Release Details

STAMFORD, CT (May 6, 2005) -- Star Gas Partners, L.P. (the "Partnership" or "Star") (NYSE: SGU, SGH), a home energy distributor and services provider specializing in heating oil, today announced financial results for its fiscal 2005 second quarter and the six-month period ended March 31, 2005. On December 17, 2004, the Partnership sold its propane segment and in March 2004 divested its TG&E segment. Consequently, the historical results of both of these segments are accounted for as discontinued operations in the Partnership's financials.

For the fiscal 2005 second quarter, Star reported a 15.3 percent increase in total revenues to $555.3 million, compared to total revenues of $481.8 million in the prior year period, as increases in selling prices more than offset a reduction in product sales volume. Average wholesale prices of home heating oil increased 44 percent to $1.35 per gallon for the fiscal 2005 second quarter, from $0.93 per gallon for the prior year period.

Heating oil volume for the fiscal 2005 second quarter declined year-over-year, from 266.4 million gallons to 245.0 million gallons. The Partnership believes that reasons for the decrease included net customer attrition, conservation due to the rise in heating oil prices and warmer winter weather, partially offset by additional volume from delivery scheduling, acquisitions and other factors. During the fiscal 2005 second quarter, temperatures in the Partnership's geographic operating areas were approximately 3.0 percent warmer than in the year-earlier period, and approximately 3.2 percent colder than normal, as reported by the National Oceanographic Atmospheric Administration ("NOAA"). Net customer attrition for the fiscal 2005 second quarter was 2.0 percent, compared to 1.7 percent for the prior year period.

From February 1, 2005, through April 30, 2005, the heating oil segment reduced its net customer loss as compared to the prior year period. For the three months ended April 30, 2005, the heating oil segment lost 8,700 accounts (net), or 1.8 percent of its heating oil customer base, as compared to the three months ended April 30, 2004 in which the heating oil segment lost 11,500 accounts (net), or 2.3 percent of its heating oil customer base. The Partnership cannot predict whether this trend will continue.

Home heating oil per gallon margins for the fiscal 2005 second quarter declined by 1.5 cents per gallon versus the corresponding year-earlier period, but the magnitude of the decline narrowed compared to the fiscal 2005 first quarter, when they were down 5.2 cents per gallon versus the corresponding year-earlier period. The Partnership sold a higher percentage of volume to lower-margin price protected customers, which contributed to the year-over-year per gallon margin decline as consumers continue to seek price protection during periods of high energy prices. In addition, margins were adversely affected by a delay in hedging the price of product sold to certain price protected customers prior to the beginning of fiscal 2005 and a failure to hedge the price of product for price protected customers incorrectly coded as variable customers, which aggregated $2.4 million. The Partnership believes that these hedging issues have been resolved.

In the fiscal 2005 second quarter, the Partnership recorded an operating loss of $17.3 million, a decline of $81.7 million compared to operating income of $64.4 million in the corresponding year-earlier period. The decline was attributable to a number of factors including: a non-cash goodwill impairment charge of $67.0 million, lower volumes, lower per gallon margins including $2.4 million in hedging issues, $3.1 million in compensation expenses related to a separation agreement with the former CEO, and Sarbanes-Oxley compliance expenses of $1.1 million, partially offset by lower service and installation costs, as well as a reduction in delivery and branch expenses. The decline in the market value of the Partnership's units and the impact of conservation and customer attrition on earnings at the heating oil segment were significant events that triggered a review of the carrying value of the heating oil segment's goodwill and the resulting impairment charge.

In the fiscal 2005 second quarter, Star reported a net loss of $24.1 million, versus $80.7 million of net income generated in the prior year's comparable quarter. The net loss was due to lower income from continuing operations and a $27.1 million reduction in income from discontinued operations relating to the divested Propane and TG & E segments. Adjustments to the proceeds from the sale of these discontinued operations of $2.5 million and lower interest expense of $1.4 million positively impacted the quarter-to-quarter comparison.

During the fiscal 2005 second quarter, the Partnership had an EBITDA (Income (loss) from Continuing Operations Before Interest, Taxes, Depreciation and Amortization) loss of $8.3 million, compared to EBITDA of $73.9 million in the prior year period. The decline was attributable to a number of factors including: a non-cash goodwill impairment charge of $67.0 million, lower volumes, lower per gallon margins including $2.4 million in hedging issues, $3.1 million in compensation expenses related to a separation agreement with the former CEO, and Sarbanes-Oxley compliance expenses of $1.1 million, partially offset by lower service and installation costs, as well as a reduction in delivery and branch expenses. EBITDA is a non-GAAP financial measure (see below reconciliation) that should not be considered as an alternative to net income (as an indicator of operating performance) or as an alternative to cash flow (as a measure of liquidity or ability to service debt obligations).

Management believes this information is of interest to investors as a supplemental measure of the Partnership's operating performance and provides additional information for evaluating the Partnership's ability to make the Minimum Quarterly Distribution.

Star Gas Partners Chief Executive Officer Joseph P. Cavanaugh stated, "Given the well-documented challenges of the home heating oil distribution industry, we are encouraged by the Partnership's fiscal second quarter operating results and the operational and customer service improvements Star has made in recent months. Most importantly, we are gratified by the return to more historic home heating oil margin levels. We are continuing to closely examine the cost side of our business. Based on current estimates, we believe operating expenses at the heating oil segment have been reduced by at least $10.0 million on an annual basis. At the Partnership level, management changes and staff reductions should reduce general and administrative expenses by $1.3 million.

"As we discussed in the March 7 announcement and on the subsequent investment community conference call, we are committed to reversing customer attrition rates, and have been following through with our stated policy of putting more focus at the district-level of our operations - empowering local managers to exercise more control and vesting them with the authority to make critical decisions, from pricing to customer service. This strategy has worked well in the past at our propane segment and at our Meenan Oil operation, and we hope to see similar positive results at our Petro operations."

For the six-month period ended March 31, 2005, Star achieved a 13.6 percent increase in revenues to $906.0 million, compared to $797.8 million in the corresponding prior year period as increases in selling prices more than offset a decline in product sales due to lower volume.

During the first half of fiscal 2005, home heating oil volume declined 10.7 percent to 387.3 million gallons, compared to the prior year period. Average wholesale supply costs were $1.36 per gallon, approximately 49 percent higher than the average wholesale supply cost of $0.91 in the comparable year-earlier period. During the 2005 six-month period, temperatures in the heating oil segment's geographic area of operations were approximately 1.2 percent warmer compared to the 2004 six-month period, and approximately 1.0 percent colder than normal during that time frame.

For the six months ended March 31, 2005, operating income decreased by $117.0 million to an operating loss of $38.4 million, compared to operating income of $78.6 million for the six months ended March 31, 2004. The aforementioned $67.0 million non-cash goodwill impairment charge, lower sales volume, a 2.8 cents per gallon decrease in home heating oil margins, $13.7 million in bridge facility, legal and bank amendment fees, $3.1 million in compensation expense related to a separation agreement with the former CEO, $1.6 million in Sarbanes-Oxley compliance and a $3.4 million increase in delivery and branch expenses, were partially offset by $0.9 million lower depreciation and amortization expenses and a $5.0 million decline in net service expenses. Certain hedging and other issues totaling $7.8 million impacted per gallon home heating oil margins in the 2005 fiscal first quarter and to a lesser extent the 2005 fiscal second quarter.

Net income for the 2005 six-month period declined to $50.3 million, versus $100.0 million for the 2004 six-month period as the $117.0 million operating income from continuing operations decline, a $42.1 million loss on redemption of debt, and a $46.7 million reduction in discontinued operations income were partially offset by a $155.4 million gain on the sale of the propane segment completed in December 2004.

EBITDA (Income (loss) from Continuing Operations Before Interest, Taxes, Depreciation and Amortization) for the six months ended March 31, 2005 declined $160.0 million to a loss of $62.3 million. The decrease was due to the non-cash goodwill charge of $67.0 million, the debt redemption loss of $42. 1 million, lower sales volume, a 2.8 cent home heating oil per gallon margin decline due in part to the $7.8 million in hedging and other issues, $13.7 million in bridge facility, legal and bank amendment fees, $3.1 million in compensation expense related to a separation agreement with the former CEO, $1.6 million in Sarbanes-Oxley compliance related fees and higher delivery and branch operating expenses of $3.4 million. EBITDA is a non-GAAP financial measure (see below reconciliation) that should not be considered as an alternative to net income (as an indicator of operating performance) or as an alternative to cash flow (as a measure of liquidity or ability to service debt obligations). Management believes this information is of interest to investors as a supplemental measure of the Partnership's operating performance and provides additional information for evaluating the Partnership's ability to make the Minimum Quarterly Distribution.

In December 2004, the Partnership completed the sale of its propane segment. Pursuant to the terms of the indenture relating to the Partnership's 10 &frac14% Senior Notes due 2013 ("MLP Notes"), the Partnership will be obligated, within 360 days of the sale, to apply the net proceeds of the sale of the propane segment either to reduce indebtedness of the Partnership or of a restricted subsidiary, or to make an investment in assets or capital expenditures useful to the Partnership or any subsidiary. To the extent any net proceeds that are not so applied within that period exceed $10 million ("excess proceeds"), the indenture requires the Partnership to make an offer to all holders of MLP Notes to purchase for cash that number of MLP Notes that may be purchased with excess proceeds at a purchase price equal to 100% of the principal amount of the MLP Notes plus accrued and unpaid interest to the date of purchase.

After repayment of certain debt and transaction expenses and estimated taxes to be paid of $3.0 million, the net proceeds from the propane segment sale were approximately $156.3 million, constituting approximately $146.3 million of excess proceeds under the Indenture. As of March 31, 2005, the heating oil segment had utilized $53.1 million of such excess proceeds to invest in working capital assets, purchase capital assets and repay long-term debt, and an additional $1.5 million is estimated to be payable for taxes, further reducing the amount of excess proceeds to $91.7 million as of March 31, 2005. The Partnership expects it may utilize all or a portion of the remaining excess proceeds to invest in working capital assets. Accordingly, there can be no assurance that any offer to purchase MLP notes will be made, or, if made, as to the size or timing of such offer.

REMINDER: Star Gas management will host a conference call and webcast today at 11:00 a.m. (ET). Conference call dial-in is 800/633-8580 or 212/346-6610. The webcast will be available at www.star-gas.com.

Star Gas Partners, L.P., is the nation's largest retail distributor of home heating oil. Additional information is available by obtaining the Partnership's SEC filings and by visiting Star's website at www.star-gas.com.

This news release includes "forward-looking statements" which represent the Partnership's expectations or beliefs concerning future events that involve risks and uncertainties, including those associated with the effect of weather conditions on the Partnership's financial performance, the price and supply of home heating oil, the consumption patterns of the Partnership's customers, the Partnership's ability to obtain satisfactory gross profit margins, the ability of the Partnership to obtain new accounts and retain existing accounts, the impact of the business process redesign project at the heating oil segment and the ability of the Partnership to address issues related to such project. All statements other than statements of historical facts included in this news release 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 the Partnership believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Partnership's expectations ("Cautionary Statements") are disclosed in this news release and in the Partnership's Annual Report on Form 10-K for the year ended September 30, 2004 including without limitation and in conjunction with the forward-looking statements included in this news release. 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, the Partnership undertakes 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 news release.

CONTACT:

Star Gas Partners
Investor Relations
203/328-7310

Robert Rinderman/Purdy Tran
Jaffoni & Collins Incorporated
212/835-8500 or SGU@jcir.com