a Securities Account. Grantor shall not permit any Pledged Equity that is an equity interest in a limited liability company or a limited partnership and that is a General Intangible to become Investment Property.

(iv) Grantor shall not:

(A) adjust, settle, compromise, amend or modify any right in respect of any Pledged Equity or any agreement relating thereto;

(B) permit the creation of any additional equity interest in any issuer of Pledged Equity, unless immediately upon creation the same is pledged to the Secured Party pursuant hereto to the extent necessary to give the Secured Party a first-priority security interest in such Pledged Equity after such creation that is in the aggregate at least the same percentage of such Pledged Equity as was subject hereto before such issue, whether such additional interest is presently vested or will vest upon the payment of money or the occurrence or nonoccurrence of any other condition; or

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(C) enter into any agreement, other than the Note Documents, creating, or otherwise permit to exist, any restriction or condition upon the transfer or exercise of any rights in respect of any Pledged Equity, including any restriction or condition upon the transfer, voting or control of any Pledged Equity.

(e) If Grantor is at any time a beneficiary under a letter of credit now or hereafter issued in favor of Grantor, Grantor shall promptly notify the Secured Party thereof and, at the request and option of the Secured Party, pursuant to an agreement in form and substance satisfactory to the Secured Party, either:

(i) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to the Secured Party of the proceeds of any drawing under such letter of credit; or

(ii) arrange for the Secured Party to become the transferee beneficiary of such letter of credit.

(f) If Grantor shall at any time after the date hereof have a Commercial Tort Claim, Grantor shall promptly notify the Secured Party in writing of the details thereof and execute and deliver to the Secured Party a supplement to Schedule 2 listing such Commercial Tort Claim, which supplement shall take effect without further action on the part of any party hereto or beneficiary hereof and shall make such Commercial Tort Claim collateral security subject to this Agreement.

ARTICLE V

Voting and Distribution Rights in Respect Of Pledged Equity

Section 5.1. Voting Rights. Grantor shall be entitled to exercise all voting and other consensual rights pertaining to the Pledged Equity or any part thereof for any purpose; provided that Grantor shall not exercise or refrain from exercising any such right if such action would have a material adverse effect on the value of any Pledged Equity or on the Secured Party’s security interest or the value thereof.

Section 5.2. Dividend Rights While No Event of Default Exists. Grantor shall be entitled to receive and retain all dividends, interest and other distributions paid in respect of the Pledged Equity if and to the extent that the payment thereof is not otherwise prohibited by the Note Documents; provided that:

(a) all dividends, interest and other distributions paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Equity;

(b) all dividends and other distributions paid or payable in cash in respect of any Pledged Equity in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid in surplus; and

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(c) all cash paid, payable or otherwise distributed in respect of principal of, or in redemption of, or in exchange for, any Pledged Equity,

shall be, and shall be forthwith delivered to the Secured Party to hold as, Collateral and shall, if received by Grantor, be received in trust for the benefit of the Secured Party, be segregated from the other property or funds of Grantor and be forthwith delivered to the Secured Party as Pledged Equity in the same form as so received (with any necessary indorsement).

Section 5.3. Actions by Secured Party. The Secured Party will execute and deliver (or cause to be executed and delivered) to Grantor all such instruments as Grantor may reasonably request for the purpose of enabling Grantor to receive the benefits Section 5.1 above and to receive the dividends or interest payments that it is authorized to receive and retain pursuant to Section 5.2 above.

Section 5.4. Rights While an Event of Default Exists. Upon the occurrence and during the continuance of an Event of Default:

(a) All rights of Grantor to receive the dividends, interest and other distributions that it would otherwise be authorized to receive and retain pursuant to Section 5.2 shall automatically cease, and all such rights shall thereupon become vested in the Secured Party, which shall thereupon have the sole right to receive and hold as Pledged Equity such dividends, interest and other distributions.

(b) All dividends, interest and other distributions that are received by Grantor contrary to subsection (a) above shall be received in trust for the benefit of the Secured Party, shall be segregated from other funds of Grantor, and shall be forthwith paid over to the Secured Party as Pledged Equity in the same form as so received (with any necessary indorsement).

ARTICLE VI

Remedies, Powers and Authorizations

Section 6.1. Normal Provisions Concerning the Collateral.

(a) Grantor irrevocably authorizes the Secured Party at any time and from time to time to file, without the signature of Grantor, in any jurisdiction any amendments to existing financing statements and any initial financing statements and amendments thereto that:

(i) indicate the Collateral as being:

(A) “all assets of Grantor and all proceeds thereof, and all rights and privileges with respect thereto” or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC or the granting clause of this Agreement; or

(B) of an equal or lesser scope or with greater detail;

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(ii) contain any other information required for the sufficiency or filing office acceptance of any financing statement or amendment, including whether Grantor is an organization, the type of organization and any organization identification number issued to Grantor; and

(iii) properly effectuate the transactions described in the Note Documents, as determined by the Secured Party in its discretion.

Grantor will furnish any such information to the Secured Party promptly upon request. A carbon, photographic or other reproduction of this Agreement or any financing statement describing any Collateral is sufficient as a financing statement and may be filed in any jurisdiction by the Secured Party. Grantor ratifies and approves all financing statements heretofore filed by or on behalf of the Secured Party in any jurisdiction in connection with the transactions contemplated hereby.

(b) Grantor appoints the Secured Party as Grantor’s attorney in fact and proxy, with full authority in the place and stead of Grantor and in the name of Grantor or otherwise, from time to time in the Secured Party’s discretion, to take any action and to execute any instrument that the Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement including any action or instrument:

(i) to obtain and adjust any insurance required to be paid to the Secured Party pursuant hereto;

(ii) to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any Collateral;

(iii) to receive, indorse and collect any drafts or other Instruments or Documents;

(iv) to enforce any obligations included in the Collateral; and

(v) to file any claims or take any action or institute any proceedings that the Secured Party may deem necessary or desirable for the collection of any Collateral or otherwise to enforce the rights of Grantor or the Secured Party with respect to any Collateral.

Such power of attorney and proxy are coupled with an interest, are irrevocable, and are to be used by the Secured Party for the sole benefit of the Beneficiaries.

(c) If Grantor fails to perform any agreement or obligation contained herein, the Secured Party may, but shall have no obligation to, itself perform, or cause performance of, such agreement or obligation, and the expenses of the Secured Party incurred in connection therewith shall be payable by Grantor under Section 6.6.

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(d) If any Collateral in which Grantor has granted a security interest hereunder is at any time in the possession or control of any warehouseman, bailee or any of Grantor’s agents, Grantor shall, upon the request of the Secured Party, notify such warehouseman, bailee or agent of the Secured Party’s rights hereunder and instruct such Person to hold all such Collateral for the Secured Party’s account subject to the Secured Party’s instructions. No such request by the Secured Party shall be deemed a waiver of any provision hereof that was otherwise violated by such Collateral being held by such Person prior to such instructions by Grantor.

(e) The Secured Party shall have the right, at any time in its discretion and without notice to Grantor, to transfer to or to register in the name of the Secured Party or any of its nominees any Investment Property or other Pledged Equity, subject only to the voting rights retained pursuant to Section 5.1.

(f) Anything herein to the contrary notwithstanding:

(i) Grantor shall remain liable to perform all duties and obligations under the agreements included in the Collateral to the same extent as if this Agreement had not been executed.

(ii) The exercise by the Secured Party of any right hereunder shall not release Grantor from any duty or obligation under any agreement included in the Collateral.

(iii) No Beneficiary shall have any obligation or liability under the agreements included in the Collateral by reason of this Agreement or any other Note Document, nor shall any Beneficiary be obligated to perform any duty or obligation of Grantor thereunder or take any action to collect or enforce any claim for payment assigned hereunder.

Section 6.2. Event of Default Remedies. If an Event of Default shall have occurred and be continuing, the Secured Party may from time to time in its discretion, without limitation and without notice except as expressly provided below:

(a) Exercise in respect of the Collateral, in addition to any other right and remedy provided for herein, under the other Note Documents, or otherwise available to it, all the rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the affected Collateral) and any other applicable law.

(b) Require Grantor to, and Grantor will at its expense and upon request of the Secured Party forthwith, assemble all or part of the Collateral as directed by the Secured Party and make it (together with all books, records and information of Grantor relating thereto) available to the Secured Party at a place to be designated by the Secured Party that is reasonably convenient to both parties.

(c) Prior to the disposition of any Collateral:

(i) to the extent permitted by applicable Law, enter, with or without process of law and without breach of the peace, any premises where any Collateral is or may be located, and without charge or liability to the Secured Party seize and remove such Collateral from such premises;

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(ii) have access to and use Company’s books, records, and information relating to the Collateral; and

(iii) store or transfer any Collateral without charge in or by means of any storage or transportation facility owned or leased by Grantor, process, repair or recondition any Collateral or otherwise prepare it for disposition in any manner and to the extent the Secured Party deems appropriate and, in connection with such preparation and disposition, use without charge any copyright, trademark, trade name, patent or technical process used by Grantor.

(d) Reduce its claim to judgment or foreclose or otherwise enforce, in whole or in part, the security interest created hereby by any available judicial procedure.

(e) Dispose of, at its office, on the premises of Grantor or elsewhere, any Collateral, as a unit or in parcels, by public or private proceedings, and by way of one or more contracts (but that the sale of any Collateral shall not exhaust the Secured Party’s power of sale, and sales may be made from time to time, and at any time, until all of the Collateral has been sold or until the Secured Obligations have been paid and performed in full), and at any such sale it shall not be necessary to exhibit any Collateral.

(f) Buy (or allow any Beneficiary to buy) Collateral, or any part thereof, at any public sale.

(g) Buy (or allow any Beneficiary to buy) Collateral, or any part thereof, at any private sale if any Collateral is of a type customarily sold in a recognized market or is of a type that is the subject of widely distributed standard price quotations.

(h) Apply by appropriate judicial proceedings for appointment of a receiver for the Collateral, or any part thereof, and Grantor consents to any such appointment.

(i) Comply with any applicable state or federal Law requirement in connection with a disposition of Collateral and such compliance shall not be considered to affect adversely the commercial reasonableness of any sale of Collateral.

(j) Sell Collateral without giving any warranty, with respect to title or any other matter.

(k) Notify (or to require Grantor to notify) any and all obligors under any Account, Payment Intangible, Instrument or other right to payment included in the Collateral of the assignment thereof to the Secured Party under this Agreement and to direct such obligors to make payment of all amounts due or to become due to Grantor thereunder directly to the Secured Party and, upon such notification and at the expense of Grantor and to the extent permitted by law, to enforce collection of any such Account, Payment Intangible, Instrument or other right to payment and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as Grantor could have done. After Grantor receives notice that the Secured Party has given (or after the Secured Party has required Grantor to give) any notice referred to above in this subsection:

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(i) all amounts and proceeds (including instruments and writings) received by Grantor in respect of any Account, Payment Intangible, Instrument or other right to payment included in the Collateral shall be received in trust for the benefit of the Secured Party hereunder, shall be segregated from other funds of Grantor and shall be forthwith paid over to the Secured Party in the same form as so received (with any necessary indorsement) to be, at the Secured Party’s discretion, either:

(A) held as cash collateral and released to Grantor upon the remedy of all Defaults and Events of Default, or

(B) while an Event of Default is continuing, applied as specified in Section 6.3, and

(ii) Grantor shall not adjust, settle or compromise the amount or payment of any Account, Payment Intangible, Instrument, or other right to payment included in the Collateral or release wholly or partly any account debtor or obligor thereon or allow any credit or discount thereon.

(l) Give any entitlement order, instruction or direction in respect of any of Investment Property to any issuer, securities intermediary, or commodity intermediary, and to withhold its consent to the exercise of any withdrawal rights or dealing rights by Grantor.

(m) Give an instruction to any depository bank that maintains a Deposit Account for Grantor with respect to the disposition of funds credited thereto or restrict the ability of Grantor to withdraw funds credited thereto, except as authorized in any other Note Document.

To the extent notice of sale shall be required by law with respect to Collateral, at least 10-days’ notice to Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification; provided that, if the Secured Party fails in any respect to give such notice, its liability for such failure shall be limited to the liability (if any) imposed on it by law under the UCC. The Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

Section 6.3. Application of Proceeds. If an Event of Default shall have occurred and be continuing, any cash held by or on behalf of the Secured Party and all cash proceeds received by or on behalf of the Secured Party in respect of any sale of, collection from, or other realization upon any Collateral may, in the discretion of the Secured Party, be held by the Secured Party as collateral for, and/or then or at any time thereafter applied in whole or in part by the Secured Party for the benefit of the Beneficiaries against, any Secured Obligation, in the following manner:

(a) First, paid to the Secured Party for any amounts then owing to the Secured Party pursuant to the Note Purchase Agreement or otherwise under the Note Documents or that has otherwise been incurred by the Secured Party in connection with the payment or other satisfaction of any Lien, encumbrance or adverse claim upon or against any Collateral or any other action that the Secured Party determines is reasonably appropriate in connection with the preservation or maintenance of the Collateral.

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(b) Second, paid to the Beneficiaries in payment of the Secured Obligations, ratably in accordance with the respective amounts thereof then owing to the Beneficiaries or as otherwise provided in the Note Purchase Agreement.

(c) Third, any surplus of such cash or cash proceeds held by or on the behalf of the Secured Party and remaining after payment in full of all the Secured Obligations shall be paid over to the applicable Grantor or to whatever Person may be lawfully entitled to receive such surplus.

Section 6.4. Deficiency. If the proceeds of any sale, collection or realization of or upon the Collateral of the Grantors by the Secured Party are insufficient to pay all Secured Obligations and all other amounts to which the Secured Party is entitled, Grantor shall be liable for the deficiency, together with interest thereon as provided in the Note Documents or (if no interest is so provided) at such other rate as shall be fixed by applicable law, together with the costs of collection and the reasonable fees of any attorneys employed by the Secured Party and/or the other Beneficiaries to collect such deficiency. Collateral may be sold at a loss to Grantor, and the Secured Party shall have no liability or responsibility to Grantor for such loss. Grantor acknowledges that a private sale may result in less proceeds than a public sale.

Section 6.5. Private Sales of Investment Property and Other Pledged Equity. The Beneficiaries may deem it impracticable to effect a public sale of any Investment Property or other Pledged Equity and may determine to make one or more private sales of such Investment Property or other Pledged Equity to a restricted group of purchasers that will be obligated to agree, among other things, to acquire the same for their own account, for investment and not with a view to the distribution or resale thereof. Any such private sale may be at a price and on other terms less favorable to the seller than the price and other terms that might have been obtained at a public sale. Any such private sale nevertheless shall be deemed to have been made in a commercially reasonable manner, and neither the Secured Party nor any other Beneficiary shall have any obligation to delay sale of any such Investment Property or other Pledged Equity for the period of time necessary to permit their registration for public sale under the Securities Act. Any offer to sell any such Collateral that has been:

(i) publicly advertised on a bona-fide basis in a newspaper or other publication of general circulation in the financial community of Oklahoma City, Oklahoma or New York, New York (to the extent that such an offer may be so advertised without prior registration under the Securities Act), or

(ii) made privately in the manner described above to not less than 15 bonafide offerees,

shall be deemed to involve a “public disposition” under Section 9-610(c) of the UCC, notwithstanding that such sale may not constitute a “public offering” under the Securities Act, and any Beneficiary may bid for such Collateral.

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Section 6.6. Indemnity and Expenses. In addition to, but not in qualification or limitation of, any similar obligations under other Note Documents:

(a) Grantors jointly and severally will indemnify the Secured Party, each other Beneficiary and any agent appointed pursuant to Section 6.9 from and against all claims, losses and liabilities growing out of or resulting from this Agreement (including enforcement of this Agreement), WHETHER OR NOT SUCH CLAIMS, LOSSES AND LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT CAUSED BY OR ARISING OUT OF SUCH INDEMNIFIED PARTY’S OWN NEGLIGENCE OR STRICT LIABILITY, except to the extent such claims, losses or liabilities are proximately caused by such indemnified party’s individual gross negligence or willful misconduct.

(b) Grantors jointly and severally will upon demand pay to the Secured Party the amount of all costs and expenses, including the fees and disbursements of the Secured Party’s counsel and of any experts and agents, that the Secured Party may incur in connection with:

(i) the transactions that give rise to this Agreement;

(ii) the preparation of this Agreement and the perfection and preservation of this security interest created under this Agreement;

(iii) the administration of this Agreement;

(iv) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any Collateral;

(v) the exercise or enforcement of any right of the Secured Party hereunder; or

(vi) the failure by any Grantor to perform or observe any of the provisions hereof.

Section 6.7. Non-Judicial Remedies. In granting to the Secured Party the power to enforce its rights hereunder without prior judicial process or judicial hearing, to the extent permitted by applicable Law, Grantor waives, renounces and knowingly relinquishes any legal right that might otherwise require the Secured Party to enforce its rights by judicial process and confirms that such remedies are consistent with the usage of trade, are responsive to commercial necessity and are the result of a bargain at arm’s length. The Secured Party may, however, in its discretion, resort to judicial process.

Section 6.8. Limitation on Duty of the Secured Party in Respect of Collateral. Beyond the exercise of reasonable care in the custody thereof, the Secured Party shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or as to the preservation of rights against prior parties or any other rights pertaining thereto. The Secured Party shall be deemed to have exercised reasonable care in the custody of Collateral in its possession if such Collateral is accorded treatment substantially equal to which that it accords its own property, and the Secured Party shall not be liable or responsible for any loss or damage to any Collateral, or for any diminution in the value thereof, by reason of the act or omission of any warehouseman, carrier, forwarding agency, consignee or other agent or bailee selected by the Secured Party in good faith.

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Section 6.9. Appointment of Other Agents. At any time, in order to comply with any legal requirement in any jurisdiction, the Secured Party may appoint any bank or trust company or one or more other Persons, either to act as co-agent or co-agents, jointly with the Secured Party, or to act as separate agent or agents on behalf of the Secured Party, with such power and authority as may be necessary for the effective operation of the provisions hereof and may be specified in the instrument of appointment.

ARTICLE VII

Miscellaneous

Section 7.1. Notices. Any notice or communication required or permitted hereunder shall be given in writing, sent in the manner provided in the Note Purchase Agreement, if to the Secured Party or to a Grantor that is a party to the Note Purchase Agreement, to the address set forth in the Note Purchase Agreement and, for any other Grantor, to the address specified opposite its name on Schedule 1, or to such other address or to the attention of such other individual as hereafter shall be designated in writing by the applicable party sent in accordance herewith. Any such notice or communication shall be deemed to have been given as provided in the Note Purchase Agreement for notices given thereunder.

Section 7.2.Amendments and Waivers. Except as provided in Section 4.2(f) or 7.3, no amendment of this Agreement shall be effective unless it is in writing and signed by Grantor and the Secured Party, and no waiver of this Agreement or consent to any departure by Grantor herefrom shall be effective unless it is in writing and signed by the Secured Party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for that given and to the extent specified in such writing. In addition, all such amendments and waivers shall be effective only if given with the necessary approvals required in the Note Purchase Agreement. No such amendment shall bind any Grantor not a party thereto, but no such amendment with respect to any Grantor shall require the consent of any other Grantor.

Section 7.3.Additional Grantors. Upon the execution and delivery, or authentication, by any Person of a security agreement supplement in substantially the form of Exhibit A:

(a) such Person shall become a Grantor hereunder, each reference in this Agreement and the other Note Documents to “Grantor” shall also mean and be a reference to such Person, and each reference in this Agreement and the other Note Documents to “Collateral” shall also mean and be a reference to the Collateral of such Person, and

(b) Schedule 2 attached to such security agreement supplement shall be incorporated into and become a part of and supplement Schedule 2 hereto, and the Secured Party may attach such supplemental schedule to such Schedule; and each reference to such Schedule shall mean and be a reference to such Schedule as supplemented pursuant to such supplement.

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Section 7.4. Preservation of Rights. No failure on the part of the Secured Party or any other Beneficiary to exercise, and no delay in exercising, any right hereunder or under any other Note Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The rights and remedies of the Secured Party provided herein and in the other Note Documents are cumulative and are in addition to, and not exclusive of, any rights or remedies provided by law or otherwise.

Section 7.5. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or invalidity without invalidating the remaining portions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.

Section 7.6. Survival. Each representation and warranty, covenant and other obligation of Grantor herein shall survive the execution and delivery of this Agreement, the execution and delivery of any other Note Document and the creation of the Secured Obligations.

Section 7.7. Binding Effect and Assignment. This Agreement shall:

(a) be binding on Grantor and its successors, and

(b) inure, together with all rights and remedies of the Secured Party hereunder, to the benefit of the Secured Party and the other Beneficiaries and their respective successors, transferees and assigns.

Without limiting the generality of the foregoing, the Secured Party and any other Beneficiary may (except as otherwise provided in any Note Document) pledge, assign or otherwise transfer any right under any Note Document to any other Person, and such other Person shall thereupon become vested with all benefits in respect thereof granted herein or otherwise. No right or duty of Grantor hereunder may be assigned or otherwise transferred without the prior written consent of the Secured Party.

Section 7.8. Release of Collateral; Termination.

(a) Upon any sale, lease, transfer or other disposition of any Collateral of Grantor in accordance with the Note Documents (other than sales of Inventory in the ordinary course of business), the Secured Party will, at Grantor’s expense, execute and deliver to Grantor such documents as Grantor shall reasonably request to evidence the release of such Collateral from the assignment and security interest granted hereby; provided that:

(i) at the time of such request and such release no Default shall have occurred and be continuing;

(ii) Grantor shall have delivered to the Secured Party, at least 10 Business Days prior to the date of the proposed release (or by such lesser notice as the Secured Party may approve), a written request for release describing the item of Collateral and the terms of the sale, lease, transfer or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a form of release for execution by the Secured Party and a certificate of Grantor to the effect that the transaction is in compliance with the Note Documents and such other matters as the Secured Party may request; and

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(iii) if any Note Document provides for any application of the proceeds of any such sale, lease, transfer or other disposition, or any payment to be made, in connection therewith, such proceeds shall have been applied or payment made as provided therein.

(b) As and when provided in the Note Purchase Agreement, this Agreement and the security interest created hereby shall terminate, all rights in the Collateral shall revert to Grantors and the Secured Party, at a Grantor’s request and at its expense, will:

(i) return to Grantor such of Grantor’s Collateral in the Secured Party’s possession as shall not have been sold or otherwise disposed of or applied pursuant to the terms hereof, and

(ii) execute and deliver to Grantor such documents as Grantor shall reasonably request to evidence such termination.

No Grantor is authorized to file any financing statement or amendment or termination statement with respect to any financing statement originally filed in connection with this Agreement without the prior written consent of the Secured Party, subject to Grantors’ rights under Sections 9-509(d)(2) and 9-518 of the UCC. Notwithstanding the foregoing, Sections 6.6, 7.9 and 7.14 shall survive the termination of this Agreement.

Section 7.9. Limitation on Interest. Section 12.9 of the Note Purchase Agreement, which limits the interest for which Grantor is obligated, is incorporated herein by reference.

Section 7.10. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

Section 7.11. Final Agreement. This Agreement and the other Note Documents represent the final agreement between the parties hereto and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties hereto. There are no unwritten oral agreements between the parties hereto.

Section 7.12. Counterparts; Facsimile. This Agreement may be separately executed in any number of counterparts, all of that when so executed shall be deemed to constitute one and the same Agreement. This Agreement may be validly delivered by facsimile or other electronic transmission of an executed counterpart of the signature page hereof.

Section 7.13. Acceptance by the Secured Party. By its acceptance of the benefits hereof, the Secured Party and the Beneficiaries shall be deemed to have agreed to be bound hereby and to perform any obligation on their part set forth herein.

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Section 7.14. Jurisdiction, Etc. this Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without regard to principles of conflicts of laws. Grantor hereby irrevocably (a) submits itself to the non-exclusive jurisdiction of the state and federal courts sitting in the State and County of New York, (b) agrees and consents that service of process may be made upon it and any of its Subsidiaries in any legal proceeding relating to the Note Documents or the Obligations by any means allowed under New York or federal law, and (c) waives any objection that it may now or hereafter have to the venue of any such proceeding being in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Grantor hereby makes the foregoing submissions, agreements, consents and waivers on behalf of and with respect to each of its Subsidiaries.

Section 7.15. Restatement. This Agreement renews and restates that certain Security Agreement dated as of August 29, 2005, executed by G M Oil Properties, Inc., an Oklahoma corporation as successor by merger to Steadfast Resources, Inc. (“GM”), in favor of the Secured Party (as amended, supplemented, restated or otherwise modified from time to time, the “Original Security Agreement”). The Original Security Agreement secured certain obligations under that certain Note Purchase Agreement dated as of August 29, 2006 by and among, Secured Party and the Holders (as defined therein), which obligations were assumed by Company pursuant to that certain Assumption Agreement of even date herewith. All of the terms and provisions of this Agreement shall supersede the terms and provisions of the Original Security Agreement. This Agreement renews, extends and continues without interruption all Liens existing by the Original Security Agreement, although the terms and provisions and conditions of such Liens shall hereafter be governed in all respects by this Agreement.

[The remainder of this page is intentionally left blank]

[Security Agreement]

23

IN WITNESS WHEREOF, Grantor has executed and delivered this Agreement as of the date first-above written.

RIO VISTA PENNY LLC
By:	/s/ Ian Bothwell
	Ian Bothwell
	Manager
RIO VISTA GO LLC
By:	/s/ Ian Bothwell
	Ian Bothwell
	Manager
RIO VISTA ECO LLC
By:	/s/ Ian Bothwell
	Ian Bothwell
	Manager
GO, LLC
By:	/s/ Ian Bothwell
	Ian Bothwell
	Manager
MV PIPELINE COMPANY
By:	/s/ Ian Bothwell
	Ian Bothwell
	President

[Signature Page to Security Agreement]

SCHEDULE 1
to
SECURITY AGREEMENT

Address for Notices and Jurisdiction of Organization

		Jurisdiction of
Name of Grantor	Type of Organization	Organization	Address for Notices
Rio Vista Penny LLC	Limited liability company	Oklahoma	2601 Northwest Expressway #902E
			Oklahoma City, Oklahoma 73112
Rio Vista ECO LLC	Limited liability company	Oklahoma	2601 Northwest Expressway #902E
			Oklahoma City, Oklahoma 73112
Rio Vista GO LLC	Limited liability company	Oklahoma	2601 Northwest Expressway #902E
			Oklahoma City, Oklahoma 73112
GO, LLC	Limited liability company	Oklahoma	2601 Northwest Expressway #902E
			Oklahoma City, Oklahoma 73112
MV Pipeline Company	Corporation	Oklahoma	2601 Northwest Expressway #902E
			Oklahoma City, Oklahoma 73112

[Security Agreement]

Schedule 1

SCHEDULE 2
to
SECURITY AGREEMENT

Scheduled Collateral

INDEBTEDNESS

Promissory Note dated November 19, 2007 from Rio Vista GO LLC, as Borrower, to
Rio Vista Penny LLC, as Lender, in the principal amount of $2,200,000, payable on demand.

DEPOSIT ACCOUNTS

None.

EQUITY AND RELATED MATTERS

50,000 shares of common stock in MV Pipeline Company, which constitutes 100% of the
issued and outstanding stock in MV Pipeline Company.

LETTER OF CREDIT RIGHTS

None.

COMMERCIAL TORT CLAIMS

None.

[Security Agreement]

Schedule 2

EXHIBIT A
to
SECURITY AGREEMENT

FORM OF GRANTOR ACCESSION AGREEMENT

                     __, 20 __

TCW Asset Management Company,
as the Secured Party for the Beneficiaries referred to
in the Security Agreement referred to below

Attn:

Ladies and Gentlemen:

The undersigned refers to:

(i) the Note Purchase Agreement dated as of November 19, 2007 (as heretofore or hereafter amended, supplemented or restated, the “Note Purchase Agreement”) among Rio Vista Penny LLC, an Oklahoma limited liability company the Holders party thereto, and you, as administrative agent, and

(ii) the Security Agreement dated as of November 19, 2007 (the “Security Agreement”) made by the Grantors from time to time party thereto in your favor for the benefit of the Beneficiaries.

Terms defined in the Note Purchase Agreement or the Security Agreement and not otherwise defined herein are used herein as defined in the Note Purchase Agreement or the Security Agreement.

SECTION 1. Grant of Security. The undersigned grants to you, for the benefit of the Beneficiaries, a security interest in all of its right, title and interest in and to all of the Collateral of the undersigned, whether now owned or hereafter acquired by the undersigned, wherever located and whether now or hereafter existing or arising, including the property of the undersigned set forth on the attached supplemental schedules to the Schedules to the Security Agreement.

SECTION 2. Security for Obligations. The grant of a security interest in, the Collateral by the undersigned under this Agreement and the Security Agreement secures the payment of the Secured Obligations. Without limiting the generality of the foregoing, this Security Agreement Supplement and the Security Agreement secures the payment of all amounts that constitute part of the Secured Obligations and that would be owed by any Restricted Person to any Beneficiary under the Note Documents but for the fact that such Secured Obligations are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving a Restricted Person.

[Security Agreement]

Exhibit A — 1

SECTION 3. Information Relating to the Undersigned. The undersigned is an entity of the type specified on Schedule 1 and is organized under the laws of the jurisdiction specified on Schedule 1 and its address for notices is specified on Schedule 1. Its organizational identification number, if any, is set forth in Schedule 1.

SECTION 4. Supplement to Security Agreement Schedule 2. The undersigned has attached hereto a supplemental Schedule 2 to Schedule 2 to the Security Agreement, and the undersigned certifies, as of the date first-above written, that such supplemental schedule has been prepared by the undersigned in substantially the form of Schedule to the Security Agreement and is true and complete.

SECTION 5. Representations, Warranties, Agreements, Waivers. The undersigned as of the date hereof makes each representation, warranty, agreement (including indemnification agreements), waiver, and acknowledgement set forth in the Security Agreement (as supplemented by the attached supplemental schedules).

SECTION 6. Obligations Under the Security Agreement. As of the date first-above written, the undersigned hereby joins the Security Agreement as a party thereto and as a Grantor thereunder and hereby agrees to be bound as a Grantor by all of the terms and provisions of the Security Agreement. As of the date first-above written, each reference in the Security Agreement to a “Grantor” shall also mean and be a reference to the undersigned.

SECTION 7. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the jurisdiction whose laws the Security Agreement provides will govern such agreement.

Very truly yours, [GRANTOR]
By
	Name:
	Title:

ACCEPTED AND AGREED AS OF THE DATE FIRST-ABOVE STATED.
TCW ASSET MANAGEMENT COMPANY, as Secured Party
By
	Name:
	Title:

[Security Agreement]

Exhibit A — 2

SCHEDULE 1
to
SECURITY AGREEMENT SUPPLEMENT

Address for Notices and Jurisdiction of Organization

		Jurisdiction of
Name of Grantor	Type of Organization	Organization	Address for Notices

[Security Agreement]

Exhibit A Schedule 1

SCHEDULE 2
to
SECURITY AGREEMENT SUPPLEMENT

Scheduled Collateral

AGREEMENTS

[List]

INDEBTEDNESS

[List]

DEPOSIT ACCOUNTS

[List]

EQUITY AND RELATED MATTERS

[Include descriptions of equity, percentage ownership and any shareholder, voting,
operating or similar agreements.]

LETTER OF CREDIT RIGHTS

[List]

COMMERCIAL TORT CLAIMS

[List]

[Security Agreement]

Exhibit A Schedule 2

EX-10.55

Exhibit 10.55

ASSUMPTION AGREEMENT

THIS ASSUMPTION AGREEMENT (this “Agreement”) dated as of November 19, 2007, is made by and among G M Oil Properties, Inc., an Oklahoma corporation (“GM Oil”), Rio Vista Penny LLC, an Oklahoma limited liability company (“Penny”), TCW Asset Management Company, as administrative agent (“Administrative Agent”), and the holders party to the Note Purchase Agreement described below (“Holders”).

WITNESSETH THAT:

WHEREAS, GM Oil has issued and sold to Holders those certain promissory notes dated as of August 29, 2005, payable to the order of Holders, in the aggregate original principal amount of $30,000,000 (the “Notes”), the payment of which Notes is secured by the documents listed in Exhibit A attached hereto and made a part hereof (the “Security Documents”), covering certain real and personal property described therein (the “Mortgaged Property”), reference being here made to the Note Purchase Agreement (as hereinafter defined) and the Security Documents and the record thereof for all purposes and for the meaning as set forth therein of all capitalized terms used in this Agreement and not otherwise defined herein (the foregoing documents and all other documents executed by GM Oil and/or any other party or parties evidencing or securing or otherwise in connection with the loans evidenced by the Notes being herein collectively called the “Note Documents”);

WHEREAS, the Notes were issued and sold pursuant to that certain Note Purchase Agreement dated as of August 29, 2005 (as amended, supplemented or restated, the “Note Purchase Agreement”), by and among GM Oil, Administrative Agent, and Holders;

WHEREAS, certain of the Note Documents provide that the indebtedness secured thereby may, at the option of the holders thereof, be accelerated if any or all of the Mortgaged Property is sold or conveyed without the consent of Holders;

WHEREAS, GM Oil and Penny entered into that certain Asset Purchase Agreement dated as of October 1, 2007, as amended by that certain Amendment to Asset Purchase Agreement dated of even date herewith between GM Oil and Penny (as so amended, the “Asset Purchase Agreement”), wherein GM Oil agreed to convey all of the Mortgaged Property to Penny and Penny agreed to assume all indebtedness and obligations owing by GM Oil under the Note Documents as set forth therein;

WHEREAS, Holders have been requested to consent to the conveyance of the Mortgaged Property to Penny and Holders are willing to so consent upon compliance with the terms and provisions of this Agreement;

WHEREAS, Defaults and Events of Defaults now exist and are continuing under the Note Purchase Agreement; and

WHEREAS, Holders are the owners and holders of the Notes, and Penny is contemporaneously herewith becoming the owner of the legal and equitable title to the Mortgaged Property;

[ASSUMPTION AGREEMENT]

NOW, THEREFORE, for and in consideration of the mutual covenants contained herein and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Holders hereby consent to the above described conveyance of the Mortgaged Property upon the terms and conditions set forth in the Asset Purchase Agreement, subject to the liens, security interests and assignments created by the Security Documents and waives their option to accelerate as provided in certain of the Note Documents arising in respect of such conveyance, without prejudice to its rights with respect to any future conveyance of said property or any interest therein.

2. Penny hereby assumes and promises to pay according to the terms thereof all Obligations and also assumes and promises to keep and perform all other covenants and obligations in the Note Purchase Agreement to be performed by the borrower thereunder, and all other obligations of the maker of the Notes under any and all other Note Documents.

3. Holders hereby agree that GM Oil shall have no obligation or liability under the Note Documents from and after the date of this Agreement.

4. Penny and GM Oil have requested that Administrative Agent and Holders waive the Designated Defaults (defined below), and Administrative Agent and Holders have agreed to do so on the terms set forth herein. Accordingly, subject to the conditions and limitations set forth herein, and the agreements of Penny and GM Oil contained herein, Administrative Agent and Holders hereby waive the Designated Defaults; provided that such waiver (a) shall not be deemed or construed as a waiver of the obligation of Penny to pay the amounts due described in clauses (a) and (b) of the definition of Designated Defaults, and (b) Penny shall pay all accrued and unpaid interest that was due and payable on September 27, 2007 in the amount of $590,868.06 on or before November 21, 2007.

As used in this Section 4, “Designated Defaults” means the following Defaults or Events of Default that have occurred as of the date of this Agreement and are continuing under the Note Purchase Agreement:

(a) On the Quarterly Payment Date of June 28, 2007, GM Oil failed to pay the Minimum Scheduled Quarterly Principal Payment, as required by Section 2.8 of the Note Purchase Agreement.

(b) On the Quarterly Payment Date of September 27, 2007, GM Oil failed to pay the Minimum Scheduled Quarterly Principal Payment, together with all accrued and unpaid interest, as required by Section 2.8 of the Note Purchase Agreement.

(c) GM Oil failed to deliver to Holder Parties a semi-annual Engineering Report, effective as of May 1, 2007, prior to June 1, 2007, as required by Section 7.2(i) of the Note Purchase Agreement.

(d) GM Oil’s failure to comply with Section 7.4(b) of the Note Purchase Agreement by notifying each Holder Party in writing of the occurrence of the above Defaults or Events of Default under the Note Purchase Agreement.

[ASSUMPTION AGREEMENT]

2

(e) The acquisition and ownership by Penny Petroleum Corporation, an Oklahoma corporation, and GO, LLC, an Oklahoma limited liability company, of interests in the Project Area and their failure to transfer or convey such interests to GM Oil.

(f) The acquisition and ownership by Concorde Resource Corp., an Oklahoma corporation, of interests in the Project Area and its failure to transfer or convey such interests to GM Oil.

5. Penny hereby represents and warrants that (a) Penny, upon the consummation of the transfer set forth in the Asset Purchase Agreement, is the sole legal and beneficial owner of the Mortgaged Property; (b) Penny is a limited liability company that is duly organized and legally existing in good standing under the laws of the State of Oklahoma; (c) the execution and delivery of, and performance under this Agreement are within Penny’s power and authority without the joinder or consent of any other party and have been duly authorized by all requisite action and are not in contravention of the powers of Penny’s certificate of limited liability company, operating agreement, or other company papers; (d) this Agreement constitutes the legal, valid and binding obligation of Penny enforceable in accordance with its terms; (e) the execution and delivery of this Agreement by Penny do not contravene, result in a breach of or constitute a default under any deed of trust, loan agreement, indenture or other contract, agreement or undertaking to which Penny is a party or by which Penny or any of its properties may be bound (nor would such execution and delivery constitute such a default with the passage of time or the giving of notice or both) and do not violate or contravene any law, order, decree, rule or regulation to which Penny is subject; and (f) there exists no uncured Default or Event of Default under the Notes, the Note Purchase Agreement, or any other Note Document (other than the Designated Defaults). Penny agrees to indemnify and hold each Holder Party harmless against any loss, claim, damage, liability or expense (including without limitation attorneys’ fees) incurred as a result of any representation or warranty made by it herein proving to be untrue in any respect.

6. GM Oil hereby represents and warrants that (a) GM Oil, prior to the transfer set forth in the Asset Purchase Agreement, is the sole legal and beneficial owner of the Mortgaged Property; (b) GM Oil is a corporation duly incorporated and legally existing under the laws of the State of Oklahoma; (c) the execution and delivery of, and performance under this Agreement are within GM Oil’s power and authority without the joinder or consent of any other party and have been duly authorized by all requisite action and are not in contravention of the powers of GM Oil’s articles of incorporation, by-laws or other corporate papers; (d) this Agreement constitutes the legal, valid and binding obligation of GM Oil enforceable in accordance with its terms; (e) the execution and delivery of this Agreement by GM Oil do not contravene, result in a breach of or constitute a default under any deed of trust, loan agreement, indenture or other contract, agreement or undertaking to which GM Oil is a party or by which GM Oil or any of its properties may be bound (nor would such execution and delivery constitute such a default with the passage of time or the giving of notice or both) and do not violate or contravene any law, order, decree, rule or regulation to which GM Oil is subject; and (f) there exists no uncured Default or Event of Default under the Notes, the Note Purchase Agreement, or any other Note Document (other than the Designated Defaults). GM Oil agrees to indemnify and hold each Holder Party harmless against any loss, claim, damage, liability or expense (including without limitation attorneys’ fees) incurred as a result of any representation or warranty made by it herein proving to be untrue in any respect.

[ASSUMPTION AGREEMENT]

3

7. Penny or GM Oil, as appropriate, upon request from Administrative Agent, agrees to execute such other and further documents as may be reasonably necessary or appropriate to consummate the transactions contemplated herein or to perfect the Liens and security interests intended to secure the payment of the Loans evidenced by the Notes.

8. If Penny shall fail to keep or perform any of the covenants or agreements contained herein or if any statement, representation or warranty contained herein by Penny is false, misleading or erroneous in any material respect, it shall constitute an Event of Default under the Note Purchase Agreement and Holder Parties shall be entitled at their option to exercise any and all of their respective rights and remedies granted pursuant to the Security Documents or any other Note Document or which any Holder Party may otherwise be entitled, whether at law or in equity. If GM Oil shall fail to keep or perform any of its covenants or agreements contained herein or if any statement, representation or warranty contained herein by GM Oil is false, misleading or erroneous in any material respect, the release of GM Oil contained in Section 3 hereof shall be null and void and of no further force or effect.

9. The Notes and the other Note Documents are hereby ratified and confirmed in all respects. All liens, security interests, mortgages and assignments granted or created by or existing under the Note Documents remain unchanged and continue, unabated, in full force and effect, Penny’s obligation to repay the Notes and the other Obligations.

10. Penny and GM Oil each hereby acknowledges that the liens, security interests and assignments created and evidenced by the Security Documents are valid and subsisting.

11.  Release of Claims. To induce Holder Parties to enter into this Agreement, Penny and GM Oil each hereby (a) represents and warrants that as of the date of this Agreement there are no claims or offsets against or defenses or counterclaims to its obligations under the Note Documents, and waives any and all such claims, offsets, defenses, or counterclaims, whether known or unknown, arising prior to the date of this Agreement, (b) releases and forever discharges the Released Persons from any and all Released Claims, and (c) covenants not to assert (and not to assist or enable any other Person to assert) any Released Claim against any Released Person. Penny and GM Oil acknowledge and agree that such release is a general release of any and all Released Claims that constitutes a full and complete satisfaction for all or any alleged injuries or damages arising out of or in connection with the Released Claims, all of which are herein compromised and settled.

[ASSUMPTION AGREEMENT]

4

As used in this Section 11, the following terms shall have the following meanings:

“Released Claims” means any and all actions, causes of action, judgments, executions, suits, debts, claims, demands, controversies, liabilities, obligations, damages and expenses of any and every character (whether known or unknown, liquidated or unliquidated, absolute or contingent, acknowledged or disputed, direct or indirect), at law or in equity, of whatsoever kind or nature (including without limitation claims of usury), whether heretofore or hereafter accruing, for or because of any matter or things done, omitted or suffered to be done by any of the Released Persons prior to and including the date hereof that in any way directly or indirectly arise out of or in any way are connected to (a) any of the Note Documents or any default or event of default thereunder, (b) any negotiation, discussion, enforcement action, agreement or failure to agree related to any Note Document or any default or event of default thereunder, or (c) any action, event, occurrence, or omission otherwise related to the rights, duties, obligations and relationships among the various Related Parties and Seller Parties.

“Released Persons” means Administrative Agent, Holders, and Royalty Owner, together with their respective employees, agents, attorneys, officers, partners, shareholders, accountants, consultants, and directors, and their respective successors and assigns.

12. This Agreement supersedes and merges all prior and contemporaneous promises, representations and agreements. No modification of this Agreement, or any waiver of rights hereunder, shall be effective unless made by supplemental agreement, in writing, executed by the parties hereto. This Agreement may not in any way be explained or supplemented by a prior, existing or future course of dealings between the parties or by any prior, existing, or future performance between the parties pursuant to this Agreement or otherwise.

13. All notices, requests, consents, demands and other communications required or permitted under this Agreement or any Note Document shall be in writing, unless otherwise specifically provided in such Note Document, and shall be deemed sufficiently given or furnished if delivered by personal delivery, by telecopy or telex, by delivery service with proof of delivery, or by registered or certified United States mail, postage prepaid, to the parties hereto at their respective addresses set forth below (unless changed by similar notice in writing given by the particular party whose address is to be changed). Any such notice or communication shall be deemed to have been given (a) in the case of personal delivery or delivery service, as of the date of first attempted delivery during normal business hours at the address provided herein, (b) in the case of telecopy or telex, upon receipt, or (c) in the case of registered or certified United States mail, three days after deposit in the mail.

If to GM Oil:	G M Oil Properties, Inc.
	111 S. Main Street
	Eufaula, Oklahoma 74432
	Attention: Bill O. Wood
	Facsimile: (325) 672-8947
If to Penny:	Rio Vista Penny LLC
	2121 Rosecrans Avenue, Suite 3355
	El Segundo, California 90245
	Attn.: Ian Bothwell Facsimile: (310) 563-6255

[ASSUMPTION AGREEMENT]

5

If to Administrative
Agent or Holders:	TCW Asset Management Company
	333 Clay Street, Suite 4150
	Houston, TX 77002
	Attention: Patrick Hickey
	Facsimile: (713) 615-7460
With copies to:	TCW Asset Management Company
	865 South Figueroa Street, Suite 1800
	Los Angeles, CA 90017
	Attention: R. Blair Thomas Facsimile: (213) 244-0604

14. Penny hereby acknowledges that the execution of this Agreement by Administrative Agent and Holders is not intended nor shall it be construed as (i) an actual or implied waiver of any subsequent default under the Notes, the Note Purchase Agreement or any other Note Document or (ii) an actual or implied waiver of any condition or obligation imposed upon Penny pursuant to the Notes, the Note Purchase Agreement or any other Note Document, except to the extent expressly set forth herein.

15. Upon execution of this Agreement, Penny shall deliver to Administrative Agent in form and substance satisfactory to Administrative Agent, an opinion of counsel to Penny stating that this Agreement is valid and binding upon Penny and enforceable in accordance with its terms.

16. Contemporaneously with the execution and delivery hereof, Penny shall pay, or cause to be paid, all costs and expenses incident to the preparation hereof and the consummation of the transactions specified herein, including without limitation fees and expenses of legal counsel to Administrative Agent and recording fees.

17. All representations, warranties, covenants and agreements of Penny and GM Oil herein shall survive the execution and delivery of this Agreement and the performance hereof, and shall further survive until all of the Obligations are paid in full. All statements and agreements contained in any certificate or instrument delivered by Penny or GM Oil hereunder or under the Note Purchase Agreement to Administrative Agent or Holders shall be deemed to constitute representations and warranties by, and/or agreements and covenants of, Penny or GM Oil, as applicable, under this Agreement and under the Note Purchase Agreement.

18. This Agreement may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All such counterparts shall be construed together and shall constitute one instrument, but in making proof hereof it shall only be necessary to produce one such counterpart. This Agreement may be validly executed by facsimile or other electronic transmission.

19. If any covenant, condition, or provision herein contained is held to be invalid by final judgment of any court of competent jurisdiction, the invalidity of such covenant, condition, or provision shall not in any way affect any other covenant, condition or provision herein contained.

[ASSUMPTION AGREEMENT]

6

20. It is expressly agreed by the parties hereto that time is of the essence with respect to this Agreement.

21. Each of GM Oil and Penny represents and warrants to Administrative Agent and each Holder that it (a) understands fully the terms of this Agreement and the consequences of the execution and delivery hereof, (b) has been afforded an opportunity to have this Agreement reviewed by, and to discuss this Agreement with, such attorneys and other persons as it may wish, and (c) has entered into this Agreement of its own free will and accord and without threat, duress or other coercion of any kind by any Person. The parties hereto acknowledge and agree that neither this Agreement shall not be construed more favorably in favor of one than the other based upon which party drafted the same, it being acknowledged that all parties hereto contributed substantially to the negotiation and preparation of this Agreement.

22. This Agreement shall be governed by and construed in accordance with the Laws of the State of New York.

23. This Agreement is a Note Document, and all provisions in the Note Purchase Agreement pertaining to Note Documents apply hereto.

24. The terms and provisions hereof shall be binding upon and inure to the benefit of the parties hereto, their successors and assigns.

25. This written Agreement and the other Note Documents represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties.

[Remainder of page intentionally left blank.]

[ASSUMPTION AGREEMENT]

7

IN WITNESS WHEREOF, this Agreement is executed as of the date first above written.

GM OIL: GM OIL PROPERTIES, INC.
By:	/s/ Bill O. Wood
	Bill O. Wood
	Chief Executive Officer
PENNY: RIO VISTA PENNY LLC
By:	/s/ Ian Bothwell
	Ian Bothwell
	Manager
ADMINISTRATIVE AGENT: TCW ASSET MANAGEMENT COMPANY, Administrative Agent
By:
	Name:
	Title
By:
	Name:
	Title

[ASSUMPTION AGREEMENT]

IN WITNESS WHEREOF, this Agreement is executed as of the date first above written.

GM OIL: G M OIL PROPERTIES, INC.
By:	/s/ Bill O. Wood
	Bill O. Wood
	Chief Executive Officer
PENNY: RIO VISTA PENNY LLC
By:	/s/ Ian Botwell
	Ian Botwell Manager
ADMINISTRATIVE AGENT: TCW ASSET MANAGEMENT COMPANY, Administrative Agent
By:	/s/ [ILLEGIBLE]
	Name:
	Title:
By:	/s/ [ILLEGIBLE]
	Name:
	Title:

[ASSUMPTION AGREEMENT]

HOLDERS:
TCW ENERGY FUND X — NL, L.P., a California limited partnership
By:	TCW (ENERGY X) LLC, its General Partner:
	By:	TCW Asset Management Company, its Managing Member
		By:	/s/ [ILLEGIBLE]
			Name:
			Title:
		By:	/s/ [ILLEGIBLE]
			Name:
			Title:
TCW ENERGY FUND XB — NL, L.P., a California limited partnership
By:	TCW (ENERGY X) LLC, its General Partner:
	By:	TCW Asset Management Company, its Managing Member
		By:	/s/ [ILLEGIBLE]
			Name:
			Title:
		By:	/s/ [ILLEGIBLE]
			Name:
			Title:

[ASSUMPTION AGREEMENT]

TCW ENERGY FUND XC — NL, L.P., a California limited partnership
By:	TCW (ENERGY X) LLC, its General Partner:
	By:	TCW Asset Management Company, its Managing Member
		By:	/s/ [ILLEGIBLE]
			Name:
			Title:
		By:	/s/ [ILLEGIBLE]
			Name:
			Title:
TCW ENERGY FUND XD — NL, L.P., a California limited partnership
By:	TCW (ENERGY X) LLC, its General Partner:
	By:	TCW Asset Management Company, its Managing Member
		By:	/s/ [ILLEGIBLE]
			Name:
			Title:
		By:	/s/ [ILLEGIBLE]
			Name:
			Title:

[ASSUMPTION AGREEMENT]

TCW ASSET MANAGEMENT COMPANY, a California corporation, as Investment Manager under the Amended and Restated Investment Management and Custody Agreement dated as of December 3, 2003 among Ensign Peak Advisors, Inc., TCW Asset Management Company and Trust Company of the West, a California trust company, as Sub-Custodian
By:	/s/ [ILLEGIBLE]
	Name:
	Title:
By:	/s/ [ILLEGIBLE]
	Name:
	Title:

TCW ASSET MANAGEMENT COMPANY, a California corporation, as Investment Manager under the Amended and Restated Investment Management and Custody Agreement dated as of December 11, 2003 among Harry L. Bradley, Jr. Partition Trust, Harry L. Bradley, Jr. Trust, Jane Bradley Uihlien Pettit Partition Trust, Jane Bradley Uihlien Trust, TCW Asset Management Company and Trust Company of the West, a California trust company, as Sub-Custodian
By:	/s/ [ILLEGIBLE]
	Name:
	Title:
By:	/s/ [ILLEGIBLE]
	Name:
	Title:

[ASSUMPTION AGREEMENT]

TCW ASSET MANAGEMENT COMPANY, a California corporation, as Investment Manager under the Amended and Restated Investment Management and Custody Agreement dated as of March 18, 2004 among ING Life Insurance and Annuity Company, TCW Asset Management Company and Trust Company of the West, a California trust company, as Sub-Custodian
By:	/s/ [ILLEGIBLE]
	Name:
	Title:
By:	/s/ [ILLEGIBLE]
	Name:
	Title:

[ASSUMPTION AGREEMENT]

EXHIBIT A

SECURITY SCHEDULE

Mortgage, Assignment, Security Agreement, Fixture Filing and Financing Statement dated as of August 29, 2005 by GM Oil in favor of Administrative Agent, as amended or supplemented.

Security Agreement dated as of August 29, 2005 executed by GM Oil in favor of Administrative Agent, as secured party, as amended or supplemented.

Pledge Agreement dated as of August 29, 2005 executed by GM Oil in favor of Administrative Agent, as secured party, as amended or supplemented.

[ASSUMPTION AGREEMENT]

EX-10.56

Exhibit 10.56

THIS WARRANT HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE (THE “STATE LAWS”). THIS WARRANT MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART, IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION OR THE AVAILABILITY OF AN APPLICABLE EXEMPTION FROM THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF SUCH ACT AND STATE LAWS EVIDENCED BY AN OPINION OF LEGAL COUNSEL, WHICH OPINION AND LEGAL COUNSEL ARE SATISFACTORY TO THE PARTNERSHIP.

RIO VISTA ENERGY PARTNERS L.P.

COMMON UNIT PURCHASE WARRANT

This Warrant certifies that, for value received, TCW Energy Funds X Holdings, L.P., a California limited partnership, or its registered assigns (“Holder”), is entitled to purchase from Rio Vista Energy Partners L.P., a Delaware limited partnership (the “Partnership”):

(a) at any time or from time to time after May 19, 2008 until such time as the Demand Loan (the “Demand Loan”) under the Note Purchase Agreement dated as of November 19, 2007 (the “Note Purchase Agreement”) by and among Rio Vista Penny LLC (“Rio Vista Penny”), TCW Asset Management Company, a California corporation (“TAMCO”), TCW Energy Fund X-NL, L.P., a California limited partnership, TCW Energy Fund XB-NL, L.P., a California limited partnership, TCW Energy Fund XC-NL, L.P., a California limited partnership, TCW Energy Fund XD-NL, L.P., a California limited partnership, TAMCO, as Investment Manager under the Amended and Restated Investment Management and Custody Agreement dated as of December 3, 2003 among Ensign Peak Advisors, Inc., TAMCO, and Trust Company of the West (“TCW”), a California trust company, as Sub-Custodian; TAMCO as Investment Manager under the Amended and Restated Investment Management and Custody Agreement dated as of March 18, 2004 among ING Life Insurance and Annuity Company, TAMCO, and TCW as Sub Custodian; and TAMCO as Investment Manager under the Amended and Restated Investment Management and Custody Agreement dated as of December 11, 2003 among Harry L. Bradley, Jr. Partition Trust, Harry L. Bradley, Jr. Trust, Jane Bradley Uihlien Pettit Partition Trust, Jane Bradley Uihlien Trust, TAMCO, and TCW as Sub-Custodian, (such entities, the “Note Holders”) is paid in full (the “Tranche 1 Exercise Period”), that number of fully paid and non-assessable common units of the Partnership derived by dividing (i) the amount of outstanding principal owed by Rio Vista Penny to the Note Holders pursuant to the Demand Loan, by (ii) the Tranche 1 Exercise Price (defined below), at an exercise price equal to the lower of (A) $13.33 per common unit (the “Fixed Tranche 1 Price”) and (B) (x) 90% multiplied by (y) the average Market Price for the 20 trading days preceding the date of Holder’s election to exercise this Warrant for such Tranche 1 Warrant Units pursuant to Section 1 (such lower price, the “Tranche 1 Exercise Price”), and

(b) at any time or from time to time after November 19, 2008 until such time as the outstanding amounts under the Note Purchase Agreement (other than the Demand Loan) are paid in full (the “Tranche 2 Exercise Period”), that number of fully paid and non-assessable common units of the Partnership derived by dividing (i) the amount of outstanding principal, accrued interest, and expenses owed by Rio Vista Penny to Holder pursuant to the Note Purchase Agreement, less the amount of outstanding principal under the Demand Loan, on the date of Holder’s election to exercise this Warrant for such Tranche 2 Warrant Units pursuant to Section 1, by (ii) the Tranche 2 Exercise Price (defined below) for an exercise price (the “Tranche 2 Exercise Price”) equal to (x) 90% multiplied by (y) the average Market Price for the 20 trading days preceding the date of Holder’s election to exercise this Warrant for such Tranche 2 Warrant Units pursuant to Section 1. As used herein, the term “Warrant Units” refers to the common units of the Partnership issuable upon exercise of this Warrant, the term “Tranche 1 Warrant Units” refers to the common units of the Partnership issuable upon the exercise of this Warrant during the Tranche 1 Exercise Period, and the term “Tranche 2 Warrant Units” refers to the common units of the Partnership issuable upon the exercise of this Warrant during the Tranche 2 Exercise Period. The Fixed Tranche 1 Price and number of Tranche 1 Warrant Units is subject to adjustment as provided in Section 3 hereof.

For the purposes of this Warrant, the “Market Price” on any day shall be the last sale price on such day on the NASDAQ Stock Market, or, if the common units are not then listed or admitted to trading on the NASDAQ Stock Market, on such other principal stock exchange on which such units are then listed or admitted to trading, or, if no sale takes place on such day on any such exchange, the average of the closing bid or asked prices on such day as officially quoted on any such exchange, or, if the common units are not then listed or admitted to trading on any stock exchange, the average of the reported closing bid and asked prices on such day in the over-the-counter market as quoted on the National Association of Securities Dealers Automated Quotation System or, if not so quoted, then as furnished by any member of the National Association of Securities Dealers, Inc. selected by the Partnership. If there shall be no meaningful over-the-counter market, the Market Price shall be the fair market value as determined solely by the general partner of the Partnership (with such fair market value being equal to or in excess of the book value).

This Warrant, together with all warrants issued upon transfer, exchange or in replacement hereof pursuant to Section 7 hereof (collectively, the “Warrants”), is subject to the following additional terms, provisions, and conditions:

Section 1. Manner of Exercise; Issuance of Certificates; Payment for Warrant Units. Subject to the provisions hereof, this Warrant may be exercised by Holder, in whole or in part, by the surrender of this Warrant, together with a completed Exercise Agreement in the form attached hereto, to the Partnership during normal business hours on any business day at the Partnership’s office in El Segundo, California (or such other office or agency of the Partnership as it may designate by notice to Holder), during, with respect to the Tranche 1 Warrant Units, the Tranche 1 Exercise Period, and with respect to the Tranche 2 Warrant Units, the Tranche 2 Exercise Period, and upon payment to the Partnership of the Tranche 1 Exercise Price for the Tranche 1 Warrant Units or the Tranche 2 Exercise Price for the Tranche 2 Warrant Units specified in said Exercise Agreement. Payment of the Tranche 1 Exercise Price shall be made by Holder by reducing the outstanding principal owed by Rio Vista Penny to the Note Holders under the Demand Loan by the amount of such payment. Payment of the Tranche 2 Exercise Price shall be made by Holder by reducing the outstanding principal (other than pursuant to the Demand Loan), accrued interest, and expenses owed by Rio Vista Penny to the Note Holders pursuant to the Note Purchase Agreement by the amount of such payment.

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The Partnership shall not be required to issue fractional Warrant Units upon any exercise of this Warrant, but instead the value of any such fractional Warrant Units shall remain outstanding under the Note Purchase Agreement. The Warrant Units so purchased shall be deemed to be issued to Holder or its designees as the record owner of such shares as of the close of business on the date or dates on which this Warrant shall have been surrendered, the completed Exercise Agreement delivered, and payment made for such Warrant Units as aforesaid. Certificates for the Warrant Units so purchased, representing the aggregate number of common units specified in said Exercise Agreement, shall be delivered to Holder within a reasonable time, not exceeding ten business days, after this Warrant shall have been so exercised.

The Warrant Units so delivered shall be in such denominations as may be reasonably requested by Holder, shall be listed for trading on any NASDAQ Stock Market (or such other exchange as the common units are then listed or traded), and shall be registered in the name of Holder or such other name as shall be designated by Holder. The Partnership will file a registration statement on Form S-3 (the “Registration Statement”) under the Securities Act of 1933, as amended (the “Securities Act”) covering the Warrant Units within 90 days following the first exercise of this Warrant and will use commercially reasonable efforts to cause the Registration Statement to be declared effective as soon as practicable thereafter. The Partnership will maintain the effectiveness of the Registration Statement until the Warrant Units have been resold pursuant to the Registration Statement or are eligible for resale, without restriction, pursuant to Rule 144 of the Securities Act.

Holder will cooperate with the Partnership as reasonably requested by the Partnership in connection with the preparation and filing of the Registration Statement. Holder will furnish to the Partnership such information regarding itself, the common units held by it, and the intended method of disposition of such common units as shall be reasonably required to cause the effectiveness of the Registration Statement and will execute and deliver such documents in connection with the Registration Statement as the Partnership may reasonably request. Holder will, upon receipt of notice from the Partnership of any event requiring suspension of the use of the prospectus included as part of the Registration Statement, immediately discontinue disposition of common units pursuant to the Registration Statement until Holder’s receipt of the copies of the supplemented or amended prospectus or receipt of notice that no supplement or amendment is required. Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it or comply with the provisions of an exemption from such prospectus delivery requirements in connection with sales of common units pursuant to the Registration Statement.

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With respect to the Tranche 1 Warrant Units, if, on the date the Registration Statement is declared effective by the Securities and Exchange Commission and the Warrant Units are not subject to contractual restriction on resale (the “Registration Date”), the Market Price (the “Registration Date Price”) is less than the Market Price on the date of such exercise of this Warrant for such Warrant Units (the “Exercise Date Price”), the Partnership and Rio Vista Penny jointly agree to deliver to Holder either (i) additional common units of the Partnership (the “Additional Units”) in such number as necessary so that the aggregate value (based on the Registration Date Price) of (A) the Tranche 1 Warrant Units issued to Holder in connection with such exercise plus (B) the Additional Units, equals the value (based on the Exercise Date Price) of the Tranche 1 Warrant Units issued to Holder in connection with such exercise, or (ii) cash (the “Additional Cash”) in such amount as necessary so that the aggregate value of (A) the Tranche 1 Warrant Units (based on the Registration Date Price) issued to Holder in connection with such exercise plus (B) the Additional Cash, equals at least the value (based on the Exercise Date Price) of the Tranche 1 Warrant Units issued to Holder in connection with such exercise. In lieu of delivery of Additional Units or Additional Cash as provided above, the Partnership and Rio Vista Penny may elect to pay cash to Holder equal to the aggregate value (based on the Exercise Date Price) of the Tranche 1 Warrant Units issued to Holder in connection with such exercise (the “All Cash Payment”). Upon delivery of the All Cash Payment to Holder, all Tranche 1 Warrant Units issued to Holder in connection with such exercise shall be returned to the Partnership and/or cancelled by the Partnership.

With respect to the Tranche 2 Warrant Units, if, on the Registration Date, the Registration Date Price is less than eighty percent (80%) of the Exercise Date Price, the Partnership and Rio Vista Penny jointly agree to deliver to Holder either (i) Additional Units in such number as necessary so that the aggregate value (based on the Registration Date Price) of (A) the Tranche 2 Warrant Units issued to Holder in connection with such exercise plus (B) the Additional Units, equals at least eighty percent (80%) of the value (based on the Exercise Date Price) of the Warrant Units issued to Holder in connection with such exercise, or (ii) Additional Cash in such amount as necessary so that the aggregate value of (A) the Tranche 2 Warrant Units (based on the Registration Date Price) issued to Holder in connection with such exercise plus (B) the Additional Cash, equals at least eighty percent (80%) of the value (based on the Exercise Date Price) of the Tranche 2 Warrant Units issued to Holder in connection with such exercise. In lieu of delivery of Additional Units or Additional Cash as provided above, the Partnership and Rio Vista Penny may elect to make an All Cash Payment to Holder equal to the aggregate value (based on the Exercise Date Price) of the Tranche 2 Warrant Units issued to Holder in connection with such exercise. Upon delivery of the All Cash Payment to Holder, all Tranche 2 Warrant Units issued to Holder in connection with such exercise shall be returned to the Partnership and/or cancelled by the Partnership.

The Partnership shall pay all taxes and other expenses and charges payable in connection with the preparation, execution, and delivery of unit certificates pursuant to this Section 1 except that, in case such unit certificates shall be registered in a name or names other than Holder of this Warrant, funds sufficient to pay all transfer taxes which shall be payable in connection with the execution and delivery of such unit certificates shall be paid by Holder to the Partnership at the time of the delivery of such unit certificates by the Partnership as mentioned above.

Section 2. Certain Actions Prohibited. The Partnership will not, by amendment of certificate of limited partnership or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by Holder of this Warrant in order to protect the exercise privilege of Holder of this Warrant against dilution or other impairment, consistent with the tenor and purpose of this Warrant.

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Section 3. Anti-dilution Provisions. The Fixed Tranche 1 Price and the number of Tranche 1 Warrant Units shall be subject to adjustment from time to time as provided in this Section 3.

(a) Adjustment for Change in Capital. If at any time after the date hereof, the Partnership (i) pays a dividend or makes a distribution on it common units in common units; (ii) subdivides its outstanding common units into a greater number of common units, (iii) combines its outstanding common units into a smaller number of common units, (iv) makes a distribution on its common units in ownership interests other than common units, or (v) issues by reclassification of its common units any ownership interests of the Partnership, then the Fixed Tranche 1 Price in effect immediately prior to such action shall be adjusted so that Holder may receive upon exercise or exchange of this Warrant and payment of the same aggregate consideration, the number of common units of the Partnership which Holder would have owned immediately following such action if Holder had exercised or exchange the Warrant for the Tranche 1 Warrant Units immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination, or reclassification.

(b) Adjustment for Other Distributions. If at any time after the date hereof, the Partnership distributes to all holders of its common units any of its assets or debt securities, the Fixed Tranche 1 Price following the record date shall be adjusted to be equal to the product of (i) the Tranche 1 Exercise Price immediately prior to the adjustment multiplied by (ii) (A) (x) the Market Price per common unit on the record date of the distribution minus (y) the aggregate fair market value (as determined by the general partner of the Partnership) on the record date of the assets or debt securities to be distributed divided by the number of outstanding common units on such date, divided by (B) the Market Price per common unit on the record date of the distribution.

The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of unitholders entitled to receive the distribution. In the event that such distribution is not actually made, the Tranche 1 Exercise Price shall again be adjusted to the Tranche 1 Exercise Price as determined without giving effect to the calculation provided hereby. In no event shall the Tranche 1 Exercise Price be adjusted to an amount less than zero.

This subsection (b) does not apply to cash distributions paid in the ordinary course of business or paid pursuant to Section 6.3 or 6.4 of the Partnership’s First Amended and Restated Agreement of Limited Partnership.

(c) Minimum Adjustment of Tranche 1 Exercise Price. If the amount of any adjustment of the Tranche 1 Exercise Price required pursuant to this Section 3 would be less than one percent (1%) of the Tranche 1 Exercise Price in effect at the time such adjustment is otherwise so required to be made, such amount shall be carried forward and adjustment with respect thereto made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate at least one percent (1%) of such Tranche 1 Exercise Price; provided that, upon the exercise of this Warrant, all adjustments carried forward and not theretofore made up to and including the date of such exercise shall, with respect to the portion of this Warrant then exercised, be made to the nearest .001 of a cent.

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(d) Notice of Adjustment. Upon the occurrence of any event requiring an adjustment of the Tranche 1 Exercise Price, then and in each such case, the Partnership shall promptly deliver to Holder of this Warrant a notice stating the Tranche 1 Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of common units issuable upon exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Within 90 days after each fiscal year in which any such adjustment shall have occurred, or within 30 days after any request therefor by Holder of this Warrant stating that Holder contemplate exercise of this Warrant, the Partnership will deliver to Holder of this Warrant a certificate of the chief financial officer of the Partnership’s general partner confirming the statements in the most recent notice delivered under this Section 3(d).

Section 4. Fundamental Change Transaction. In case at any time after the date hereof a purchase, tender, or exchange offer shall have been made to and accepted by the holders of more than 50% of the outstanding common units, or the Partnership is otherwise a party to any transaction (including, without limitation, a merger, consolidation, sale of all or substantially all the Partnership’s assets, liquidation, or recapitalization of the common units) which is to be effected in such a way that as a result of such transaction or offer the holders of common units (or any other securities of the Partnership then issuable upon the exercise of this Warrant) shall be entitled to receive stock or other securities or property (including cash) with respect to or in exchange for common units (or such other securities), (each such transaction being herein called a “Fundamental Change Transaction”), then, as a condition of such Fundamental Change Transaction, lawful and adequate provision shall be made whereby Holder of this Warrant shall thereafter have a warrant that gives them the right to purchase and receive upon the basis and upon the terms and conditions specified in this Warrant, and in lieu of the common units (or such other securities) purchasable immediately before such transaction upon the exercise hereof, such stock or other securities or property (including cash) as may be issuable or payable with respect to or in exchange for a number of outstanding common units (or such other securities) equal to the number of common units (or such other securities) purchasable immediately before such transaction upon the exercise hereof, had such Fundamental Change Transaction not taken place. In any such case appropriate provision shall be made with respect to the rights and interests of Holder of this Warrant to the end that the provisions hereof (including, without limitation, the provisions for adjustments of the Tranche 1 Exercise Price and of the number of Tranche 1 Warrant Units purchasable upon exercise hereof) shall thereafter be applicable, as nearly as reasonably may be, in relation to the stock or other securities or property thereafter deliverable upon the exercise hereof (including an immediate adjustment of the Tranche 1 Exercise Price if by reason of or in connection with such Fundamental Change Transaction any securities are issued or event occurs which would, under the terms hereof, require an adjustment of the Tranche 1 Exercise Price). In the event of a consolidation or merger of the Partnership with or into another corporation or entity as a result of which a greater or lesser number of common units of the surviving corporation or entity are issuable to holders of common units in respect of the number of shares of common units outstanding immediately prior to such consolidation or merger, then the Tranche 1 Exercise Price in effect immediately prior to such consolidation or merger shall be adjusted in the same manner as though there were a subdivision or combination of the outstanding common units.

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The Partnership shall not effect any such Fundamental Change Transaction unless prior to or simultaneously with the consummation thereof the successor corporation or entity (if other than the Partnership) resulting from such consolidation or merger or the corporation or entity purchasing such assets and any other corporation or entity the shares of stock or other securities or property of which are receivable thereupon by Holder of this Warrant shall expressly assume, by written instrument executed and delivered (and satisfactory in form) to Holder of this Warrant, (i) the obligation to deliver to Holder such stock or other securities or property as, in accordance with the foregoing provisions, Holder may be entitled to purchase and (ii) all other obligations of the Partnership hereunder.

Section 5. Other Notices. In case at any time:

(a) the Partnership shall declare or pay to all the holders of common units or other equity securities any dividend (whether payable in common units, cash, securities or other property), other than cash distributions pursuant to Section 6.3 or 6.4 of the Partnership’s First Amended and Restated Agreement of Limited Partnership;

(b) the Partnership shall offer for subscription pro rata to all the holders of common units any additional equity interests of any class or other rights;

(c) there shall be any capital reorganization, or reclassification of the common units of the Partnership, or consolidation or merger of the Partnership with, or sale of all or substantially all its assets to, another corporation or other entity;

(d) there shall be a voluntary or involuntary dissolution, liquidation, or winding-up of the Partnership; or

(e) there shall be any other Fundamental Change Transaction;

then, in any one or more of such cases, the Partnership shall give to Holder of this Warrant (i) at least 15 days prior to any event referred to in clause (a) above, at least 30 days prior to any event referred to in clause (b), (c), (d) or (e) above, written notice of the date on which the books of the Partnership shall close or a record shall be taken for such dividend, distribution, or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up, or transaction and (ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up, or transaction known to the Partnership, at least 30 days prior written notice of the date (or, if not then known, a reasonable approximation thereof by the Partnership) when the same shall take place. Such notice in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution, or subscription rights, the date on which such holders of common units shall be entitled thereto, and such notice in accordance with the foregoing clause (ii) shall also specify the date on which such holders of common units shall be entitled to exchange their common units for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up, or transaction, as the case may be. Such notice shall also state that the action in question or the record date is subject to the effectiveness of a registration statement under Securities Laws, or to a favorable vote of security holders, if either is required.

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Section 6. Certain Events. If any event occurs as to which, in the good faith judgment of the general partner of the Partnership, the other provisions of Section 3 or Section 4 are not strictly applicable or if strictly applicable would not fairly protect the exercise rights of Holder of this Warrant in accordance with the essential intent and principles of such provisions, then the general partner of the Partnership shall make such adjustment, if any, on a basis consistent with such essential intent and principles, necessary to preserve, without dilution, the rights of Holder of this Warrant; provided that no such adjustment shall have the effect of increasing the aggregate purchase price of the Warrant Units.

Section 7. Issue Tax. The issuance of certificates for Warrant Units upon the exercise of this Warrant shall be made without charge to Holder of this Warrant or such shares for any issuance tax in respect thereof, provided that the Partnership shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any warrant or certificate in a name other than Holder of this Warrant.

Section 8. No Rights or Liabilities as a Partner. This Warrant shall not entitle Holder to any voting rights or other rights as a partner of the Partnership. No provision of this Warrant, in the absence of affirmative action by Holder to purchase Warrant Units, and no mere enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the Tranche 1 Exercise Price or Tranche 2 Exercise Price or as a partner of the Partnership, whether such liability is asserted by the Partnership or by creditors of the Partnership.

Section 9. Transfer, Exchange, and Replacement of Warrant; Representations and Covenants.

(a) Warrant Transferable. Holder of this Warrant may transfer and assign it to any affiliate of Holder, provided that such person is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, as presently in effect, or a Qualified Institutional Buyer (as defined in Rule 144A promulgated under the Securities Act, as presently in effect). Holder of this Warrant may not transfer and assign it to any other person without the prior written consent of the Partnership. The permitted or approved transfer of this Warrant and all rights hereunder, in whole or in part, is registrable at the office or agency of the Partnership referred to in Section 9(e) by Holder in person or by his duly authorized attorney, upon surrender of this Warrant properly endorsed. Upon any permitted or approved transfer of this Warrant to any person, other than a person who is at that time a holder of other Warrants, the Partnership shall have the right to require Holder and the transferee to make customary representations to the extent reasonably necessary to assure that the transfer will comply with the Securities Act and any applicable state securities laws. Holder of this Warrant, by taking or holding the same, consents and agrees that this Warrant, when endorsed in blank, shall be deemed negotiable, and that Holder, when this Warrant shall have been so endorsed, may be treated by the Partnership and all other persons dealing with this Warrant as the absolute owner and Holder for any purpose and as the person entitled to exercise the rights represented by this Warrant and to the registration of transfer hereof on the books of the Partnership; but until due presentment for registration of transfer on such books the Partnership may treat the registered Holder as the owner and holder of this Warrant for all purposes, and the Partnership shall not be affected by any notice to the contrary.

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(b) Warrant Exchangeable for Different Denominations. This Warrant is exchangeable, upon the surrender of this Warrant by Holder at the office or agency of the Partnership referred to in Section 9(e) hereof, for new Warrants of like tenor representing in the aggregate the right to purchase the number of common units which may be purchased hereunder, each of such new Warrants to be imprinted with the same legend appearing on the face of this Warrant and to represent the right to purchase such number of common units as shall be designated by Holder at the time of such surrender. For purposes hereof, the term “Warrant” shall be deemed to include any and all such replacement Warrants, whether issued pursuant to this Section 9(b) or any other Section hereof.

(c) Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Partnership of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft, or destruction, upon delivery of an indemnity agreement reasonably satisfactory in form and amount to the Partnership, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Partnership, at its expense, will execute and deliver, in lieu thereof, a new Warrant of like tenor.

(d) Cancellation; Payment of Expenses. Upon the surrender of this Warrant in connection with any transfer, exchange, or replacement as provided in Section 9(c), this Warrant shall be promptly cancelled by the Partnership. The Partnership shall pay all taxes (other than securities transfer taxes) and all other expenses and charges payable in connection with the preparation, execution, and delivery of Warrants pursuant to this Section 9.

(e) Register. The Partnership shall maintain, at its office in El Segundo, California (or such other office or agency of the Partnership as it may designate by notice to Holder), a register for this Warrant, in which the Partnership shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner of this Warrant.

(f) Reservation of Authorized Common Units. The Partnership has, and shall continue at all times to reserve and keep available out of the aggregate of its authorized but unissued common units, free and clear of all preemptive rights, such number of its duly authorized common units, or other stock or securities deliverable pursuant to Section 3 hereof, as shall be sufficient to enable the Partnership at any time to fulfill all of its obligations hereunder upon the exercise of this Warrant.

(g) Representations and Covenants of the Partnership. The Partnership represents and covenants that all Warrant Units will, when issued, be validly issued, fully paid and nonassessable. Upon the exercise of this Warrant, the issuance of the Warrant Units will not be subject to any preemptive or similar rights. The Partnership further represents that all securities previously offered or sold by the Partnership which were not registered pursuant to the Securities Act or the Securities Exchange Act of 1934, as amended, were offered or sold pursuant to valid exemptions from the Securities Act. No private offering memorandum furnished to any offeree or purchaser of such securities, at the time of delivery of such private offering memorandum, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading.

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(h) Representations and Covenants of Holder. Holder is acquiring this Warrant and will acquire the Warrant Units for its own account, with no present intention of distributing or reselling this Warrant or the Warrant Units or any part thereof in violation of applicable securities laws. Subject to Section 1 hereof, Holder acknowledges that this Warrant has not been, and when issued the Warrant Units will not be, registered under the Securities Act or the securities laws of any state in the United States or any other jurisdiction and may not be offered or sold by such Holder unless subsequently registered under the Securities Act (if applicable to the transaction) and any other securities laws or unless exemptions from the registration or other requirements of the Securities Act and any other securities laws are available for the transaction. Holder represents that it is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, as presently in effect, or a Qualified Institutional Buyer (as defined in Rule 144A promulgated under the Securities Act, as presently in effect).

Section 10. Notices. All notices, requests, and other communications required or permitted to be given or delivered hereunder to Holder of this Warrant shall be in writing, and shall be personally delivered, or shall be sent by certified or registered mail, postage prepaid, or by delivery service with proof of delivery, and addressed to Holder at the address shown for Holder on the books of the Partnership, or at such other address as shall have been furnished to the Partnership by notice from Holder. All notices, requests, and other communications required or permitted to be given or delivered hereunder to the Partnership shall be in writing, and shall be personally delivered, or shall be sent by certified or registered mail, postage prepaid, or by delivery service with proof of delivery, and addressed to the office of the Partnership at 2121 Rosecrans Avenue, Suite 3355, El Segundo, CA 90245, Attention: Chief Financial Officer, or at such other address as shall have been furnished to Holder of this Warrant by notice from the Partnership. Any such notice, request, or other communication may be sent by facsimile but shall in such case be subsequently confirmed by a writing personally delivered or sent by certified or registered mail as provided above. All notices, requests, and other communications shall be deemed to have been given either at the time of the delivery thereof to (or the receipt by, in the case of a facsimile) the person entitled to receive such notice at the address of such person for purposes of this Section 10, or, if mailed, at the completion of the third full day following the time of such mailing thereof to such address, as the case may be.

Section 11. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF DELAWARE, WITHOUT REGARD TO ANY CHOICE OF LAW PRINCIPLES OF SUCH STATE.

Section 12. Remedies. The Partnership stipulates that the remedies at law of Holder of this Warrant in the event of any default or threatened default by the Partnership in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate, and that such terms may be specifically enforced by a decree for the specific enforcement of any agreement contained herein or by an injunction against a violation of any of the terms hereof or otherwise.

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Section 13. Miscellaneous.

(a) Amendments. This Warrant and any provision hereof may not be changed, waived, discharged, or terminated orally, but only by an instrument in writing signed by the party (or any predecessor in interest thereof) against which enforcement of the same is sought.

(b) Descriptive Headings. The descriptive headings of the several sections of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof.

(c) Successors and Assigns. This Warrant shall, to the extent provided in Section 9(a), be binding upon any entity succeeding to the Partnership by merger, consolidation, or acquisition of all or substantially all the Partnership’s assets.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Partnership and Rio Vista Penny have caused this Warrant to be signed by their duly authorized officers on this 19th day of November, 2007.

RIO VISTA ENERGY PARTNERS L.P.
By:	Rio Vista GP, LLC,
	its General Partner
By:
	Name:
	Title:
RIO VISTA PENNY LLC
By:
	Name:
	Title:

FORM OF EXERCISE AGREEMENT

Dated:	.
To:

Attention:                                         

The undersigned, Holder of the foregoing Warrant, hereby elect to exercise purchase rights represented thereby for, and to purchase thereunder,                      common units covered by such Warrant pursuant to Section 1 of such Warrant, herewith makes payment in full for such common units by reducing the outstanding principal, accrued interest, and other expenses owing to Holder by GMOP pursuant to the Note Purchase Agreement by $                     and request that certificates for such common units (and any other securities or other property issuable upon such exercise) be issued in the name of, and delivered to                                          and                                         .

The undersigned, Holder of the foregoing Warrant, is acquiring such common units for its own account, with no present intention of distributing or reselling such units or any part thereof in violation of applicable securities laws. Subject to Section 1 of such Warrant, Holder acknowledges that such units have not been registered under the Securities Act of 1933 (the “Securities Act”) or the securities laws of any state in the United States or any other jurisdiction and may not be offered or sold by such Holder unless subsequently registered under the Securities Act (if applicable to the transaction) and any other securities laws or unless exemptions from the registration or other requirements of the Securities Act and any other securities laws are available for the transaction. Holder represents that it is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, as presently in effect, or a Qualified Institutional Buyer (as defined in Rule 144A promulgated under the Securities Act, as presently in effect).

Signature:
Title of Signing Officer or Agent (if any):
Note:	The above signature should correspond exactly with the name on the face of the within Warrant or with the name of the assignee appearing in the assignment form.

FORM OF ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers all the rights represented by and under the within Warrant, with respect to the number of common units covered thereby set forth hereinbelow, to:

Name of Assignee Address No. of Common Units

, and hereby irrevocably constitutes and appoints                                          as agent and attorney- in-fact to transfer said Warrant on the books of the within-named partnership, with full power of substitution in the premises.

Dated:                                         ,                     

In the presence of

Name:

Signature:

Title of Signing Officer or Agent (if any):

Address:

Note: The above signature should correspond exactly with the name on the face of the within Warrant.

EX-10.57

Exhibit 10.57

THIS NOTE IS SUBJECT TO THE TERMS OF THE AGREEMENT OF SUBORDINATION AND ASSIGNMENT DATED NOVEMBER 19, 2007 BY RIO VISTA ENERGY PARTNERS L.P. AND GARY MOORES IN FAVOR OF RZB FINANCE LLC.

PROMISSORY NOTE

$500,000.00 Dallas, Texas November 19, 2007

FOR VALUE RECEIVED, Rio Vista Energy Partners L.P., a Delaware limited partnership, (the “Borrower”), promises to pay to Gary Moores, an individual resident of Oklahoma (the “Lender”), at the address set forth in Section 6 herein, or such other place as the Lender may designate by written notice to Borrower, the principal sum of FIVE HUNDRED THOUSAND DOLLARS AND NO CENTS ($500,000.00) in lawful money of the United States of America.

1. Payments of Principal and Interest. Borrower agrees to pay both principal and interest in full on the sixth month anniversary of the execution of this Note, provided if that date is a weekend or holiday, payment shall be made on the first business day thereafter. This Note shall accrue interest at a rate of seven percent (7%) per annum.

2. Prepayment. Borrower may repay this Note at any time without prepayment penalty.

3. Events of Default. The occurrence of any of the following shall be deemed to be an event of default hereunder:

(a) Any payment due under the Note is not paid within three (3) days of the day upon which such payment is due as set in Paragraph 1 above;

(b) Borrower makes a general assignment for the benefit of creditors or otherwise becomes insolvent (however such insolvency is evidenced);

(c) Borrower closes its business or transfers substantially all of its assets to an independent third party;

(d) Any petition for relief under the U.S. Bankruptcy Code or similar state insolvency or debt moratorium statute is filed by or against Borrower and is not dismissed within thirty (30) days after filing; or

(e) Any governmental authority, court, or court appointed receiver or officer takes possession and control of all or a substantial portion of the assets and affairs of Borrower, and such possession and control is not relinquished within ten (10) days.

If any Event of Default shall occur for any reason whatsoever, this Note shall, at the election of Lender, become immediately due and payable in full upon written demand by Lender, and Lender may exercise all rights and remedies provided to secured parties and creditors pursuant to this Note, the Uniform Commercial Code and any other applicable law.

4. Assignments. Borrower may not assign its rights under this Note without the prior written consent of Lender.

5. Amendments and Waivers. No failure by Lender to exercise any right or remedy hereunder shall operate as a waiver hereof. This Note may not be amended, or compliance with any provision hereof waived, except by a written agreement duly executed between Borrower and Lender.

6. Severability. If any section or provision of this Note or the application of such section or provision is held invalid, the remainder of this Note shall not be affected thereby.

7. Notices. All notices, requests, demands or other communications required or permitted under this Note shall be in writing and shall be deemed to have been duly given or made on the date of service if served personally on the party to whom notice is to be given, on the date of transmission if sent by facsimile, telex, telecopier or telegraph, or on the fifth (5^th) day after mailing if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid, properly addressed as follows:

To Borrower:	Rio Vista Energy Partners L.P.
	820 Gesssner Rd., Suite 1285
	Houston, Texas 77024
With a copy to:	Kevin W. Finck
	Law Offices of Kevin W. Finck
	2 Embarcadero Center, Suite 1670
	San Francisco, California 91111
	Fax: (415) 394-6446
To Lender:	Gary Moores

8. Cumulative Rights. The remedies of Lender as provided herein shall be cumulative and concurrent and may be pursued successively or concurrently against maker.

9. Forbearance Not a Waiver. No delay or omission on the part of Lender in exercising any rights under this Note on default by Borrower shall operate as a waiver of such right or any of other right under this Note for the same or other default.

10. Successors and Assigns. This Note and all of the covenants, promises, and agreements contained herein shall be binding upon and inure to the benefit of the respective legal and personal representatives, devisees, heirs, successors, and assigns of Lender.

2

11. Captions. The descriptive headings of the various sections or parts of this Note are for convenience only and shall not affect the meaning or construction of any of the provisions hereof.

12. Governing Law. This Note and the legal relations between Borrower and Lender shall be governed by and construed in accordance with the laws of the state of Oklahoma.

13. Attorney’s Fees. Whether or not suit is filed, Borrower agrees to pay all reasonable attorneys’ fees, costs of collection, costs, and expenses incurred by Lender in connection with the enforcement or collection of this Note. Borrower further agrees to pay all costs of suit and the sum adjudged as attorneys’ fees in any action to enforce payment of this Note or any part of it.

14. Entire Agreement. This Note constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes any and all other prior agreements, understandings, discussions, and/or commitments of any kind.

IN WITNESS WHEREOF, the undersigned have executed and delivered this Note effective as of the date first written above.

“BORROWER”
Rio Vista Energy Partners, L.P.
a Delaware limited partnership
By:	/s/ [ILLEGIBLE]
	Rio Vista G.P. LLC, its General Partner
Name:	Ian T. Bothwell
Title:	Acting Chief Executive Officer,
	Acting President, Vice President,
	Chief Financial Officer,
	Treasurer and Assistant Secretary
	(Principal Executive, Financial and
	Accounting Officer)

3

EX-21

Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

U.S. Subsidiaries

Name of Subsidiaries	State of Organization	Trade Names
Penn Octane International, L.L.C.	Delaware	None
Rio Vista Operating GP LLC	Delaware	None
Rio Vista Operating Partnership L.P.	Delaware	None
Rio Vista E & P LLC	Oklahoma	None
Rio Vista Eco LLC	Oklahoma	None
Rio Vista GO LLC	Oklahoma	None
Rio Vista Penny LLC	Oklahoma	None
Regional Enterprises, Inc.	Virginia	None

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement on Form S-8 (filed in February 2008) of Rio Vista Energy Partners L.P. of our report dated April 4, 2008, which appears on page 58 of this annual report on Form l0-K for the year ended December 31, 2007.

/s/ BURTON McCUMBER & CORTEZ, L.L.P.

Brownsville, Texas
April 15, 2008

EX-23.2

Lee Keeling and Associates, Inc.

Petroleum Consultants

TULSA OFFICE	HOUSTON OFFICE
First Place Tower	Kellog Brown and Root Tower
15 East Fifth Street. Suite 3500	601 Jefferson Ave.• Suite 3690
Tulsa, Oklahoma 74103-4350	Houston, Texas 77002-7912
(918) 587-5521 • Fax: (918) 587-2881	(713) 651-8006 • Fax: (281) 754-4934

Exhibit 23.2

Consent of Lee Keeling and Associates, Inc.

We hereby consent to the use of the name Lee Keeling and Associates, Inc., to references to Lee Keeling and Associates, Inc. as independent petroleum engineers, and to the inclusion of information taken from our “Appraisal Report as of December 31, 2007 on Certain Properties owned by Rio Vista Energy Partners L.P.” in the sections “Business and Properties — Oklahoma Assets — Drilling Activity,” “Business and Properties — Oil and Gas Data — Proved Reserves,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors,” “Selected Financial Data — Summary Reserve and Operating Data,” “Notes to Consolidated Financial Statements — Use of Estimates,” and ''Notes to Consolidated Financial Statements — Supplementary Oil and Gas Data (Unaudited)” of the Rio Vista Energy Partners L.P. Annual Report on Form l0-K for the year ended December 31, 2007, and to the incorporation by reference of the Rio Vista Energy Partners L.P. Annual Report on Form l0-K in the Registration Statement on Form S-8 (File No. 333-149248).

/s/ Lee Keeling and Associates, Inc.
Lee Keeling and Associates, Inc.

Tulsa, Oklahoma
April 15, 2008

WWW.LKAENGINEERS.COM

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Ian T. Bothwell, Acting Chief Executive Officer, certify that:

1. I have reviewed this report on Form 10-K of Rio Vista Energy Partners L.P.;

2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 15, 2008

/s/ Ian T. Bothwell  

Ian T. Bothwell 

Acting President and Acting Chief Executive Officer (Principal Executive Officer) of Rio Vista GP LLC, the General Partner of Rio Vista Energy Partners L.P. 

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Ian T. Bothwell, Chief Financial Officer, certify that:

1. I have reviewed this report on Form 10-K of Rio Vista Energy Partners L.P.;

2. Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 15, 2008

/s/ Ian T. Bothwell  

Ian T. Bothwell, Chief Financial Officer 

(Principal Accounting and Financial Officer) of Rio Vista GP LLC, the General Partner of Rio Vista Energy Partners L.P. 

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Rio Vista Energy Partners L.P. (“Rio Vista”) on Form 10-K for the year ended December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Ian T. Bothwell, Acting Chief Executive Officer of Rio Vista GP LLC, the General Partner of Rio Vista, and Ian T. Bothwell, Chief Financial Officer of Rio Vista GP LLC, the General Partner of Rio Vista certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Ian T. Bothwell  

Ian T. Bothwell, Acting Chief Executive 

Officer of Rio Vista GP LLC, the general partner of Rio Vista Energy Partners L.P. 
April 15, 2008

/s/ Ian T. Bothwell  

Ian T. Bothwell, Chief Financial Officer of 

Rio Vista GP LLC, the General Partner of Rio Vista Energy Partner L.P. 
April 15, 2008