Statement Regarding Forward-Looking Disclosure

This Quarterly Report on Form 10-Q includes "forward-looking statements" which represent our expectations or beliefs concerning future events that involve risks and uncertainties, including those associated with the effect of weather conditions on our financial performance, the price and supply of home heating oil, the consumption patterns of our customers, our ability to obtain satisfactory gross profit margins, our ability to obtain new accounts and retain existing accounts, our ability to make strategic acquisitions, the impact of litigation, our ability to contract for our current and future supply needs, natural gas conversions, future union relations and the outcome of current and future union negotiations, the impact of future environmental, health, and safety regulations, the ability to attract and retain employees, customer credit worthiness, counter party credit worthiness, marketing plans and general economic conditions. All statements other than statements of historical facts included in this Report including, without limitation, the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere herein, are forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct and actual results may differ materially from those projected as a result of certain risks and uncertainties. Important factors that could cause actual results to differ materially from our expectations ("Cautionary Statements") include, but are not limited to, those set forth under the heading "Risk Factors" and "Business Initiatives and Strategy" in the Partnership's Annual Report on Form 10-K (the "Form 10-K") for the fiscal year ended September 30, 2008 and under the heading "Risk Factors" in this Quarterly Report on Form 10-Q. Without limiting the foregoing, the words "believe," "anticipate," "plan," "expect," "seek," "estimate" and similar expressions are intended to identify forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. Unless otherwise required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Report.

Overview

The following is a discussion of the historical condition and results of operations of the Partnership and its subsidiaries, and should be read in conjunction with the description of our business in Item 1. "Business" of the Form 10-K and the historical Financial and Operating Data and Notes thereto included elsewhere in this Report.

In fiscal 2008, we completed our transition from a centralized customer service model to a more traditional customer service model in which the majority of our customer service calls are answered locally. We have implemented an employee staffed centralized call center to augment our internal staffing requirements for certain overflow, off-peak and weekend hours.

Current Economic Conditions Could Adversely Affect Our Results Of Operations And Financial Condition.

In 2008 and continuing into fiscal 2009, economic conditions in the United States have experienced a downturn due to the sequential effects of the sub-prime lending crisis, general credit market crisis, the general unavailability of financing, collateral effects on the finance and banking industries, volatile energy prices, concerns about inflation, slower economic activity, decreased consumer confidence, reduced corporate profits and capital spending, adverse business conditions, increased unemployment and liquidity concerns.

Uncertainty about current economic conditions poses a risk as our customers may postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values, which could have a material negative effect on the demand for the Partnership's equipment and services and could lead to increased conservation and the possibility of certain of our customers seeking lower cost providers. Any increase in existing customers seeking lower cost providers and/or increase in the rejection rate of potential accounts could increase the Partnership's overall rate of net customer attrition. If adverse economic conditions persist, the Partnership could experience an increase in bad debts from financially distressed customers, which would have a negative effect on our liquidity, results of operations and financial condition.

Seasonality

In analyzing our financial results, the following matters should be considered. Our fiscal year ends on September 30. All references to quarters and years respectively in this document are to fiscal quarters and years unless otherwise noted. The seasonal nature of our business results in the sale of approximately 30% of our volume of home heating oil in the first fiscal quarter and 45% of our volume in the second fiscal quarter of each fiscal year, the peak heating season. In addition, sales volume typically fluctuates from year to year in response to variations in weather, wholesale energy prices, customer mix and other factors.

Degree Day

A "degree day" is an industry measurement of temperature designed to evaluate energy demand and consumption. Degree days are based on how far the average temperature departs from 65°F. Each degree of temperature above 65°F is counted as one cooling degree day, and each degree of temperature below 65°F is counted as one heating degree day. Degree days are accumulated each day over the course of a year and can be compared to a monthly or a long-term (multi-year) average, or normal, to see if a month or a year was warmer or cooler than usual. Degree days are officially observed by the National Weather Service and officially archived by the National Climatic Data Center. For purposes of evaluating our results of operations, we use the normal heating degree day amount as reported by the National Weather Service in our operating areas.

EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures)

EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization) and Adjusted EBITDA are non-GAAP financial measures that are used as supplemental financial measures by management and external users of our financial statements, such as investors, commercial banks and research analysts, to assess:

• our compliance with certain financial covenants included in our debt agreements;

• our financial performance without regard to financing methods, capital structure, income taxes or historical cost basis;

• our ability to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners;

• our operating performance and return on invested capital as compared to those of other companies in the retail distribution of refined petroleum products business, without regard to financing methods and capital structure; and

• the viability of acquisitions and capital expenditure projects and the overall rates of return of alternative investment opportunities.

Adjusted EBITDA is calculated as earnings from continuing operations before net interest expense, income taxes, depreciation and amortization, (increase) decrease in the fair value of derivatives, gain or loss on debt redemption, goodwill impairment, and other non-cash and non-operating charges. Management believes the presentation of this measure is relevant and useful because it allows investors to view the Partnership's performance in a manner similar to the method management uses, and makes it easier to compare its results with other companies that have different financing and capital structures. In addition, this measure is consistent with the manner in which the Partnership's debt covenants in its material debt agreements are calculated. Both the Partnership's 10.25% Senior Note agreement and its bank credit facility contain covenants that restrict equity distributions, acquisitions, and the amount of debt it can incur. Under the most restrictive of these covenants, which is found in the bank credit facility, the agent bank could step in and control all cash transactions for the Partnership if we failed to comply with the minimum availability or the fixed charge coverage ratio. The Partnership is required to maintain either availability (borrowing base less amounts borrowed and letters of credit issued) of $25.0 million or a fixed charge coverage ratio of 1.1 to
1.0 (Adjusted EBITDA being a significant component of this calculation). This method of calculating Adjusted EBITDA may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP.

Each of EBITDA and Adjusted EBITDA has its limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of the limitations of EBITDA and Adjusted EBITDA are:

• EBITDA and Adjusted EBITDA do not reflect our cash used for capital expenditures;

• Although depreciation and amortization are non-cash charges, the assets being depreciated or amortized often will have to be replaced and EBITDA and Adjusted EBITDA do not reflect the cash requirements for such replacements;

• EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital requirements;

• EBITDA and Adjusted EBITDA do not reflect the cash necessary to make payments of interest or principal on our indebtedness; and

• EBITDA and Adjusted EBITDA do not reflect the cash required to pay taxes.

Per Gallon Gross Profit Margins

We believe the change in home heating oil margins should be evaluated on a cents per gallon basis, before the effects of increases or decreases in the fair value of derivative instruments, as we believe that realized per gallon margins should not include the impact of non-cash changes in the market value of hedges before the settlement of the underlying transaction.

A significant portion of our home heating oil volume is sold to individual customers under an arrangement pre-establishing the ceiling sales price or a fixed price of home heating oil over a fixed period. When our customers agree to purchase home heating oil from us for the next heating season we will purchase option contracts, swaps and futures contracts for a substantial majority of the heating oil that we expect to sell to these price-protected customers. The amount of home heating oil volume that we hedge per price-protected customer is based upon the estimated fuel consumption per average customer, per month. In the event that the actual usage exceeds the amount of the hedged volume on a monthly basis, we could be required to obtain additional volume at unfavorable margins. In addition, should actual usage in any month be less than the hedged volume, our hedging losses could be greater.

Fixed Priced Customers

During the six months ended March 31, 2009, we estimate that approximately 14,900 of our fixed price customers as of September 30, 2008 (equal to approximately 3.7% of our home heating oil customer base) that entered into a fixed price arrangement during the period from April 1, 2008 to October 31, 2008 have either renegotiated their fixed price (approximately 9,600 customers) or switched to a competitor (approximately 5,300 customers) as a result of significant decreases in the price of home heating oil. Based on renegotiations and terminations through March 31, 2009, we believe that the impact of this development on our net income in fiscal 2009 has been largely reflected in our operating results through March 31, 2009 and has not been material. Should more fixed price customers decide to renegotiate their fixed price arrangement or seek another supplier, we expect that our profitability for the balance of fiscal 2009 would be adversely impacted.

Derivatives

SFAS No. 133 and No. 161, established accounting and reporting standards requiring that derivative instruments be recorded at fair value and included in the consolidated balance sheet as assets or liabilities. To the extent derivative instruments designated as cash flow hedges are effective, as defined in SFAS No. 133, changes in fair value are recognized in other comprehensive income until the forecasted hedged item is recognized in earnings. Currently, the Partnership has elected not to designate its derivative instruments as hedging instruments under SFAS 133, and the change in fair value of the derivative instruments are recognized in our statement of operations. Therefore, we experience great volatility in earnings as outstanding home heating oil derivative instruments are marked to market and non-cash gains and losses are recorded prior to the sale of the commodity to the customer. To the extent that the Partnership continues this accounting treatment, the volatility in any given period related to unrealized non-cash gains or losses on derivative home heating oil instruments can be significant to the overall results of the Partnership. However, we ultimately expect those gains and losses to be offset by the cost of product when purchased.

Volatility in Home Heating Oil Prices

The wholesale price of home heating oil has been extremely volatile over the last several years. During fiscal 2008, new record highs for home heating oil were achieved many times. Wholesale home heating oil prices in the last 18 months have increased by over $1.80 and decreased by over $2.90 per gallon. Our liquidity is adversely impacted in times of increasing heating oil prices, as the Partnership must use cash to pay for its hedging requirements and to fund a portion of the increased levels of accounts receivable and inventory. Our liquidity is adversely impacted at times of decreasing heating oil prices due to the increased margin requirements for futures contracts and collateral requirements for swaps that we use to manage market risks related to our fixed price customers and physical inventory. Consumer awareness of all energy costs, including home heating oil, is increasing. This heightened awareness has increased customer losses and hindered our ability to attract new customers, as many new price-conscious customers seek out the lowest price providers regardless of the level of service they provide or their financial stability. We also have experienced a reduction in volume of home heating oil sold due to conservation efforts by our customers, and we expect that this trend will continue.

Weather Insurance Contract - Warm Weather

Weather conditions have a significant impact on the demand for home heating oil because our customers depend on this product principally for space heating purposes. Actual weather conditions can vary substantially from year to year, significantly affecting our financial performance. We purchased weather insurance to help mitigate the adverse effect of warm weather on our cash flows for the period from November 1, 2007 to February 29, 2008, taken as a whole and for the period November 1, 2008 to February 28, 2009, taken as a whole. The strike or "pay-off" price is based on the 10-year moving average of degree-days for the contract period and has been set at approximately 3% less than the 10 year moving average. For every degree-day not realized below the strike-price we are entitled to receive $35,000, up to a maximum of $12.5 million. We did not realize any benefit from our weather insurance contract in fiscal 2008 and fiscal 2009. Currently, we do not have weather insurance beyond February 28, 2009 and the Partnership is evaluating the financial benefit of purchasing weather insurance for future periods.

Accounts Receivable

As of March 31, 2009, the Partnership's accounts receivable balance was $161.0 million (net of allowance) and represents a decrease of $105.4 million or 39.6% when compared to the balance as of March 31, 2008 of $266.4 million (net of allowance). This decline in accounts receivable of 39.6% was due primarily to the decline in the wholesale cost of product. Day's sales outstanding as of March 31, 2009, improved to 29.6 days, when compared to the level at March 31, 2008 of 37.7 days. Included in the gross accounts receivable balance as of March 31, 2009 are amounts due that are 90-days or more in arrears of $18.5 million. As of March 31, 2008, the comparable amounts due from customers 90 days or more in arrears was $20.9 million. The Partnership is actively collecting these past due accounts and has established a reserve based on historical data and current economic and pricing conditions. Given the current economic conditions, the collection of these amounts could prove to be more difficult than in the past and bad debt expense could increase.

Customer Attrition

We measure net customer attrition for our full service residential and commercial home heating oil customers. Net customer attrition is the difference between gross customer losses and customers added through internal marketing efforts. Customers purchased in acquisitions are not included in the calculation of gross customer gains, but are factored on a pro-rata basis in the denominator when calculating the percentages of gross customer gains and losses. Gains and losses at acquisitions since the acquired date of the acquisition are included in the calculation of net customer attrition. Gross customer losses are the result of a number of factors, including price competition, move-outs, service issues, credit losses and conversions to natural gas. When a customer moves out of an existing home, we count the "move out" as a loss and if we are successful in signing up the new homeowner, the "move in" is treated as a gain.

Gross customer gains and gross customer losses

                                   Three Months Ended        Six Months Ended
                                        March 31                 March 31
                                    2009         2008        2009        2008
          Description
          Gross Customer Gains      11,700       12,300      38,000      34,300
          Gross Customer Losses    (24,000 )    (19,000 )   (55,800 )   (46,500 )

          Net Customer Loss        (12,300 )     (6,700 )   (17,800 )   (12,200 )

Gross customer gains, gross customer losses and net customer attrition as a percentage of the home heating oil customer base

                                  Three Months Ended          Six Months Ended
                                       March 31                   March 31
                                 2009            2008         2009         2008
        Description
        Gross Customer Gains        2.9 %           3.0 %        9.5 %       8.3 %
        Gross Customer Losses      (6.0 )%         (4.5 )%     (13.9 )%    (11.2 )%

        Net Customer Loss          (3.1 )%         (1.5 )%      (4.4 )%     (2.9 )%

We lost 55,800 accounts during the six months ended March 31, 2009, or 13.9% of our home heating oil customer base, as compared to the six months ended March 31, 2008 in which we lost 46,500 accounts, or 11.2% of our home heating oil customers. The increase in gross customer losses of 9,300 accounts was primarily due to price (5,100 accounts) and credit-related losses (3,600 accounts) and conversions to natural gas (1,300 accounts). The increase in price losses was largely due to fixed price customers that decided to terminate their arrangement and switched to a competitor.

During the six months ended March 31, 2009, we gained 38,000 customers, or 9.5% of our home heating oil customer base, as compared to the six months ended March 31, 2008 in which we gained 34,300 customers, or 8.3% of our home heating oil customer base. The increase in gross customers gains of 3,700 accounts was due to our customer referral programs and targeted advertising and direct mail programs.

We believe that the continued adverse economic conditions and price volatility will negatively impact our ability to attract customers and retain existing customers in the future.

Results of Operations

The following is a discussion of the results of operations of the Partnership and its subsidiaries, and should be read in conjunction with the historical Financial and Operating Data and Notes thereto included elsewhere in this Quarterly Report.

Volume

For the three months ended March 31, 2009, retail volume of home heating oil increased by 6.5 million gallons, or 3.9%, to 175.9 million gallons, as compared to 169.4 million gallons for the three months ended March 31, 2008, as the additional volume from acquisitions and colder weather was reduced by net customer attrition, conservation and other factors. Volume of other petroleum products decreased by 1.1 million gallons, or 7.8%, to 13.5 million gallons for the three months ended March 31, 2009, as compared to 14.6 million gallons for the three months ended March 31, 2008. An analysis of the change in the retail volume of home heating oil, which is based on managements' estimates, sampling and other mathematical calculations, is found below:

            (in millions of gallons)                     Heating Oil
            Volume-Three months ended March 31, 2008           169.4

            Impact of colder temperatures                       16.1
            Net customer attrition - retail/commercial         (11.0 )
            Acquisitions                                         3.0
            Conservation/Other                                  (1.6 )

            Change                                               6.5

            Volume-Three months ended March 31, 2009           175.9

Temperatures in our geographic areas of operations for the three months ended March 31, 2009 were 9.5% colder than the three months ended March 31, 2008 and approximated normal, as reported by the National Oceanic Atmospheric Administration ("NOAA"). For the twelve months ended March 31, 2009, net customer attrition was 5.9%. Excluding the impact of weather, we expect that home heating oil volume for the remainder of fiscal 2009 will be less than the comparable period in fiscal 2008 due to net customer attrition, conservation and other factors.

The percentage of home heating oil volume sold to residential variable price customers decreased to 41.2% of total home heating oil volume sales for the three months ended March 31, 2009, as compared to 42.7% for the three months ended March 31, 2008. Accordingly, the percentage of home heating oil volume sold to residential price-protected customers increased to 45.0% for the three months ended March 31, 2009, as compared to 43.1% for the three months ended March 31, 2008. For the three months ended March 31, 2009, sales to commercial/industrial customers represented 13.8% of total home heating oil volume sales, as compared to14.2% for the three months ended March 31, 2008.

Product Sales

For the three months ended March 31, 2009, product sales decreased $142.2 million, or 22.9%, to $478.7 million, as compared to $620.9 million for the three months ended March 31, 2008, as an increase in home heating oil volume of 3.9% was more than offset by the impact of a decrease in home heating oil selling prices. Average home heating oil selling prices decreased by $0.8273 per gallon, or 24.3%, from $3.4083 per gallon for the three months ended March 31, 2008 to $2.5810 for the three months ended March 31, 2009 in response to the 35.1% per gallon decrease in home heating oil wholesale products costs described below. Product sales also rose due to an increase in billed liquidated damages of $1.1 million for protected price account terminations.

Installation and Service Sales

For the three months ended March 31, 2009, service and installation sales decreased $2.6 million, or 5.9%, to $41.7 million, as compared to $44.4 million for the three months ended March 31, 2008, due to the decline in installation sales of $2.8 million, and a decline in ancillary plumbing service of $0.4 million. Heating service income increased by $0.6 million. Installation sales were weak during the three months ended March 31, 2009 due to rising unemployment, reduced home equity loans and consumer credit, and reduced consumer confidence. We believe that this trend will continue and that our installation sales will be lower for the balance of fiscal 2009, as compared to the six months ended September 30, 2008.

Cost of Product

For the three months ended March 31, 2009, cost of product decreased $167.6 million, or 34.1%, to $323.6 million, as compared to $491.2 million for the three months ended March 31, 2008, as the increase in home heating oil sold was more than offset by the impact of a decrease in wholesale product cost. Average wholesale product cost for home heating oil decreased by $0.9358 per gallon, or 35.1%, to an average of $1.7291 per gallon for the three months ended March 31, 2009, from an average of $2.6649 for the three months ended March 31, 2008.

We believe that the change in home heating oil margins should be evaluated before the effects of increases or decreases in the fair value of derivative instruments, as we believe that realized per gallon margins should not include the impact of non-cash changes in the market value of hedges before the settlement of the underlying transaction. On that basis, home heating oil margins for the three months ended March 31, 2009, increased $0.1086 per gallon to $0.8524 per gallon in the three months ended March 31, 2009 from $0.7438 per gallon in the three months ended March 31, 2008. During the three months ended March 31, 2008, the rise in home heating oil wholesale product costs limited margin expansion capability. Conversely, during the three months ended March 31, 2009, home heating oil wholesale product costs continued to decline, which contributed to the Partnership's ability to expand its home heating oil margins as wholesale prices decreased more rapidly than retail prices. The Partnership's gross profit and per gallon margins were negatively impacted by approximately $6.9 million, or 4.0 cents per home heating oil gallon due to the effects of weighted average inventory costing on cost of sales during the three months ended March 31, 2009.

For the three months ended March 31, 2009, total product gross profit increased by $25.5 million, as compared to the three months ended March 31, 2008, due to the increase in realized home heating oil per gallon margins ($19.1 million), an increase in home heating oil volume ($4.9 million), higher income from liquidated damages from customer cancellations ($1.1 million) and higher gross . . .