Management Factors

The Company is engaged in multiple acquisition, disposition and financing transactions, as well as ongoing operations in California, Texas, Virginia and Mexico.  The Company has limited management resources to oversee these operations and transactions.  The Company has limited experience managing the Virginia operations which were acquired in July 2007.  The Company has not previously operated exploration and production (E&P) assets such as the Oklahoma Assets proposed to be acquired.  These limitations may adversely affect the Company’s ability to execute its business strategy.  The Company’s chief financial officer, Ian T. Bothwell, is currently also serving as acting president and acting chief executive officer. The Company is dependent upon the services of Mr. Bothwell and members of the board of directors of Penn Octane and the board of managers of the general partner of Rio Vista. The loss of the services of any of these individuals could have a material adverse effect upon the Company. The Company currently does not have an employment agreement with Mr. Bothwell or key man life insurance.

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