UNITED STATES
                   SECURITIES AND EXCHANGE COMMISSION
                         WASHINGTON, D.C. 20549

                               FORM 10-Q

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006

[ ]  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: 1-10398

                            GIANT INDUSTRIES, INC.
            (Exact Name of Registrant as Specified in its Charter)

             Delaware                                   86-0642718
     (State of Incorporation)                         (I.R.S. Employer
                                                     Identification No.)

23733 North Scottsdale Road, Scottsdale, Arizona           85255
    (Address of principal executive offices)             (Zip code)

                              (480) 585-8888
           (Registrant's telephone number, including area code)

                       _____________________________
           (Former name, former address and former fiscal year,
                      if changed since last report)

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 the filing requirements for the past 90 days.

                           Yes [X]    No [ ]

Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition
of "accelerated filer and large accelerated filer" in Rule 12b-2 of the
Exchange Act. (Check one):

                       Large Accelerated Filer [ ]
           Accelerated Filer [X]   Non-Accelerated Filer [ ]

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

                           Yes [ ]    No [X]

Number of Common Shares outstanding at August 1, 2006: 14,639,312 shares.


<PAGE>
                   GIANT INDUSTRIES, INC. AND SUBSIDIARIES
                                     INDEX


PART I  - FINANCIAL INFORMATION......................................   1

Item 1  - Financial Statements.......................................   1

          Condensed Consolidated Balance Sheets at
          June 30, 2006 and December 31, 2005 (Unaudited)............   1

          Condensed Consolidated Statements of Earnings for the
          Three and Six Months Ended June 30, 2006 and 2005
          (Unaudited)................................................   2

          Condensed Consolidated Statements of Cash Flows for
          the Six Months Ended June 30, 2006 and 2005(Unaudited).....  3-4

          Notes to Condensed Consolidated Financial Statements
          (Unaudited)................................................  5-37

Item 2  - Management's Discussion and Analysis of
          Financial Condition and Results of Operations.............. 38-61

Item 3  - Quantitative and Qualitative Disclosures
          About Market Risk..........................................  62

Item 4  - Controls and Procedures....................................  62

PART II - OTHER INFORMATION..........................................  63

Item 1  - Legal Proceedings..........................................  63

Item 1A - Risk Factors............................................... 63-69

Item 4  - Submission of Matters to a Vote of Security Holders........  70

Item 6  - Exhibits and Reports on Form 8-K........................... 70-71

SIGNATURE............................................................  72



<PAGE>
<TABLE>
                                           PART I
                                    FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS.

                            GIANT INDUSTRIES, INC. AND SUBSIDIARIES
                             CONDENSED CONSOLIDATED BALANCE SHEETS
                                          (Unaudited)
                        (In thousands, except shares and per share data)

<CAPTION>
                                                               June 30,       December 31,
                                                                2006              2005
                                                              ----------      ------------
<S>                                                           <C>              <C>
ASSETS
Current assets:
  Cash and cash equivalents.............................      $   90,819       $ 164,280
  Receivables, net......................................         185,096         142,125
  Inventories...........................................         134,191         124,105
  Prepaid expenses and other............................          10,509          10,449
  Deferred income taxes.................................           1,763           1,396
                                                              ----------       ---------
    Total current assets................................         422,378         442,355
                                                              ----------       ---------
Property, plant and equipment...........................         891,624         764,788
Less accumulated depreciation and amortization..........        (308,983)       (297,962)
                                                              ----------       ---------
                                                                 582,641         466,826
                                                              ----------       ---------
Goodwill................................................          50,633          50,607
Other assets............................................          28,788          24,684
                                                              ----------       ---------
                                                              $1,084,440       $ 984,472
                                                              ==========       =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable......................................      $  187,976       $ 139,710
  Accrued expenses......................................          62,172          68,798
                                                              ----------       ---------
    Total current liabilities...........................         250,148         208,508
                                                              ----------       ---------
Long-term debt..........................................         275,119         274,864
Deferred income taxes...................................          93,292          76,834
Other liabilities.......................................          27,489          24,430
Commitments and contingencies (Note 10)
Stockholders' equity:
  Preferred stock, par value $.01 per share,
    10,000,000 shares authorized, none issued
  Common stock, par value $.01 per share,
    50,000,000 shares authorized, 18,391,292 and
    18,366,077 shares issued............................             184             184
  Additional paid-in capital............................         218,296         216,917
  Retained earnings.....................................         258,092         221,203
  Unearned compensation related to restricted stock.....          (1,726)         (2,014)
                                                              ----------       ---------
                                                                 474,846         436,290
  Less common stock in treasury - at cost,
    3,751,980 shares....................................         (36,454)        (36,454)
                                                              ----------       ---------
    Total stockholders' equity..........................         438,392         399,836
                                                              ----------       ---------
                                                              $1,084,440       $ 984,472
                                                              ==========       =========

See accompanying notes to Condensed Consolidated Financial Statements.

                                             1
</TABLE>


<PAGE>
<TABLE>
                             GIANT INDUSTRIES, INC. AND SUBSIDIARIES
                          CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                                           (Unaudited)
                              (In thousands, except per share data)

<CAPTION>
                                                         Three Months Ended      Six Months Ended
                                                              June 30,               June 30,
                                                       ---------------------   ----------------------
                                                          2006        2005        2006        2005
                                                       ----------  ---------   ----------  ----------
<S>                                                    <C>         <C>         <C>         <C>
Net revenues.........................................  $1,145,279  $ 863,357   $2,008,304  $1,575,084
                                                       ----------  ---------   ----------  ----------
Cost of products sold (excluding depreciation
  and amortization)..................................   1,016,706    748,883    1,827,259   1,374,673
Operating expenses...................................      55,322     48,744      108,009      94,988
Depreciation and amortization........................      10,969      9,492       20,536      20,463
Selling, general and administrative expenses.........      13,205     11,843       23,211      19,641
Net loss/(gain) on disposal/write-down of assets.....          49       (207)        (591)       (219)
Gain from insurance settlement due to fire incident..     (33,100)      (196)     (35,953)     (3,688)
                                                       ----------  ---------   ----------  ----------
Operating income.....................................      82,128     44,798       65,833      69,226
Interest expense.....................................      (4,178)    (6,382)      (8,860)    (13,376)
Costs associated with early debt extinguishment......           -     (2,099)           -      (2,099)
Amortization of financing costs......................        (399)    (1,496)        (798)     (2,000)
Investment and other income..........................       1,079        368        2,681         489
                                                       ----------  ---------   ----------  ----------
Earnings from continuing operations
  before income taxes................................      78,630     35,189       58,856      52,240
Provision for income taxes...........................      29,392     14,651       21,967      21,644
                                                       ----------  ---------   ----------  ----------
Earnings from continuing operations..................      49,238     20,538       36,889      30,596

Earnings from discontinued operations, net of income
  tax provision of $13 and $9........................           -         22            -          15
                                                       ----------  ---------   ----------  ----------
Net earnings.........................................  $   49,238  $  20,560   $   36,889  $   30,611
                                                       ==========  =========   ==========  ==========
Net earnings per common share:
  Basic
    Continuing operations............................  $     3.37  $    1.53   $     2.53  $     2.37
    Discontinued operations..........................           -          -            -           -
                                                       ----------  ---------   ----------  ----------
                                                       $     3.37  $    1.53   $     2.53  $     2.37
                                                       ==========  =========   ==========  ==========
  Assuming dilution
    Continuing operations...........................   $     3.35  $    1.51   $     2.51  $     2.34
    Discontinued operations.........................            -          -            -           -
                                                       ----------  ---------   ----------  ----------
                                                       $     3.35  $    1.51   $     2.51  $     2.34
                                                       ==========  =========   ==========  ==========

See accompanying notes to Condensed Consolidated Financial Statements.

                                             2
</TABLE>


<PAGE>
<TABLE>
                                GIANT INDUSTRIES, INC. AND SUBSIDIARIES
                            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              (Unaudited)
                                            (In thousands)
<CAPTION>
                                                                               Six Months Ended
                                                                                   June 30,
                                                                            -----------------------
                                                                               2006         2005
                                                                            ---------     ---------
<S>                                                                         <C>           <C>
Cash flows from operating activities:
  Net earnings..........................................................    $  36,889     $  30,611
Adjustments to reconcile net earnings to net cash provided by
  operating activities:
  Depreciation and amortization from continuing operations..............       20,536        20,463
  Amortization of financing costs.......................................          798         2,000
  Compensation expense related to restricted stock awards...............          193             -
  Deferred income taxes.................................................       16,101        14,688
  Deferred crude oil purchase discounts.................................          457           615
  Payments to deferred compensation plan................................       (1,476)            -
  Net gain on the disposal of assets from continuing operations.........         (591)         (219)
  Net gain on the disposal of assets from discontinuing operations,
    including assets held for sale......................................            -           (22)
  Gain from insurance settlement due to fire incident...................      (35,953)       (3,688)
  Proceeds from insurance settlement for business
    interruption due to fire incident...................................       25,000             -
  Income tax benefit from exercise of stock options.....................            -           328
    Changes in operating assets and liabilities
    (Increase) in receivables...........................................      (49,708)      (31,800)
    (Increase) in inventories...........................................       (9,589)      (31,666)
    Decrease in prepaid expenses........................................            7         6,639
    (Increase) in other assets..........................................       (3,485)         (303)
    Increase in accounts payable........................................       45,162        44,900
    (Decrease)/increase in accrued expenses.............................      (10,541)        1,008
    Increase in other liabilities.......................................        2,694         1,090
                                                                            ---------     ---------
Net cash (used in)/provided by operating activities.....................       36,494        54,644
                                                                            ---------     ---------
Cash flows from investing activities:
  Purchase of property, plant and equipment.............................     (128,620)      (27,697)
  Acquisition activity..................................................       (1,207)            -
  Proceeds from assets held for sale....................................            -         1,866
  Proceeds from insurance settlement for property
    damage due to fire incident.........................................       17,950         3,688
  Proceeds from sale of property, plant and equipment and other assets..        1,913         1,124
  Funding of restricted cash escrow funds...............................            -       (21,883)
  Release of restricted cash escrow funds...............................            -        21,883
                                                                            ---------     ---------
Net cash used in investing activities...................................     (109,964)      (21,019)
                                                                            ---------     ---------
Cash flows from financing activities:
  Payments of long-term debt............................................            -       (18,828)
  Proceeds from line of credit..........................................       10,000        36,000
  Payments on line of credit............................................      (10,000)      (36,000)
  Net proceeds from issuance of common stock............................            -        22,349
  Proceeds from exercise of stock options...............................            9           202
  Deferred financing costs..............................................            -        (1,142)
                                                                            ---------     ---------
Net cash provided by financing activities...............................            9         2,581
                                                                            ---------     ---------
Net (decrease)/increase in cash and cash equivalents....................      (73,461)       36,206
  Cash and cash equivalents:
    Beginning of period.................................................      164,280        23,714
                                                                            ---------     ---------
    End of period.......................................................    $  90,819     $  59,920
                                                                            =========     =========
                                             3
</TABLE>


<PAGE>
Significant Noncash Investing and Financing Activities.

In March 2006, we contributed 25,115 newly issued shares of our common
stock, valued at $1,465,000, to our 401(k) plan as a discretionary
contribution for the year 2005. We also capitalized approximately
$4,648,000 of interest as part of construction in progress.
At June 30, 2006, approximately $19,322,000 of purchases of property,
plant and equipment had not been paid and, accordingly, were accrued in
accounts payable and accrued liabilities.

In the first half of 2005, we transferred $118,000 of property, plant and
equipment to other assets. We also contributed 34,196 newly issued shares
of our common stock, valued at $972,000, to our 401(k) plan as a
discretionary contribution for the year 2004. At June 30, 2005,
approximately $4,710,000 of purchases of property, plant and equipment
had not been paid and accordingly, were accrued in accounts payable and
accrued liabilities.

See accompanying notes to Condensed Consolidated Financial Statements.



































                                    4


<PAGE>
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (Unaudited)

NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION, STOCK-BASED EMPLOYEE
         COMPENSATION AND CURRENT PRONOUNCEMENTS:

Organization

     Giant Industries, Inc., through our subsidiary Giant Industries
Arizona, Inc. and its subsidiaries, refines and sells petroleum products.
Our operations are located:

     -  on the East Coast - primarily in Virginia, Maryland, and North
        Carolina; and
     -  in the Southwest - primarily in New Mexico, Arizona, and
        Colorado, with a concentration in the Four Corners area where
        these states meet.

     In addition, our wholesale group distributes commercial wholesale
petroleum products primarily in Arizona and New Mexico.

     We have three business segments:

     -  our refining group;
     -  our retail group; and
     -  our wholesale group.

     See Note 9 for a further discussion of our business segments.

Basis of Presentation:

     The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States of America, hereafter referred to
as generally accepted accounting principles, for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments and reclassifications considered necessary for a fair and
comparable presentation have been included. These adjustments and
reclassifications are of a normal recurring nature, with the exception of
discontinued operations (see Note 4) and business segments (see Note 9).
Operating results for the three and six months ended June 30, 2006 are
not necessarily indicative of the results that may be expected for the
year ending December 31, 2006. The accompanying financial statements
should be read in conjunction with the consolidated financial statements
and notes thereto included in our Annual Report on Form 10-K for the year
ended December 31, 2005.





                                    5


<PAGE>
     We have made certain reclassifications to our 2005 financial
statements and notes to conform to the financial statement
classifications used in the current year. They had no effect on reported
earnings or stockholders' equity.

Stock-Based Employee Compensation:

     We have a stock-based employee compensation plan that is more fully
described in Note 10 to our Annual Report on Form 10-K for the year ended
December 31, 2005. On January 1, 2006, we adopted Statement of Financial
Accounting Standard ("SFAS") 123R, "Share-Based Payment", that requires
us to measure the cost of employee services received in exchange for
stock options granted using the fair value method and amortize such costs
over the vesting period of such arrangements. The adoption of SFAS 123R
did not have a material impact on our financial statements for the three
and six months ended June 30, 2006.

     In prior years, we accounted for this plan under the recognition and
measurement principles of Accounting Principles Board Opinion ("APB") No.
25, "Accounting for Stock Issued to Employees", and related
Interpretations, as permitted by SFAS No. 123, "Accounting for Stock-
Based Compensation". We used the intrinsic value method to account for
stock-based employee compensation. The following table illustrates the
effect on net earnings and earnings per share as if we had applied the
fair value recognition provisions of SFAS No. 123 to stock-based employee
compensation for the three and six months ended June 30, 2005.

<TABLE>
<CAPTION>
                                              Three Months Ended    Six Months Ended
                                                June 30, 2005        June 30, 2005
                                              ------------------   ------------------
                                               (In thousands, except per share data)
<S>                                                <C>                  <C>
Net earnings, as reported...................       $20,560              $30,611
Deduct: Total stock-based employee
  compensation expense determined
  under the fair value based method
  for all awards, net of related
  tax effect................................            (7)                 (24)
                                                   -------              -------
Pro forma net earnings......................       $20,553              $30,587
                                                   =======              =======
Earnings per share:
  Basic - as reported.......................       $  1.53             $   2.37
                                                   =======              =======
  Basic - pro forma.........................       $  1.53             $   2.37
                                                   =======              =======
  Diluted - as reported.....................       $  1.51             $   2.34
                                                   =======              =======
  Diluted - pro forma.......................       $  1.51             $   2.34
                                                   =======              =======
</TABLE>

                                    6


<PAGE>
Current Pronouncements

     In November 2004, Financial Accounting Standards Board ("FASB")
issued SFAS 151, "Inventory Costs - An Amendment of ARB No. 43, Chapter
4", which is effective for fiscal years beginning after June 15, 2005.
This Statement requires that idle capacity expense, freight, handling
costs, and wasted materials (spoilage), regardless of whether these costs
are considered abnormal, be treated as current period charges. In
addition, this statement requires that allocation of fixed overhead to the
costs of conversion be based on the normal capacity of the production
facilities. The adoption of SFAS 151 did not have a material impact on our
financial statements for the three and six months ended June 30, 2006.

     In March 2006, the Emerging Issues Task Force ("EITF") reached a
tentative conclusion in EITF Issue No. 06-3, "How Taxes Collected From
Customers and Remitted to Governmental Authorities Should Be Presented in
the Income Statement (That is, Gross Versus Net Presentation)", that the
presentation of taxes on either a gross or net basis within the scope of
this EITF Issue is an accounting policy decision requiring disclosure
pursuant to APB Opinion No. 22, "Disclosure of Accounting Policies". If a
reporting entity reports revenue on a gross basis, then the amount of
taxes included must be disclosed. This EITF Issue applies to financial
reports for interim and annual reporting periods beginning after December
15, 2006. We currently report consolidated revenues and cost of products
sold on a net basis and, as such, no further disclosures are necessary in
our financial statements.

     In March 2006, FASB issued a proposal that would require employers
to recognize the overfunded or underfunded positions of defined benefit
post-retirement plans, including pension plans ("plans"), in their
balance sheets. The proposal also would require that employers measure
plan assets and obligations as of the date of their financial statements.
The proposed statement would be effective for fiscal years ending after
December 15, 2006. We have not yet completed our evaluation of the impact
this proposed statement would have on our financial statements.

     FASB issued proposed FASB Staff Position ("FSP") No. AUG AIR-a,
"Accounting for Planned Major Maintenance Activities", that disallowed
the accrue-in-advance method for planned major maintenance activities.
Our scheduled turnaround activities are considered as planned major
maintenance activities. Since we do not use the accrue-in-advance method
of accounting for our turnaround activities, this proposed FSP has no
impact on our financial statements.

     In June 2006, FASB issued FASB Interpretation No. 48, "Accounting
for Uncertainty in Income Taxes - an interpretation of SFAS 109" ("FIN
48"), which provides criteria for the recognition, measurement,
presentation and disclosure of uncertain tax positions. A tax benefit
from an uncertain position may be recognized only if it is "more likely
than not" that the position is sustainable based on its technical merits.
The provisions of FIN 48 are effective for fiscal years beginning after
December 15, 2006. We are currently assessing the impact of FIN 48 on our
financial statements.

                                    7


<PAGE>
NOTE 2 - INVENTORIES:

     Our inventories consist of the following:

<TABLE>
<CAPTION>
                                            June 30,     December 31,
                                              2006            2005
                                            ---------     ------------
                                                    (In thousands)
<S>                                         <C>             <C>
First-in, first-out ("FIFO") method:
  Crude oil............................     $ 71,078        $ 77,188
  Refined products.....................      146,591          97,150
  Refinery and shop supplies...........       14,517          13,790
  Merchandise..........................        9,771           7,259
Retail method:
  Merchandise..........................        7,250           8,982
                                            --------        --------
    Subtotal...........................      249,207         204,369
Adjustment for last-in,
  first-out ("LIFO") method............     (115,016)        (80,264)
                                            --------        --------
    Total..............................     $134,191        $124,105
                                            ========        ========
</TABLE>

     The portion of inventories valued on a LIFO basis totaled
$80,169,969 and $76,299,000 at June 30, 2006 and December 31, 2005,
respectively. The information in the following paragraph will facilitate
comparison with the operating results of companies using the FIFO method
of inventory valuation.

     If inventories had been determined using the FIFO method at June 30,
2006 and 2005, net earnings and diluted earnings per share would have
been higher as follows:

<TABLE>
<CAPTION>
                                   Three Months Ended     Six Months Ended
                                        June 30,              June 30,
                                   ------------------    ------------------
                                     2006       2005       2006       2005
                                   -------    -------    -------    -------
                                     (In thousands, except per share data)
<S>                                <C>        <C>        <C>        <C>
Net earnings...................    $11,346     $4,533    $21,782    $12,186
Diluted earnings per share.....    $  0.77     $ 0.33    $  1.48    $  0.93
</TABLE>






                                    8


<PAGE>
     For interim reporting purposes, inventory increments expected to be
liquidated by year-end are valued at the most recent acquisition costs,
and inventory liquidations that are expected to be reinstated by year-end
are ignored for LIFO inventory valuation calculations. The LIFO effects
of inventory increments not expected to be liquidated by year-end, and
the LIFO effects of inventory liquidations not expected to be reinstated
by year-end, are recorded in the period such increments and liquidations
occur.













































                                    9


<PAGE>
NOTE 3 - GOODWILL AND OTHER INTANGIBLE ASSETS:

     At June 30, 2006 and December 31, 2005, we had goodwill of
$50,633,000 and $50,607,000, respectively.

     The changes in the carrying amount of goodwill for the six months
ended June 30, 2006 are as follows:

<TABLE>
<CAPTION>
                                           Refining Group    Retail Group  Wholesale Group   Total
                                         ------------------  ------------  ---------------  -------
                                                      Four
                                         Yorktown   Corners
                                         --------   -------
                                                              (In thousands)
<S>                                      <C>        <C>        <C>             <C>          <C>
Balance as of January 1, 2006..........  $ 21,028   $   125    $ 4,414         $ 25,040     $ 50,607
Goodwill written off related to the
  sale of retail unit..................         -         -        (19)               -          (19)
Goodwill associated with
  purchase of lubricating business*....         -         -          -              500          500
Goodwill reduction associated
  with Dial Oil purchase**.............         -         -          -             (455)        (455)
                                         --------   -------    -------         --------     --------
Balance as of June 30, 2006............  $ 21,028   $   125    $ 4,395         $ 25,085     $ 50,633
                                         ========   =======    =======         ========     ========

 * See Note 11, "Acquisitions", for additional information regarding the lubricating business purchase.

** Reduction to goodwill for Dial Oil Co. ("Dial Oil") was recorded at the conclusion of the
   allocation period provided for by SFAS 141, "Business Combinations".
</TABLE>




















                                    10


<PAGE>
     A summary of the intangible assets that are included in "Other
Assets" in the Condensed Consolidated Balance Sheets at June 30, 2006 and
December 31, 2005 is presented below:

<TABLE>
<CAPTION>
                                                   June 30, 2006                      December 31, 2005
                                       ------------------------------------   ------------------------------------
                                         Gross                        Net       Gross                        Net
                                       Carrying     Accumulated    Carrying   Carrying     Accumulated    Carrying
                                         Value      Amortization     Value      Value      Amortization     Value
                                       --------     ------------   --------   --------     ------------   --------
                                                                      (In thousands)
<S>                                     <C>           <C>          <C>         <C>           <C>          <C>
Amortized intangible assets:
  Rights-of-way.....................    $ 3,849       $ 2,953      $   896     $ 3,729       $ 2,870      $   859
  Contracts.........................      1,376         1,287           89       1,376         1,227          149
  Licenses and permits..............      1,096           568          528       1,096           503          593
                                        -------       -------      -------     -------       -------      -------
                                          6,321         4,808        1,513       6,201         4,600        1,601
                                        -------       -------      -------     -------       -------      -------
Unamortized intangible assets:
  Liquor licenses...................      8,543             -        8,543       8,335             -        8,335
                                        -------       -------      -------     -------       -------      -------
Total intangible assets.............    $14,864       $ 4,808      $10,056     $14,536       $ 4,600      $ 9,936
                                        =======       =======      =======     =======       =======      =======
</TABLE>

     Intangible asset amortization expense for the three and six months
ended June 30, 2006 was approximately $105,000 and $208,000,
respectively. Intangible asset amortization expense for the three and six
months ended June 30, 2005 was approximately $100,000 and $200,000,
respectively. Estimated amortization expense for the rest of this fiscal
year and the next five fiscal years is as follows:

             2006 Remainder....................     $ 204,000
             2007..............................       263,000
             2008..............................       221,000
             2009..............................       219,000
             2010..............................        94,000
             2011..............................        45,000














                                    11


<PAGE>
NOTE 4 - DISCONTINUED OPERATIONS AND ASSET DISPOSALS:

     The following table contains information regarding our discontinued
operations, all of which are included in our retail group.

<TABLE>
<CAPTION>
                                   Three Months Ended     Six Months Ended
                                        June 30,              June 30,
                                   ------------------    ------------------
                                     2006       2005       2006       2005
                                   -------    -------    -------    -------
                                                 (In thousands)
<S>                                <C>        <C>        <C>        <C>
Net revenues.....................  $     -    $     -    $     -    $     -
                                   -------    -------    -------    -------
Net operating income.............  $     -    $    13    $     -    $     2
Gain on disposal.................        -         22          -         22
                                   -------    -------    -------    -------
Earnings before income taxes.....  $     -    $    35    $     -    $    24
                                   -------    -------    -------    -------
Net earnings.....................  $     -         22    $     -    $    15
                                   -------    -------    -------    -------
</TABLE>































                                    12


<PAGE>
NOTE 5 - ASSET RETIREMENT OBLIGATIONS:

     SFAS No. 143, "Accounting for Asset Retirement Obligations",
addresses financial accounting and reporting obligations associated with
the retirement of tangible long-lived assets and the associated asset
retirement costs. This statement requires that the fair value of a
liability for an asset retirement obligation ("ARO") be recognized in the
period in which it is incurred if a reasonable estimate of fair value can
be made. The associated asset retirement cost ("ARC") is capitalized as
part of the carrying amount of the long-lived asset. Our legally
restricted assets that are set aside for purposes of settling ARO
liabilities are approximately $365,000 as of June 30, 2006. These assets
are set aside to fund costs associated with the closure of certain solid
waste management facilities.

     In March 2005, the FASB issued Interpretation 47, "Accounting for
Conditional Asset Retirement Obligations" ("FIN 47"). This interpretation
clarifies the term conditional ARO as used in SFAS No. 143. Conditional
ARO refers to a legal obligation to perform an asset retirement activity
in which the timing and/or method of settlement are conditional on a
future event that may or may not be within the control of the entity.
Accordingly, an entity is required to recognize a liability for the fair
value of a conditional ARO if the fair value of the liability can be
reasonably estimated. Clarity is also provided regarding when an entity
would have sufficient information to reasonably estimate the fair value
of an ARO. We applied FIN 47 as of December 31, 2005.

     We identified the following ARO's:

     1.  Landfills -- pursuant to Virginia law, the two solid waste
management facilities at our Yorktown refinery must satisfy closure and
post-closure care and financial responsibility requirements.

     2.  Crude Pipelines -- our right-of-way agreements generally require
that pipeline properties be returned to their original condition when the
agreements are no longer in effect. This means that the pipeline surface
facilities must be dismantled and removed and certain site reclamation
performed. We do not believe these right-of-way agreements will require
us to remove the underground pipe upon taking the pipeline permanently
out of service. Regulatory requirements, however, may mandate that such
out-of-service underground pipe be purged.

     3.  Storage Tanks -- we have a legal obligation under applicable law
to remove or close in place certain underground and aboveground storage
tanks, both on owned property and leased property, once they are taken
out of service. Under some lease arrangements, we also have committed to
restore the leased property to its original condition.








                                    13


<PAGE>
     We identified the following conditional ARO:

     1.  Refinery Piping and Heaters -- we have a legal obligation to
properly remove or dispose of materials that contain asbestos which
surround certain refinery piping and heaters.

     The following table reconciles the beginning and ending aggregate
carrying amount of our ARO's for the six months ended June 30, 2006 and
the year ended December 31, 2005.

<TABLE>
<CAPTION>
                                            June 30,   December 31,
                                             2006          2005
                                           ---------   ------------
                                                (In thousands)
<S>                                         <C>           <C>
Liability beginning of year...........      $2,625        $2,272
Liabilities incurred..................           3           322
Liabilities settled...................         (22)         (150)
Accretion expense.....................           8           181
                                            ------        ------
Liability end of period...............      $2,614        $2,625
                                            ======        ======
</TABLE>

     Our ARO's are recorded in "Other Liabilities" on our Condensed
Consolidated Balance Sheets.



























                                    14


<PAGE>
NOTE 6 - LONG-TERM DEBT:

     Our long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                         June 30,   December 31,
                                                          2006          2005
                                                        ---------   ------------
                                                             (In thousands)
<S>                                                     <C>           <C>
11% senior subordinated notes, due 2012, net of
  unamortized discount of $2,722 and $2,882,
  interest payable semi-annually.....................   $127,279      $127,119
8% senior subordinated notes, due 2014, net of
  unamortized discount of $2,160 and $2,255,
  interest payable semi-annually.....................    147,840       147,745
                                                        --------      --------
  Total                                                 $275,119      $274,864
                                                        ========      ========
</TABLE>

     Repayment of both the 11% and 8% senior subordinated notes
(collectively, the "notes") is jointly and severally guaranteed on an
unconditional basis by our subsidiaries, subject to a limitation designed
to ensure that such guarantees do not constitute a fraudulent conveyance.
Except as otherwise specified in the indentures pursuant to which the
notes were issued, there are no restrictions on the ability of our
subsidiaries to transfer funds to us in the form of cash dividends, loans
or advances. General provisions of applicable state law, however, may
limit the ability of any subsidiary to pay dividends or make
distributions to us in certain circumstances.

     The indentures governing the notes contain restrictive covenants
that, among other things, restrict our ability to:

     -  create liens;
     -  incur or guarantee debt;
     -  pay dividends;
     -  repurchase shares of our common stock;
     -  sell certain assets or subsidiary stock;
     -  engage in certain mergers;
     -  engage in certain transactions with affiliates; or
     -  alter our current line of business.

     In addition, subject to certain conditions, we are obligated to
offer to repurchase a portion of the notes at a price equal to 100% of
the principal amount thereof, plus accrued and unpaid interest, if any,
to the date of repurchase, with the net cash proceeds of certain sales or





                                   15


<PAGE>
other dispositions of assets. Upon a change of control, we would be
required to offer to repurchase all of the notes at 101% of the principal
amount thereof, plus accrued interest, if any, to the date of purchase.
At June 30, 2006, retained earnings available for dividends under the
most restrictive terms of the indentures were approximately $96,896,000.

     Separate financial statements of our subsidiaries are not included
herein because the aggregate assets, liabilities, earnings, and equity of
the subsidiaries are substantially equivalent to our assets, liabilities,
earnings, and equity on a consolidated basis; the subsidiaries are
jointly and severally liable for the repayment of the notes; and the
separate financial statements and other disclosures concerning the
subsidiaries are not deemed by us to be material to investors.

     We also have a senior secured revolving facility (the "Credit
Facility") with a group of banks. The term of the Credit Facility expires
in June 2010. The Credit Facility is primarily a working capital and
letter of credit facility. The availability of funds under this facility
is the lesser of (i) $175,000,000, or (ii) the amount determined under a
borrowing base calculation tied to eligible accounts receivable and
inventories. We also have options to increase the size of the facility to
up to $250,000,000.

     The interest rate applicable to the Credit Facility is based on
various short-term indices. At June 30, 2006, this rate was approximately
6.8% per annum. We are required to pay a quarterly commitment fee of .25%
per annum of the unused amount of the facility.

     At June 30, 2006, there were no direct borrowings outstanding under
the Credit Facility. At June 30, 2006, there were, however, $41,092,000
of irrevocable letters of credit outstanding, primarily to crude oil
suppliers, insurance companies, and regulatory agencies. At December 31,
2005, there were no direct borrowings and $66,771,000 of irrevocable
letters of credit outstanding primarily to crude oil suppliers, insurance
companies, and regulatory agencies.

     The obligations under the Credit Facility are guaranteed by each of
our principal subsidiaries and secured by a security interest in our
personal property, including:

     - accounts receivable;
     - inventory;
     - contracts;
     - chattel paper;
     - trademarks;
     - copyrights;
     - patents;
     - license rights;
     - deposits; and
     - investment accounts and general intangibles.





                                   16


<PAGE>
     The Credit Facility contains negative covenants limiting, among
other things, our ability to:

     - incur additional indebtedness;
     - create liens;
     - dispose of assets;
     - consolidate or merge;
     - make loans and investments;
     - enter into transactions with affiliates;
     - use loan proceeds for certain purposes;
     - guarantee obligations and incur contingent obligations;
     - enter into agreements restricting the ability of subsidiaries to
       pay dividends to us;
     - make distributions or stock repurchases;
     - make significant changes in accounting practices or change our
       fiscal year; and
     - prepay or modify subordinated indebtedness.

     The Credit Facility also requires us to meet certain financial
covenants, including maintaining a minimum consolidated net worth, a
minimum consolidated interest coverage ratio, and a maximum consolidated
funded indebtedness to total capitalization percentage, each as defined
in the Credit Facility.

     Our failure to satisfy any of the covenants in the Credit Facility
is an event of default under the Credit Facility. The Credit Facility
also includes other customary events of default, including, among other
things, a cross-default to our other material indebtedness and certain
changes of control.


























                                   17


<PAGE>
NOTE 7 - PENSION AND POST-RETIREMENT BENEFITS:

     The components of the net periodic benefit cost are as follows:

<TABLE>
<CAPTION>
                                                        Yorktown
                                                    Cash Balance Plan
                                      --------------------------------------------
                                       Three Months Ended       Six Months Ended
                                            June 30,                June 30,
                                      --------------------    --------------------
                                        2006        2005        2006        2005
                                      --------    --------    --------    --------
<S>                                   <C>         <C>         <C>         <C>
Service cost........................  $376,103    $339,131    $752,206    $678,262
Interest cost.......................   173,109     167,780     346,218     335,560
Expected return on plan assets......  (114,020)    (69,345)   (228,040)   (138,690)
Amortization of prior service cost..        73     (26,618)        146     (53,236)
Amortization of net loss............         -      14,992           -      29,984
                                      --------    --------    --------    --------
Net periodic benefit cost...........  $435,265    $425,940    $870,530    $851,880
                                      ========    ========    ========    ========
</TABLE>

<TABLE>
<CAPTION>
                                                        Yorktown
                                                  Retiree Medical Plan
                                      --------------------------------------------
                                       Three Months Ended       Six Months Ended
                                            June 30,                June 30,
                                      --------------------    --------------------
                                        2006        2005        2006        2005
                                      --------    --------    --------    --------
<S>                                   <C>         <C>         <C>         <C>
Service cost........................  $ 78,639    $ 54,924    $157,278    $109,848
Interest cost.......................    74,914      55,166     149,828     110,332
Amortization of net loss............    24,887       4,001      49,774       8,002
                                      --------    --------    --------    --------
Net periodic benefit cost...........  $178,440    $114,091    $356,880    $228,182
                                      ========    ========    ========    ========
</TABLE>











                                   18


<PAGE>
NOTE 8 - EARNINGS PER SHARE:

     The following table sets forth the computation of basic and diluted
(loss)/earnings per share:

<TABLE>
<CAPTION>
                                                     Three Months Ended      Six Months Ended
                                                           June 30,              June 30,
                                                    ---------------------  ---------------------
                                                       2006        2005       2006       2005
                                                    ----------  ---------  ----------  ---------
<S>                                                 <C>         <C>        <C>         <C>
Numerator                                                           (In thousands)

Earnings from continuing operations..............   $   49,238  $  20,538  $   36,889  $  30,596
Earnings from discontinued operations............            -         22           -         15
                                                    ----------  ---------  ----------  ---------
Net earnings.....................................   $   49,238  $  20,560  $   36,889  $  30,611
                                                    ==========  =========  ==========  =========
</TABLE>

<TABLE>
<CAPTION>
                                                     Three Months Ended        Six Months Ended
                                                           June 30,                 June 30,
                                                    ---------------------   ----------------------
                                                       2006        2005        2006        2005
                                                    ----------  ---------   ----------  ----------
<S>                                                 <C>         <C>         <C>         <C>
Denominator

Basic - weighted average shares outstanding......   14,601,212  13,405,673  14,591,772  12,896,435
Effect of dilutive stock options.................       72,995     179,620      73,003     188,686
Effect of dilutive restricted stock grants.......        9,794           -       9,052           -
                                                    ----------  ----------  ----------  ----------
Diluted - weighted average shares outstanding....   14,684,001  13,585,293  14,673,827  13,085,121
                                                    ==========  ==========  ==========  ==========
</TABLE>













                                   19


<PAGE>
<TABLE>
<CAPTION>
                                                     Three Months Ended      Six Months Ended
                                                           June 30,              June 30,
                                                    ---------------------  ---------------------
                                                       2006        2005       2006       2005
                                                    ----------  ---------  ----------  ---------
<S>                                                 <C>         <C>        <C>         <C>
Basic earnings per share
Earnings from continuing operations..............   $     3.37  $    1.53  $     2.53  $    2.37
Earnings from discontinued operations............            -          -           -          -
                                                    ----------  ---------  ----------  ---------
Net earnings.....................................   $     3.37  $    1.53  $     2.53  $    2.37
                                                    ==========  =========  ==========  =========
</TABLE>

<TABLE>
<CAPTION>
                                                     Three Months Ended      Six Months Ended
                                                           June 30,              June 30,
                                                    ---------------------  ---------------------
                                                       2006        2005       2006       2005
                                                    ----------  ---------  ----------  ---------
<S>                                                 <C>         <C>        <C>         <C>
Diluted earnings per share
Earnings from continuing operations..............   $     3.35  $    1.51  $     2.51  $    2.34
Earnings from discontinued operations............            -          -           -          -
                                                    ----------  ---------  ----------  ---------
Net (loss)/earnings..............................   $     3.35  $    1.51  $     2.51  $    2.34
                                                    ==========  =========  ==========  =========
</TABLE>

     In March 2006, we contributed 25,115 newly issued shares of our
common stock, valued at $1,465,000, to our 401(k) plan as a discretionary
contribution for the year 2005. In March 2005, we issued 1,000,000 shares
of common stock in an underwritten public offering. In April 2005, we
contributed 34,196 newly issued shares of our common stock, valued at
$972,000, to our 401(k) plan as a discretionary contribution for the year
2004.















                                   20


<PAGE>
NOTE 9 - BUSINESS SEGMENTS:

     We are organized into three operating segments based on
manufacturing and marketing criteria. These segments are the refining
group, the retail group and the wholesale group (formerly known as
Phoenix Fuel). A description of each segment and its principal products
follows:

REFINING GROUP

     Our refining group operates our Ciniza and Bloomfield refineries in
the Four Corners area of New Mexico and the Yorktown refinery in
Virginia. It also operates a crude oil gathering pipeline system in New
Mexico, two finished products distribution terminals, and a fleet of
crude oil and finished product trucks. Our three refineries make various
grades of gasoline, diesel fuel, and other products from crude oil, other
feedstocks, and blending components. We also acquire finished products
through exchange agreements and from various suppliers. We sell these
products through our service stations, independent wholesalers and
retailers, commercial accounts, and sales and exchanges with major oil
companies. We purchase crude oil, other feedstocks, and blending
components from various suppliers.

RETAIL GROUP

     Our retail group operates service stations, which include
convenience stores or kiosks. Our service stations sell various grades of
gasoline, diesel fuel, general merchandise, including tobacco and
alcoholic and nonalcoholic beverages, and food products to the general
public. Our refining group or our wholesale group supplies the gasoline
and diesel fuel that our retail group sells. We purchase general
merchandise and food products from various suppliers. At June 30, 2006,
our retail group operated 134 service stations with convenience stores or
kiosks. The 134 service stations include 12 service stations acquired in
the Dial Oil acquisition that were transferred in the second quarter from
the wholesale group to the retail group for reporting purposes.

WHOLESALE GROUP

     Our wholesale group consists of Phoenix Fuel and Dial Oil (which was
acquired on July 12, 2005). Our wholesale group primarily distributes
commercial wholesale petroleum products. Our wholesale group includes
several lubricant and bulk petroleum distribution plants, unmanned fleet
fueling operations, a bulk lubricant terminal facility, and a fleet of
finished product and lubricant delivery trucks. In the second quarter, 12
service stations acquired in the Dial Oil transaction were transferred
for reporting purposes to our Retail Group. We purchase petroleum fuels
and lubricants from suppliers and to a lesser extent from our refining
group.






                                   21


<PAGE>
OTHER

     Our operations that are not included in any of the three segments
are included in the category "Other". These operations consist primarily
of corporate staff operations.

     Operating income for each segment consists of net revenues less cost
of products sold, operating expenses, depreciation and amortization, and
the segment's selling, general and administrative expenses. Cost of
products sold reflects current costs adjusted, where appropriate, for
LIFO and lower of cost or market inventory adjustments.

     The total assets of each segment consist primarily of net property,
plant and equipment, inventories, accounts receivable, and other assets
directly associated with the segment's operations. Included in the total
assets of the corporate staff operations are a majority of our cash and
cash equivalents, and various accounts receivable, net property, plant
and equipment, and other long-term assets.

     Disclosures regarding our reportable segments with a reconciliation
to consolidated totals for the three and six months ended June 30, 2006
and 2005, are presented below. The tables pertaining to the three and six
months ended June 30, 2005 do not include the results of Dial Oil.
































                                   22


<PAGE>
<TABLE>
<CAPTION>
                                                   As of and for the Three Months Ended June 30, 2006
                                            -------------------------------------------------------------------
                                            Refining     Retail   Wholesale           Reconciling
                                             Group       Group**    Group     Other      Items     Consolidated
                                            -------------------------------------------------------------------
                                                                     (In thousands)
<S>                                         <C>         <C>       <C>       <C>       <C>         <C>
Customer net revenues:
  Finished products:
    Four Corners operations..............   $  182,295
    Yorktown operations..................      459,205
                                            ----------
      Total..............................   $  641,500  $124,149  $312,295  $      -  $       -   $1,077,944
  Merchandise and lubricants.............            -    40,972    17,947         -          -       58,919
  Other..................................        2,880     4,586       887        63          -        8,416
                                            ----------  --------  --------  --------  ---------   ----------
      Total..............................      644,380   169,707   331,129        63          -    1,145,279
                                            ----------  --------  --------  --------  ---------   ----------
Inter-segment net revenues:
  Finished products......................      121,507         -    32,773         -   (154,280)           -
  Merchandise and lubricants.............            -         -         8         -         (8)           -
  Other..................................        5,936         -       385         -     (6,321)           -
                                            ----------  --------  --------  --------  ---------   ----------
      Total..............................      127,443         -    33,166         -   (160,609)           -
                                            ----------  --------  --------  --------  ---------   ----------
Total net revenues from
  continuing operations..................   $  771,823  $169,707  $364,295  $     63  $(160,609)  $1,145,279
                                            ==========  ========  ========  ========  =========   ==========
Operating income/(loss):
  Four Corners operations................   $   35,375
  Yorktown operations....................       14,589
                                            ----------
      Total operating (loss)/income
        before corporate allocation......   $   49,964  $  3,978  $  3,527  $ (8,392) $  33,051   $   82,128
Corporate allocation.....................       (4,017)   (2,649)   (1,022)    7,688          -            -
                                            ----------  --------  --------  --------  ---------   ----------
  Operating (loss)/income from
    continuing operations................   $   45,947  $  1,329  $  2,505  $   (704) $  33,051       82,128
                                            ==========  ========  ========  ========  =========
Interest expense.........................                                                             (4,178)
Amortization of financing costs..........                                                               (399)
Investment and other income..............                                                              1,079
                                                                                                  ----------
Earnings from continuing operations
  before income taxes....................                                                         $   78,630
                                                                                                  ==========
Depreciation and amortization:
  Four Corners operations................   $    3,967
  Yorktown operations....................        3,906
                                            ----------
      Total from continuing operations...   $    7,873  $  2,051  $    789  $    256  $      -    $   10,969
                                            ==========  ========  ========  ========  ========    ==========
Total assets.............................   $  706,596  $120,262  $157,450  $100,132  $      -    $1,084,440
Capital expenditures.....................   $   66,487  $    997  $  1,039  $    398  $      -    $   68,921
</TABLE>

**Includes 12 convenience stores acquired in the Dial Oil acquisition.

                                   23


<PAGE>
<TABLE>
<CAPTION>
                                                   As of and for the Three Months Ended June 30, 2005
                                            ----------------------------------------------------------------
                                            Refining   Retail   Wholesale          Reconciling
                                              Group    Group      Group     Other     Items     Consolidated
                                            ----------------------------------------------------------------
                                                                     (In thousands)
<S>                                         <C>       <C>       <C>       <C>        <C>          <C>
Customer net revenues:
  Finished products:
    Four Corners operations..............   $149,277
    Yorktown operations..................    394,717
                                            --------
      Total..............................   $543,994  $ 78,318  $187,062  $      -   $      -     $ 809,374
  Merchandise and lubricants.............          -    36,325     9,627         -          -        45,952
  Other..................................      3,086     4,230       502       213          -         8,031
                                            --------  --------  --------  --------   --------     ---------
      Total..............................    547,080   118,873   197,191       213          -       863,357
                                            --------  --------  --------  --------   --------     ---------
Intersegment net revenues:
  Finished products......................     60,937         -    18,532         -    (79,469)            -
  Other..................................      5,104         -         -         -     (5,104)            -
                                            --------  --------  --------  --------   --------     ---------
      Total..............................     66,041         -    18,532         -    (84,573)            -
                                            --------  --------  --------  --------   --------     ---------
Total net revenues from
  From continuing operations.............   $613,121  $118,873  $215,723  $    213   $(84,573)    $ 863,357
                                            ========  ========  ========  ========   ========     =========
Operating income (loss):
  Four Corners operations................   $ 19,724
  Yorktown operations....................     27,312
                                            --------
      Total operating income (loss)
        before corporate allocation......   $ 47,036  $  3,114  $  2,815  $ (8,557)  $    425     $  44,833
Corporate allocation.....................     (4,372)   (2,535)     (790)    7,697          -             -
                                            --------  --------  --------  --------   --------     ---------
Total operating income (loss) after
  corporate allocation...................     42,664       579     2,025      (860)       425        44,833
Discontinued operations (gain) loss......          -       (13)        -         -        (22)          (35)
                                            --------  --------  --------  --------   --------     ---------
  Operating income (loss) from
    continuing operations................   $ 42,664  $    566  $  2,025  $   (860)  $    403        44,798
                                            ========  ========  ========  ========   ========
Interest expense.........................                                                            (6,382)
Costs associated with early
  debt extinguishment....................                                                            (2,099)
Amortization of financing costs..........                                                            (1,496)
Interest and investment income...........                                                               368
                                                                                                  ---------
Earnings from continuing operations
  before income taxes....................                                                         $  35,189
                                                                                                  =========
Depreciation and amortization:
  Four Corners operations................   $  4,101
  Yorktown operations....................      2,638
                                            --------
      Total from continuing operations...   $  6,739  $  2,190  $    370  $    193   $      -     $   9,492
                                            ========  ========  ========  ========   ========     =========
Total assets.............................   $531,578  $106,279  $ 90,941  $ 74,009   $      -     $ 802,807
Capital expenditures.....................   $ 12,720  $  1,230  $    576  $    345   $      -     $  14,871

</TABLE>
                                   24


<PAGE>
<TABLE>
<CAPTION>
                                                         As of and for the Six Months Ended June 30, 2006
                                            -------------------------------------------------------------------
                                            Refining     Retail   Wholesale           Reconciling
                                             Group       Group**    Group     Other      Items     Consolidated
                                            -------------------------------------------------------------------
                                                                     (In thousands)
<S>                                         <C>         <C>       <C>       <C>       <C>         <C>
Customer net revenues:
  Finished products:
    Four Corners operations..............   $  314,957
    Yorktown operations..................      784,749
                                            ----------
      Total..............................   $1,099,706  $218,297  $550,781  $      -  $       -   $1,868,784
  Merchandise and lubricants.............            -    76,503    37,585         -          -      114,088
  Other..................................       13,811     9,686     1,802       133          -       25,432
                                            ----------  --------  --------  --------  ---------   ----------
      Total..............................    1,113,517   304,486   590,168       133          -    2,008,304
                                            ----------  --------  --------  --------  ---------   ----------
Inter-segment net revenues:
  Finished products......................      213,582         -    56,412         -   (269,994)           -
  Merchandise and lubricants.............            -         -        18         -        (18)           -
  Other..................................       11,109         -       771         -    (11,880)           -
                                            ----------  --------  --------  --------  ---------   ----------
      Total..............................      224,691         -    57,201         -   (281,892)           -
                                            ----------  --------  --------  --------  ---------   ----------
Total net revenues from
  continuing operations..................   $1,338,208  $304,486  $647,369  $    133  $(281,892)  $2,008,304
                                            ==========  ========  ========  ========  =========   ==========
Operating income/(loss):
  Four Corners operations................   $   46,609
  Yorktown operations....................      (16,216)
                                            ----------
      Total operating (loss)/income
        before corporate allocation......   $   30,393  $  5,689  $  7,702  $(14,495) $  36,544   $   65,833
Corporate allocation.....................       (6,466)   (4,680)   (1,905)   13,051          -            -
                                            ----------  --------  --------  --------  ---------   ----------
  Operating (loss)/income from
    continuing operations................   $   23,927  $  1,009  $  5,797  $ (1,444) $  36,544       65,833
                                            ==========  ========  ========  ========  =========
Interest expense.........................                                                             (8,860)
Amortization of financing costs..........                                                               (798)
Investment and other income..............                                                              2,681
                                                                                                  ----------
Loss from continuing operations
  before income taxes....................                                                         $   58,856
                                                                                                  ==========
Depreciation and amortization:
  Four Corners operations................   $    7,958
  Yorktown operations....................        6,416
                                            ----------
      Total from continuing operations...   $   14,374  $  4,126  $  1,551  $    485  $      -    $   20,536
                                            ==========  ========  ========  ========  ========    ==========
Total assets.............................   $  706,596  $120,262  $157,450  $100,132  $      -    $1,084,440
Capital expenditures.....................   $  124,061  $  1,811  $  2,243  $    505  $      -    $  128,620
</TABLE>

**Includes 12 convenience stores acquired in the Dial Oil acquisition.

                                   25


<PAGE>
<TABLE>
<CAPTION>
                                                      As of and for the Six Months Ended June 30, 2005
                                            ----------------------------------------------------------------
                                            Refining   Retail   Wholesale          Reconciling
                                              Group    Group      Group     Other     Items     Consolidated
                                            ----------------------------------------------------------------
                                                                     (In thousands)
<S>                                         <C>         <C>       <C>       <C>        <C>          <C>
Customer net revenues:
  Finished products:
    Four Corners operations..............   $  270,151
    Yorktown operations..................      709,424
                                            ----------
      Total..............................   $  979,575  $140,128  $353,804  $      -   $       -    $1,473,507
  Merchandise and lubricants.............            -    67,612    18,649         -           -        86,261
  Other..................................        5,855     8,059     1,089       313           -        15,316
                                            ----------  --------  --------  --------   ---------    ----------
      Total..............................      985,430   215,799   373,542       313           -     1,575,084
                                            ----------  --------  --------  --------   ---------    ----------
Intersegment net revenues:
  Finished products......................      111,252         -    33,845         -    (145,097)            -
  Other..................................        9,465         -         -         -      (9,465)            -
                                            ----------  --------  --------  --------   ---------    ----------
      Total..............................      120,717         -    33,845         -    (154,562)            -
                                            ----------  --------  --------  --------   ---------    ----------
Total net revenues from
  continuing operations..................   $1,106,147  $215,799  $407,387  $    313   $(154,562)   $1,575,084
                                            ==========  ========  ========  ========   =========    ==========
Operating income (loss):
  Four Corners operations................   $   26,010
  Yorktown operations....................       44,962
                                            ----------
      Total operating income (loss)
        before corporate allocation......   $   70,972  $  1,435  $  6,515  $(13,601)   $  3,929    $   69,250
Corporate allocation.....................       (7,110)   (4,099)   (1,322)   12,531           -             -
                                            ----------  --------  --------  --------   ---------    ----------
Total operating income (loss) after
  corporate allocation...................       63,862    (2,664)    5,193    (1,070)      3,929        69,250
Discontinued operations loss.............            -        (2)        -         -         (22)          (24)
                                            ----------  --------  --------  --------   ---------    ----------
  Operating income (loss) from
    continuing operations................   $   63,862  $ (2,666) $  5,193  $ (1,070)  $   3,907        69,226
                                            ==========  ========  ========  ========   =========
Interest expense.........................                                                              (13,376)
Costs associated with early
  debt extinguishment....................                                                               (2,099)
Amortization of financing costs..........                                                               (2,000)
Interest and investment income...........                                                                  489
                                                                                                    ----------
Earnings from continuing operations
  before income taxes....................                                                           $   52,240
                                                                                                    ==========
Depreciation and amortization:
  Four Corners operations................   $    8,171
  Yorktown operations....................        5,296
                                            ----------
      Total from continuing operations...   $   13,467  $  5,737  $    886  $    373   $       -    $   20,463
                                            ==========  ========  ========  ========   =========    ==========
Total assets.............................   $  531,578  $106,279  $ 90,941  $ 74,009   $       -    $  802,807
Capital expenditures.....................   $   23,725  $  2,010  $  1,035  $    927   $       -    $   27,697

</TABLE>
                                   26


<PAGE>
NOTE 10 - COMMITMENTS AND CONTINGENCIES:

     We have pending against us various legal actions, claims,
assessments and other contingencies arising in the normal course of our
business, including those matters described below. Some of these matters
involve or may involve significant claims for compensatory, punitive, or
other damages. These matters are subject to many uncertainties, and it is
possible that some of these matters could be ultimately decided,
resolved, or settled adversely. As explained more fully below, we have
recorded accruals for losses related to those matters that we consider to
be probable and that can be reasonably estimated. We currently believe
that any amounts exceeding our recorded accruals should not materially
affect our financial condition or liquidity. It is possible, however,
that the ultimate resolution of these matters could result in a material
adverse effect on our results of operations.

     Federal, state and local laws relating to the environment, health
and safety affect nearly all of our operations. As is the case with all
companies engaged in similar industries, we face significant exposure
from actual or potential claims and lawsuits involving environmental,
health and safety matters. These matters include soil and water
contamination, air pollution, and personal injuries or property damage
allegedly caused by substances made, handled, used, released, or disposed
of by us or by our predecessors.

     Future expenditures related to environmental, health, and safety
matters cannot be reasonably quantified in many circumstances for various
reasons. These reasons include the uncertain nature of remediation and
cleanup cost estimates and methods, imprecise and conflicting data
regarding the hazardous nature of various types of substances, the number
of other potentially responsible parties involved, defenses that may be
available to us, and changing environmental, health, and safety laws,
including changing interpretations of these laws.

ENVIRONMENTAL AND LITIGATION ACCRUALS

     We expense or capitalize environmental expenditures depending on the
circumstances:

     - expenditures that relate to an existing environmental condition
       caused by past operations, and which do not result in an asset
       with an economic life greater than one year, are expensed; and

     - expenditures that relate to an existing environmental condition
       caused by past operations, and which result in an asset with an
       economic life greater than one year, are capitalized in the period
       incurred and depreciated over their useful life.








                                   27


<PAGE>
     Under circumstances in which environmental expenditures, or losses
associated with litigation, are anticipated and related to past events,
we accrue for the liability if cleanup expenditures, administrative
penalties, adverse judgments, or other liabilities are probable and the
costs can be reasonably estimated.

     We do not accrue for future environmental expenditures associated
with:

     - our compliance with clean air, clean water, and similar regulatory
       programs, including programs relating to the composition of motor
       fuels, that do not require us to undertake soil removal or similar
       cleanup activities;

     - our compliance with settlements, consent decrees, and other
       agreements with governmental authorities that do not require us to
       undertake soil removal or similar cleanup activities;

     - groundwater monitoring; or

     - capital projects.

     Expenditures for these matters are capitalized or expensed when
incurred.

     We do not discount our environmental and litigation liabilities, and
record these liabilities without consideration of potential recoveries
from third parties, except that we do take into account amounts that
others are contractually obligated to pay us. Subsequent adjustments to
estimates, which may be significant, may be made as more information
becomes available or as circumstances change.

     As of June 30, 2006 and December 31, 2005, we had environmental
liability accruals of approximately $4,549,000 and $4,941,000,
respectively, which are summarized below, and litigation accruals in the
aggregate of approximately $329,000 and $990,000, respectively.
Environmental accruals are recorded in the current and long-term sections
of our Condensed Consolidated Balance Sheets. Litigation accruals are
recorded in the current section of our Consolidated Balance Sheets.
















                                   28


<PAGE>
<TABLE>
<CAPTION>
                           SUMMARY OF ACCRUED ENVIRONMENTAL CONTINGENCIES
                                          (In thousands)

                                           December 31,   Increase                June 30,
                                               2005      (Decrease)   Payments      2006
                                           ------------  ----------   --------    --------
<S>                                          <C>           <C>          <C>        <C>
Yorktown Refinery........................... $ 3,540       $    -       $ (293)    $ 3,247
Bloomfield Refinery.........................     229            -            -         229
Farmington Refinery.........................     570            -            -         570
Bloomfield Tank Farm (Old Terminal).........      42            -           (8)         34
Bloomfield - River Terrace..................      46            6          (22)         30
Other Projects..............................     514            3          (78)        439
                                             -------       ------       ------     -------
   Totals..................................  $ 4,941       $    9       $ (401)    $ 4,549
                                             =======       ======       ======     =======
</TABLE>

     Approximately $4,110,000 of our environmental accrual is for the
following projects discussed below:

     - $3,247,000 and $229,000, respectively, for environmental
       obligations assumed in connection with our acquisitions of the
       Yorktown refinery and the Bloomfield refinery;

     - $570,000 for the remediation of the hydrocarbon plume that appears
       to extend no more than 1,800 feet south of our inactive Farmington
       refinery;

     - $34,000 for remediation of hydrocarbon contamination on and
       adjacent to the 5.5 acres that we own in Bloomfield, New Mexico;
       and

     - $30,000 for remediation of the river terrace area of the
       Bloomfield refinery.

     The remaining $439,000 of the accrual relates to:

     - closure of certain solid waste management units at the Ciniza
       refinery;

     - closure of the Ciniza refinery land treatment facility including
       post-closure expenses; and

     - miscellaneous remediation projects.







                                   29


<PAGE>
YORKTOWN ENVIRONMENTAL LIABILITIES

     We assumed certain liabilities and obligations in connection with
our purchase of the Yorktown refinery from BP Corporation North America
Inc. and BP Products North America Inc. (collectively "BP"). BP, however,
agreed to reimburse us for all losses that are caused by or relate to
property damage caused by, or any environmental remediation required due
to, a violation of environmental, health, and safety laws during BP's
operation of the refinery, subject to certain limitations. For a further
discussion of this matter, refer to Note 17, "Commitments and
Contingencies", in our Consolidated Financial Statements included in our
Annual Report on Form 10-K for the year ended December 31, 2005.

     Certain environmental matters relating to the Yorktown refinery are
discussed below.

YORKTOWN 1991 ORDER

     In connection with the Yorktown acquisition, we assumed BP's
obligations under an administrative order issued in 1991 by the
Environmental Protection Agency ("EPA") under the Resource Conservation
and Recovery Act("RCRA"). The order requires an investigation of certain
areas of the refinery and the development of measures to correct any
releases of contaminants or hazardous substances found in these areas. A
RCRA Facility Investigation was conducted and approved conditionally by
EPA in 2002. Following the investigation, a Risk Assessment/Corrective
Measures Study ("RA/CMS") was finalized in 2003, which summarized the
remediation measures agreed upon by us, EPA, and the Virginia Department
of Environmental Quality ("VDEQ"). The RA/CMS proposes investigation,
sampling, monitoring, and cleanup measures, including the construction of
an on-site corrective action management unit that would be used to
consolidate hazardous solid materials associated with these measures.
These proposed actions relate to soil, sludge, and remediation wastes
relating to solid waste management units. Groundwater in the aquifers
underlying the refinery, and surface water and sediment in a small pond
and tidal salt marsh on the refinery property, also are addressed in the
RA/CMS.

     Based on the RA/CMS, EPA issued a proposed cleanup plan for public
comment in December 2003 setting forth preferred corrective measures for
remediating soil, groundwater, sediment, and surface water contamination
at the refinery. Following the public comment period, EPA issued its
final remedy decision and response to comments in April 2004. In August
2006, we agreed to the terms of an administrative consent order pursuant
to which we will implement our cleanup plan.









                                   30


<PAGE>
     Our most current estimate of expenses associated with the order is
between $25,000,000 ($17,500,000 of which we believe is subject to
reimbursement by BP) and $27,000,000 ($19,500,000 of which we believe is
subject to reimbursement by BP). We anticipate that these expenses will
be incurred over a period of approximately 35 years from the date of the
order (expected to be August 2006). We believe that between approximately
$9,500,000 and $10,500,000 of this amount will be incurred over an
initial four-year period, and additional expenditures of approximately
$7,500,000 will be incurred over the following four-year period, with the
remainder thereafter. We currently have $3,247,000 recorded as an
environmental liability for this project, which reflects our belief that
BP is responsible for reimbursing us for expenditures on this project
that exceed this amount and also reflects expenditures previously
incurred in connection with this matter.

     As part of the cleanup plan, the facility's underground sewer system
will be cleaned, inspected, and repaired as needed. A portion of this
sewer work is scheduled to begin during the construction of the
corrective action management unit and related remediation work, and is
included in our associated cost estimate. We anticipate that construction
of the corrective action management unit and related remediation work
will be completed approximately five to seven years from the date of the
order, which we expect will be issued in August 2006. We have
preliminarily estimated that the balance of the sewer work will cost
between approximately $1,500,000 and $3,500,000 over a period of three to
five years, beginning around the time the construction of the corrective
action management unit and related remediation work is nearing
completion. We do not know whether any cleanup will be required in
connection with this capital project and, accordingly, have not recorded
a liability for this matter.

BLOOMFIELD REFINERY ENVIRONMENTAL OBLIGATIONS

     In connection with the acquisition of the Bloomfield refinery, we
assumed certain environmental obligations including the seller's
obligations under an administrative order issued by EPA in 1992 pursuant
to RCRA. We believe some of the requirements of the draft NMED order
discussed below under the caption "Bloomfield Refinery - NMED Draft
Order" may duplicate some of the requirements of the 1992 order. We
anticipate that discussions will be held with EPA and NMED concerning
their respective requirements for investigation and remediation of the
Bloomfield refinery. As of June 30, 2006, we had $229,000 recorded as an
environmental liability for this project. For a further discussion of
this matter, refer to Note 17, "Commitments and Contingencies", in our
Consolidated Financial Statements included in our Annual Report on Form
10-K for the year ended December 31, 2005.









                                   31


<PAGE>
FARMINGTON REFINERY MATTERS

     In 1973, we constructed the Farmington refinery, which we operated
until 1982. In 1985, we became aware of soil and shallow groundwater
contamination at this property. Our environmental consulting firms
identified several areas of contamination in the soils and shallow
groundwater underlying the Farmington property. One of our consultants
indicated that contamination attributable to past operations at the
Farmington property has migrated off the refinery property, including a
hydrocarbon plume that appears to extend no more than 1,800 feet south of
the refinery property. Our remediation activities are ongoing under the
supervision of the New Mexico Oil Conservation Division ("OCD"), although
OCD has not issued a clean-up order. As of June 30, 2006, we had $570,000
recorded as an environmental liability for this project.

BLOOMFIELD TANK FARM (OLD TERMINAL)

     We have discovered hydrocarbon contamination adjacent to a 55,000
barrel crude oil storage tank that was located in Bloomfield, New Mexico.
We believe that all or a portion of the tank and the 5.5 acres we own on
which the tank was located may have been a part of a refinery owned by
various other parties, that, to our knowledge, ceased operations in the
early 1960s. We received approval to conduct a pilot bioventing project
to address remaining contamination at the site, which was completed in
2001. Based on the results of the pilot project, we submitted a
remediation plan to OCD proposing the use of bioventing to address the
remaining contamination. This remediation plan was approved by OCD in
2002. We anticipate that we will incur approximately $20,000 in expenses
from 2006 through early 2008 to continue remediation until natural
attenuation has completed the process of groundwater remediation. As of
June 30, 2006, we had $34,000 recorded as an environmental liability for
this project.

BLOOMFIELD REFINERY - WEST OUTFALL AND RIVER TERRACE

     In August 2004, hydrocarbon discharges were discovered seeping into
two small gullies, or draws, in an area of the Bloomfield refinery site
known as the west outfall. We took immediate containment and other
corrective actions, including removal of contaminated soils, construction
of lined collection sumps, and further investigation and monitoring. To
further remediate these discharges and prevent additional migration of
contamination, we constructed an underground barrier with a pollutant
extraction and collection system, which was completed in the second
quarter of 2005.











                                   32


<PAGE>
     With the approval of OCD, we installed sheet piling in an area of
the Bloomfield refinery site known as the river terrace in 1999 to block
migration of groundwater contaminants. Monitoring wells also were
installed, with annual sampling results submitted to OCD. In connection
with the construction of the underground barrier at the west outfall, OCD
required more investigation of elevated hydrocarbon levels in the river
terrace area. As a result of this investigation, in August 2005, OCD
approved a bioventing plan to reduce hydrocarbon levels in this area.
Bioventing involves pumping air into the soil to stimulate bacterial
activity, which in turn consumes hydrocarbons. Construction of the
bioventing system was completed in January 2006. As of June 30, 2006, we
had $30,000 recorded as an environmental liability for this project.

YORKTOWN CONSENT DECREE

     In connection with the acquisition of the Yorktown refinery, we
assumed BP's responsibilities related to a consent decree among various
parties covering many locations (the "Consent Decree"). We have expended
approximately $18,000,000 in connection with this matter through the
second quarter of 2006. Since our expenditures for this matter do not
involve soil removal or similar cleanup activities, we have not recorded
an environmental liability for this project and will capitalize or
expense expenditures when incurred. For a further discussion of this
matter, refer to Note 17, "Commitments and Contingencies", in our
Consolidated Financial Statements included in our Annual Report on Form
10-K for the year ended December 31, 2005.

BLOOMFIELD REFINERY - NMED DRAFT ORDER

     On June 21, 2006, we received a draft administrative compliance
order from the New Mexico Environment Department ("NMED") alleging that
releases of contaminants and hazardous substances that have occurred at
the Bloomfield refinery over the course of its operation have resulted in
soil and groundwater contamination. Among other things, the draft order
requires that we:

     - investigate and determine the nature and extent of such releases
       of contaminants and hazardous substances;

     - perform interim remediation measures, or continue interim measures
       already begun, to mitigate any potential threats to human health
       or the environment from such releases;

     - identify and evaluate alternatives for corrective measures to
       clean up any contaminants and hazardous substances released at the
       refinery and prevent or mitigate their migration at or from the
       site;








                                   33


<PAGE>
     - implement any corrective measures that may be approved by NMED; and

     - develop and implement work plans and corrective measures over a
       period of approximately four years.

     The draft order recognizes that prior work we have satisfactorily
completed may fulfill some of the foregoing requirements. In that regard,
we have already put in place some remediation measures with the approval
of NMED or OCD. See, for example, the discussion above under the heading
"Bloomfield Refinery - West Outfall and River Terrace."

     The draft order is open for public comments for 60 days. We plan to
submit comments during the public comment period. Following the public
comment period, NMED will issue a response to all written comments and a
final order. We currently do not know the nature and extent of any
cleanup actions that may be required under the final order and,
accordingly, have not recorded a liability for this matter.

BLOOMFIELD REFINERY - OCD COMPLIANCE ORDER

     On September 19, 2005, we received an Administrative Compliance
Order from OCD alleging that: (1) we had failed to notify OCD of the west
outfall discharges at our Bloomfield refinery; (2) we had allowed
contaminants to enter the San Juan River from the refinery's river
terrace area; and (3) we had failed to comply with certain conditions of
the refinery's groundwater discharge plan. In March 2006, we reached a
settlement with OCD in the form of a consent order and paid a civil
penalty of $30,000. The settlement requires that we apply for a discharge
plan modification. The discharge plan modification must include a
comprehensive action plan for the investigation and remediation of
contaminated soil and groundwater at the refinery. Until this plan is
completed and a remediation plan is approved by the two agencies with
regulatory oversight, OCD and NMED, we cannot reasonably estimate the
cost of any associated remediation activities. We believe the
requirements of this settlement may duplicate some of the requirements of
the draft NMED order discussed above under the caption "Bloomfield
Refinery - NMED Draft Order". We anticipate further discussions with OCD
and NMED concerning their respective requirements for investigation and
remediation at the Bloomfield refinery.

FOUR CORNERS REFINERIES - SETTLEMENT AGREEMENTS

     In July 2005, we reached an administrative settlement with NMED and
EPA in the form of consent agreements that resolved certain alleged
violations of air quality regulations at our Ciniza and Bloomfield
refineries.









                                   34


<PAGE>
     Our settlement does not require us to undertake soil removal or
similar cleanup activities and, accordingly, we have not recorded an
environmental liability for this matter and will capitalize or expense
expenditures when incurred. For a further discussion of this matter,
refer to Note 17, "Commitments and Contingencies", in our Consolidated
Financial Statements included in our Annual Report on Form 10-K for the
year ended December 31, 2005.

BLOOMFIELD REFINERY - EPA COMPLIANCE ORDER

     On October 12, 2005, we received an Administrative Compliance Order
from EPA in connection with a compliance evaluation inspection at the
Bloomfield refinery in 2000 and a follow-up inspection in early 2001. We
send waste water from the refinery's process units through an oil-water
separator, a series of aeration ponds that continue the treatment and
processing of oily water, and a series of evaporation ponds, before the
water is injected into a permitted deep well. EPA alleged that benzene
levels in the aeration ponds exceed permissible RCRA levels. EPA also
alleged that we failed to make a RCRA hazardous waste determination in
connection with waste water going into the aeration ponds. In May 2006, we
reached a settlement with EPA in the form of a consent agreement and paid
a civil penalty of $75,000. The settlement requires that we make equipment
modifications to reduce benzene levels in the waste water coming from the
refinery's process units. We currently estimate that we will incur capital
expenditures of approximately $1,200,000 to comply with the settlement,
the majority of which will be incurred in 2007. Since the settlement does
not require us to undertake any cleanup activities, we have not recorded
an environmental liability for this matter.

MTBE LITIGATION

     Lawsuits have been filed in numerous states alleging that MTBE, a
blendstock used by many refiners in producing specially formulated
gasoline, has contaminated water supplies. MTBE contamination primarily
results from leaking underground or aboveground storage tanks. The suits
allege MTBE contamination of water supplies owned and operated by the
plaintiffs, who are generally water providers or governmental entities. The
plaintiffs assert that numerous refiners, distributors, or sellers of MTBE
and/or gasoline containing MTBE are responsible for the contamination. The
plaintiffs also claim that the defendants are jointly and severally liable
for compensatory and punitive damages, costs, and interest. Joint and
several liability means that each defendant may be liable for all of the
damages even though that party was responsible for only a small part of the
damages. We are a defendant in approximately 30 of these MTBE lawsuits
pending in Virginia, Connecticut, Massachusetts, New Hampshire, New York,
New Jersey, and Pennsylvania. In the second quarter of 2006, we also were
named as a defendant in a new MTBE lawsuit filed by the State of New
Mexico. The lawsuit alleges that numerous plaintiffs, including us, are
responsible for the contamination of public and private water supplies
throughout the state. We intend to vigorously defend these lawsuits. Since
we have yet to determine if a liability is probable, and we cannot
reasonably estimate the amount of any loss associated with these matters,
we have not recorded a liability for these lawsuits.


                                   35


<PAGE>
YORKTOWN REFINERY INCIDENT

     On November 25, 2005, a fire occurred at our Yorktown refinery.
Damage was primarily done to the gas plant that supports the fluid
catalytic cracker ("FCC"), a unit that alters the molecular composition
of materials sent into the unit in order to produce gasoline, diesel,
fuel oil, heating oil, and other products. Some piping and
instrumentation cables for other operating units in the refinery were
also damaged by the fire. All of the units at the refinery were shut down
to assess the scope of work needed to return the refinery to safe and
efficient operations. The refinery was brought back to operation in two
stages. Certain units, including the crude unit, began operations in
January 2006. The gas plant and the FCC returned to operation in April
2006, and the refinery has returned to its normal operating level of
approximately 62,000 barrels per day.

     We have property insurance coverage with a $1,000,000 deductible
that should cover a significant portion of the costs of repairing the
Yorktown refinery. We also have business interruption insurance coverage
for the financial impact of the fire after the policy's 45-day waiting
period is exceeded. As of June 30, 2006, we have received $42,950,000 of
insurance proceeds consisting of $17,950,000 for property claims and
$25,000,000 for business interruption claims. As of June 30, 2006, we
recorded a gain of $35,953,000 as a result of insurance recoveries
received related to the fire. In July 2006, we received an additional
$3,150,000 of insurance proceeds for property claims. We expect to
receive additional amounts on both our property insurance and business
interruption insurance claims. We believe that these additional
reimbursements will have a significant impact on our 2006 earnings.


























                                   36


<PAGE>
NOTE 11 - ACQUISITIONS:

     In accordance with the conclusion of the allocation period provided
for by SFAS 141, "Business Combinations", we recorded a $455,000
reduction in goodwill with a corresponding increase of $180,000 in
intangible assets, $139,000 in fixed assets, with the remainder of
$136,000 to other miscellaneous assets and liabilities.

     In May 2006, we acquired a lubricating business in El Paso, Texas.
We funded this acquisition with cash on hand. These assets primarily
include lubricants inventory, fixed assets and miscellaneous receivables.
The acquisition has been accounted for using the purchase method of
accounting whereby the total purchase price has been preliminarily
allocated to tangible and intangible assets acquired based on the fair
market values on the date of acquisition. The pro forma effect of the
acquisition on Giant's results of operations is immaterial.

     We are also in the process of closing the acquisition of certain
assets from Amigo Petroleum Company. We will fund this acquisition with
cash on hand. We will be acquiring twenty-five convenience stores. We are
also purchasing two bulk petroleum distribution plants and a
transportation fleet. The acquisition will be accounted for using the
purchase method of accounting whereby the total purchase price has been
preliminarily allocated to tangible and intangible assets acquired based
on the fair market values on the date of acquisition. The pro forma
effect of the acquisition on Giant's results of operations is immaterial.




























                                   37


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

COMPANY OVERVIEW

     We refine and sell petroleum products and operate service stations
and convenience stores. Our operations are divided into three strategic
business units: the refining group, the retail group, and the wholesale
group. The refining group operates two refineries in the Four Corners
area of New Mexico and one refinery in Yorktown, Virginia. The refining
group sells its products to wholesale distributors and retail chains. Our
retail group operated 134 service stations as of June 30, 2006. This
includes 12 service stations acquired in the Dial Oil Co.("Dial Oil")
transaction on July 12, 2005 whose results of operations had previously
been included in the wholesale group from the date of the acquisition.
Our retail group sells its petroleum products and merchandise to
consumers in New Mexico, Arizona and Southern Colorado. Our wholesale
group distributes commercial wholesale petroleum products primarily in
Arizona and New Mexico.

     In order to maintain and improve our financial performance, we are
focused on several critical and challenging objectives. We will be
addressing these objectives in the short-term as well as over the next
three to five years. In our view, the most important of these objectives
are:

     - increasing margins through management of inventories and taking
       advantage of sales and purchasing opportunities;

     - minimizing operating expenses and capital expenditures;

     - increasing the available crude oil supply for our Four Corners
       refineries;

     - cost effectively complying with current environmental regulations
       as they apply to our refineries, including future clean air
       standards;

     - improving our overall financial health and flexibility by, among
       other things, reducing our debt and overall costs of capital,
       including our interest and financing costs, and maximizing our
       return on capital employed; and

     - evaluating opportunities for internal growth and growth by
       acquisition.










                                   38


<PAGE>
CRITICAL ACCOUNTING POLICIES

     A critical step in the preparation of our financial statements is
the selection and application of accounting principles, policies, and
procedures that affect the amounts that are reported. In order to apply
these principles, policies, and procedures, we must make judgments,
assumptions, and estimates based on the best available information at the
time. Actual results may differ based on the accuracy of the information
utilized and subsequent events, some of which we may have little or no
control over. In addition, the methods used in applying the above may
result in amounts that differ considerably from those that would result
from the application of other acceptable methods. The development and
selection of these critical accounting policies, and the related
disclosure below, have been reviewed with the audit committee of our
board of directors.

     Our significant accounting policies, including revenue recognition,
inventory valuation, and maintenance costs, are described in Note 1 to
our Consolidated Financial Statements included in our Annual Report on
Form 10-K for the year ended December 31, 2005. The following accounting
policies are considered critical due to the uncertainties, judgments,
assumptions and estimates involved:

     -  accounting for contingencies, including environmental remediation
        and litigation liabilities;

     -  assessing the possible impairment of long-lived assets;

     -  accounting for asset retirement obligations;

     -  accounting for our pension and post-retirement benefit plans; and

     -  accounting for inventories.

     There have been no changes to these policies in 2006.

RESULTS OF OPERATIONS

     The following discussion of our Results of Operations should be read
in conjunction with the Consolidated Financial Statements and related
notes thereto included in Part I, Item 1 in this Form 10-Q, and in Item 8
of our Annual Report on Form 10-K for the year ended December 31, 2005.













                                   39


<PAGE>
     Below is operating data for our operations:

<TABLE>
<CAPTION>
                                                          Three Months Ended      Six Months Ended
                                                               June 30,                June 30,
                                                        ---------------------   ---------------------
                                                           2006        2005        2006        2005
                                                        ---------   ---------   ---------   ---------
<S>                                                     <C>         <C>         <C>         <C>
Refining Group Operating Data:
  Four Corners Operations:
    Crude Oil/NGL Throughput (BPD)..............          28,658      29,811      28,889      29,313
    Refinery Sourced Sales Barrels (BPD)........          27,084      29,344      27,774      28,954
    Average Crude Oil Costs ($/Bbl).............        $  67.86    $  51.64    $  65.22    $  49.63
    Refining Margins ($/Bbl)....................        $  21.97    $  13.48    $  16.30    $  10.72

  Yorktown Operations:
    Crude Oil/NGL Throughput (BPD)..............          60,396      68,449      49,055      67,102
    Refinery Sourced Sales Barrels (BPD)........          61,668      71,539      47,645      67,157
    Average Crude Oil Costs ($/Bbl).............        $  68.36    $  48.76    $  64.96    $  46.92
    Refining Margins ($/Bbl)....................        $   6.65    $   7.30    $   3.10    $   7.06

Retail Group Operating Data:*
(Continuing operations only)
  Fuel Gallons Sold (000's).....................          49,021      41,410      95,282      80,879
  Fuel Margins ($/gal)..........................        $   0.17    $   0.17        0.16    $   0.14
  Merchandise Sales ($ in 000's)................        $ 40,972    $ 36,325    $ 76,502    $ 67,612
  Merchandise Margins...........................              27%         27%         27%         27%
  Operating Retail Outlets at Period End........             134         124         134         124

Wholesale Group Operating Data:
    Fuel Gallons Sold (000's)...................         149,231     120,344     289,979     241,209
    Fuel Margins ($/gal)........................        $   0.06    $   0.06    $   0.06    $   0.06
    Lubricant Sales ($ in 000's)................        $ 15,770    $  9,027      33,414    $ 17,439
    Lubricant Margins...........................              14%         10%         13%         12%

*Includes statistics for 12 retail stores acquired in the Dial Oil transaction on July 12, 2005.
</TABLE>















                                   40


<PAGE>
RECONCILIATIONS TO AMOUNTS REPORTED UNDER GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES

REFINING GROUP
--------------

Refining Margin
---------------

     Refining margin is the difference between average net sales prices
and average cost of products produced per refinery sourced sales barrel
of refined product. Refining margins for each of our refineries and all
of our refineries on a consolidated basis are calculated as shown below.

<TABLE>
<CAPTION>
                                                          Three Months Ended      Six Months Ended
                                                               June 30,                June 30,
                                                        ---------------------   ---------------------
                                                           2006        2005        2006        2005
                                                        ---------   ---------   ---------   ---------
<S>                                                     <C>         <C>         <C>         <C>
AVERAGE PER BARREL
------------------
Four Corners Operation
  Net sales...........................................  $   95.24   $   68.70   $   85.63   $   64.02
  Less cost of products...............................      73.27       55.22       69.33       53.30
                                                        ---------   ---------   ---------   ---------
  Refining margin.....................................  $   21.97   $   13.48   $   16.30   $   10.72
                                                        =========   =========   =========   =========
Yorktown Operation
  Net sales...........................................  $   78.65   $   57.92   $   72.87   $   55.46
  Less cost of products...............................      72.00       50.62       69.77       48.40
                                                        ---------   ---------   ---------   ---------
  Refining margin.....................................  $    6.65   $    7.30   $    3.10   $    7.06
                                                        =========   =========   =========   =========
Consolidated
  Net sales...........................................  $   83.72   $   61.05   $   77.57   $   58.04
  Less cost of products...............................      72.39       51.96       69.61       49.88
                                                        ---------   ---------   ---------   ---------
  Refining margin.....................................  $   11.33   $    9.09   $    7.96   $    8.16
                                                        =========   =========   =========   =========
</TABLE>








                                   41


<PAGE>
<TABLE>
<CAPTION>
                                                          Three Months Ended       Six Months Ended
                                                               June 30,                 June 30,
                                                        ---------------------   -----------------------
                                                           2006        2005        2006         2005
                                                        ---------   ---------   ----------   ----------
<S>                                                     <C>         <C>         <C>          <C>
Reconciliations of refined product sales from
produced products sold per barrel to net revenues

Four Corners Operations
  Average sales price per produced barrel sold........  $   95.24   $   68.70   $    85.63   $    64.02
  Times refinery sourced sales barrels per day........     27,084      29,344       27,774       28,954
  Times number of days in period......................         91          91          181          181
                                                        ---------   ---------   ----------   ----------
  Refined product sales from produced products
    Sold* (000's).....................................  $ 234,733   $ 183,450   $  430,470   $  335,508
                                                        =========   =========   ==========   ==========

Yorktown Operations
  Average sales price per produced barrel sold........  $   78.65   $   57.92   $    72.87   $    55.46
  Times refinery sourced sales barrels per day........     61,668      71,539       47,645       67,157
  Times number of days in period......................         91          91          181          181
                                                        ---------   ---------   ----------   ----------
  Refined product sales from produced products
    Sold* (000's).....................................  $ 441,367   $ 377,062   $  628,412   $  674,139
                                                        =========   =========   ==========   ==========

Consolidated (000's)
  Sum of refined product sales from produced
    products sold*....................................  $ 676,100   $ 560,512   $1,058,882   $1,009,647
  Purchased product, transportation and other revenues     95,723      52,609      279,326       96,500
                                                        ---------   ---------   ----------   ----------
  Net revenues........................................  $ 771,823   $ 613,121   $1,338,208   $1,106,147
                                                        =========   =========   ==========   ==========

*Includes inter-segment net revenues.
</TABLE>















                                   42


<PAGE>
<TABLE>
<CAPTION>
                                                          Three Months Ended      Six Months Ended
                                                               June 30,                June 30,
                                                        ---------------------   ---------------------
                                                           2006        2005        2006        2005
                                                        ---------   ---------   ---------   ---------
<S>                                                     <C>         <C>         <C>         <C>
Reconciliation of average cost of products
per produced barrel sold to total cost of
products sold (excluding depreciation and
amortization)

Four Corners Operations
  Average cost of products per produced barrel sold...  $   73.27   $   55.22   $    69.33  $   53.30
  Times refinery sourced sales barrels per day........     27,084      29,344       27,774     28,954
  Times number of days in period......................         91          91          181        181
                                                        ---------   ---------   ----------  ---------
  Cost of products for produced products
    sold (000's)......................................  $ 180,584   $ 147,454   $  348,528  $ 279,328
                                                        =========   =========   ==========  =========

Yorktown Operations
  Average cost of products per produced barrel sold...  $   72.00   $   50.62   $    69.77  $   48.40
  Times refinery sourced sales barrels per day........     61,668      71,539       47,645     67,157
  Times number of days in period......................         91          91          181        181
                                                        ---------   ---------   ----------  ---------
  Cost of products for produced products
    sold (000's)......................................  $ 404,049   $ 329,539   $  601,679  $ 588,322
                                                        =========   =========   ==========  =========

Consolidated (000's)
  Sum of refined cost of produced products sold.......  $ 584,633   $ 476,993   $  950,207  $ 867,650
  Purchased product, transportation and other
    cost of products sold.............................     87,968      44,314      263,183     80,725
                                                        ---------   ---------   ----------  ---------
  Total cost of products sold (excluding
    depreciation and amortization)....................  $ 672,601   $ 521,307   $1,213,390  $ 948,375
                                                        =========   =========   ==========  =========
</TABLE>














                                   43


<PAGE>
<TABLE>
<CAPTION>
RETAIL GROUP
------------

Fuel Margin
-----------
     Fuel margin is the difference between fuel sales less cost of fuel sales divided by
number of gallons sold.

                                                       Three Months Ended      Six Months Ended
                                                            June 30,                June 30,
                                                     ---------------------   ---------------------
                                                        2006        2005        2006        2005
                                                     ---------   ---------   ---------   ---------
<S>                                                  <C>         <C>         <C>         <C>
(in 000's except fuel margin per gallon)

Fuel sales........................................   $ 141,445   $  93,797   $ 251,076   $ 170,495
Less cost of fuel sold............................     133,232      86,746     236,145     158,955
                                                     ---------   ---------   ---------   ---------
Fuel margin.......................................   $   8,213   $   7,051   $  14,931   $  11,540
Number of gallons sold............................      49,021      41,410      95,282      80,879
Fuel margin per gallon............................   $    0.17   $    0.17   $    0.16   $    0.14

Reconciliation of fuel sales to net revenues
(000's)

Fuel sales........................................   $ 141,445   $  93,797   $ 251,076   $ 170,495
Excise taxes included in sales....................     (17,296)    (15,479)    (32,779)    (30,366)
                                                     ---------   ---------   ---------   ---------
Fuel sales, net of excise taxes...................     124,149      78,318     218,297     140,129
Merchandise sales.................................      40,972      36,325      76,503      67,612
Other sales.......................................       4,586       4,230       9,686       8,058
                                                     ---------   ---------   ---------   ---------
Net revenues......................................   $ 169,707   $ 118,873   $ 304,486   $ 215,799
                                                     =========   =========   =========   =========
Reconciliation of fuel cost of products sold to
total cost of products sold (excluding
depreciation and amortization) (000's)

Fuel cost of products sold........................   $ 133,232   $  86,746   $ 236,145   $ 158,955
Excise taxes included in cost of products sold....     (17,296)    (15,479)    (32,779)    (30,366)
                                                     ---------   ---------   ---------   ---------
Fuel cost of products sold, net of excise taxes...     115,936      71,267     203,366     128,589
Merchandise cost of products sold.................      29,729      26,496      55,528      49,281
Other cost of products sold.......................       3,411       3,362       7,425       6,430
                                                     ---------   ---------   ---------   ---------
Total cost of products sold (excluding
  depreciation and amortization)..................   $ 149,076   $ 101,125   $ 266,319   $ 184,300
                                                     =========   =========   =========   =========
</TABLE>


                                   44


<PAGE>
<TABLE>
<CAPTION>
WHOLESALE GROUP (1)(2)
---------------

Fuel Margin
-----------
     Fuel margin is the difference between fuel sales less cost of fuel sales divided by
number of gallons sold.

                                                       Three Months Ended      Six Months Ended
                                                            June 30,                June 30,
                                                     ---------------------   ---------------------
                                                        2006        2005        2006        2005
                                                     ---------   ---------   ---------   ---------
<S>                                                  <C>         <C>         <C>         <C>
(in 000's except fuel margin per gallon)

Fuel sales........................................   $ 393,195   $ 250,908   $ 700,751   $ 473,795
Less cost of fuel sold............................     384,307     243,954     682,980     459,388
                                                     ---------   ---------   ---------   ---------
Fuel margin.......................................   $   8,888   $   6,954   $  17,771   $  14,407
Number of gallons sold............................     149,231     120,344     289,979     241,209
Fuel margin per gallon............................   $    0.06   $    0.06   $    0.06   $    0.06

Reconciliation of fuel sales to net revenues
(000's)

Fuel sales........................................   $ 393,195   $ 250,908   $ 700,751   $ 473,795
Excise taxes included in sales....................     (48,127)    (45,314)    (93,558)    (86,146)
                                                     ---------   ---------   ---------   ---------
Fuel sales, net of excise taxes...................     345,068     205,594     607,193     387,649
Lubricant sales...................................      15,770       9,027      33,414      17,439
Other sales.......................................       3,457       1,102       6,762       2,299
                                                     ---------   ---------   ---------   ---------
Net revenues......................................   $ 364,295   $ 215,723   $ 647,369   $ 407,387
                                                     =========   =========   =========   =========
Reconciliation of fuel cost of products sold to
total cost of products sold excluding
(depreciation and amortization) (000's)

Fuel cost of products sold........................   $ 384,307   $ 243,954   $ 682,980   $ 459,388
Excise taxes included in cost of products sold....     (48,127)    (45,314)    (93,558)    (86,146)
                                                     ---------   ---------   ---------   ---------
Fuel cost of products sold, net of excise taxes...     336,180     198,640     589,422     373,242
Lubricant cost of products sold...................      13,602       8,084      28,952      15,326
Other cost of products sold.......................       1,305         133       2,548         465
                                                     ---------   ---------   ---------   ---------
Total cost of products sold (excluding
  depreciation and amortization)..................   $ 351,087   $ 206,857   $ 620,922   $ 389,033
                                                     =========   =========   =========   =========

(1) Includes Phoenix Fuel and wholesale component of Dial Oil Company.
(2) Dial Oil presents sales and cost of sales, net of excise taxes.
</TABLE>

                                   45


<PAGE>
<TABLE>
<CAPTION>
                                                       Three Months Ended       Six Months Ended
                                                            June 30,                June 30,
                                                     ----------------------  ----------------------
                                                        2006        2005        2006        2005
                                                     ----------  ----------  ----------  ----------
<S>                                                  <C>         <C>         <C>         <C>
Consolidated
------------
Reconciliation to net revenues reported in
  Condensed Consolidated Statements of Operations
  (000's)

Net revenues - Refinery Group.....................   $  771,823  $  613,121  $1,338,208  $1,106,147
Net revenues - Retail Group.......................      169,707     118,873     304,486     215,799
Net revenues - Wholesale Group....................      364,295     215,723     647,369     407,387
Net revenues - Other..............................           63         213         133         313
Eliminations......................................     (160,609)    (84,573)   (281,892)   (154,562)
                                                     ----------  ----------  ----------  ----------
Total net revenues reported in Condensed
  Consolidated Statements of Operation............   $1,145,279  $  863,357  $2,008,304  $1,575,084
                                                     ==========  ==========  ==========  ==========
Reconciliation to cost of products sold (excluding
  depreciation and amortization) in Condensed
Consolidated Statements of Operations (000's)

Cost of products sold - Refinery Group
  (excluding depreciation and amortization).......   $  672,601  $  521,307  $1,213,390  $  948,375
Cost of products sold - Retail Group
  (excluding depreciation and amortization).......      149,076     101,125     266,319     184,300
Cost of products sold - Wholesale Group
  (excluding depreciation and amortization).......      351,087     206,857     620,922     389,033
Eliminations......................................     (160,609)    (84,573)   (281,892)   (154,562)
Other.............................................        4,551       4,167       8,520       7,527
                                                     ----------  ----------  ----------  ----------
Total cost of products sold (excluding
  depreciation and amortization) reported in
  Condensed Consolidated Statements of Operations.   $1,016,706  $  748,883  $1,827,259  $1,374,673
                                                     ==========  ==========  ==========  ==========
</TABLE>













                                   46


<PAGE>
     Our refining margin per barrel is calculated by subtracting cost of
products from net sales and dividing the result by the number of barrels
sold for the period. Our fuel margin per gallon is calculated by
subtracting cost of fuel sold from fuel sales and dividing the result by
the number of gallons sold for the period. We use refining margin per
barrel and fuel margin per gallon to evaluate performance, and allocate
resources. These measures may not be comparable to similarly titled
measures used by other companies. Investors and analysts use these
financial measures to help analyze and compare companies in the industry
on the basis of operating performance. These financial measures should not
be considered as alternatives to segment operating income, revenues, costs
of sales and operating expenses or any other measure of financial
performance presented in accordance with accounting principles generally
accepted in the United States of America.

     We believe the comparability of our continuing results of operations
for the three and six months ended June 30, 2006 with the same period in
2005 was affected by, among others, the following factors:

     -  weaker net refining margins for our Yorktown refinery in 2006,
        due primarily to the Yorktown fire in the fourth quarter of
        2005, which resulted in:

        -  a complete shutdown of refinery operations from November 25,
           2005 to mid-January, 2006, and a partial shutdown from mid-
           January, 2006 to late April, 2006;

        -  the need to sell feedstocks for the FCC at a lower margin as
           compared to sales of finished products while the refinery was
           operating at less than full capacity; and

        -  higher costs which began in the late spring and are expected
           to continue through the early fall as a result of higher costs
           for a blending component at our Yorktown refinery.

     This factor was partially offset by the following positive
     factors:

     -  stronger net refining margins for our Four Corners refineries in
        2006, due to, among other things:

        -  increased sales in our Tier 1 market; and
        -  favorable margins due to tight finished product supply in
           certain of our market areas; and

     -  receipt of $42,950,000 in insurance proceeds and the resulting
        gain of $35,953,000 as a result of the Yorktown fire discussed
        above.






                                   47


<PAGE>
     EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

     Our earnings from continuing operations before income taxes
increased $43,441,000 for the three months ended June 30, 2006, compared
to the same period in 2005. As noted above, this increase was primarily
due to the increase in operating income resulting from the gain recorded
in connection with the Yorktown fire insurance proceeds and higher fuel
margins in certain of our market areas.

     Our earnings from continuing operations before income taxes
increased $6,616,000 for the six months ended June 30, 2006, compared to
the same period in 2005. As noted above, this increase was primarily due
to a gain recorded as a result of insurance proceeds received relating to
the Yorktown fire incident.

     YORKTOWN REFINERY

     Our Yorktown refinery operated at an average throughput rate of
approximately 60,396 barrels per day in the second quarter of 2006
compared to 68,449 barrels per day in the second quarter of 2005. For the
six months ended June 30, 2006 and 2005, the average throughput rate was
49,055 and 67,102 barrels per day, respectively.

     Refining margins for the second quarter of 2006 were $6.65 per barrel
and were $7.30 per barrel for the second quarter of 2005. Refining margins
for the six months ended June 30, 2006 and 2005 were $3.10 per barrel and
$7.06 per barrel, respectively. As noted above, this decrease in refining
margins was due primarily to the disruption of our refinery operations
caused by the fire and the sale of feedstocks that would otherwise have
been processed into higher value (higher priced) gasoline and diesel.

     Revenues for our Yorktown refinery increased for the three and six
months ended June 30, 2006 primarily due to an increase in finished
product prices as a result of favorable market conditions.

     Operating expenses for our Yorktown refinery increased for the three
and six months ended June 30, 2006 due to higher outside services and
purchased fuel costs, partially offset by decreases in utilities,
chemical and catalyst costs.

     Depreciation and amortization expense for our Yorktown refinery
increased for the three and six months ended June 30, 2006 due to
depreciation of additional assets that were put into service during the
second quarter of 2006.

     FOUR CORNERS REFINERIES

     Our Four Corners refineries operated at an average throughput rate
of approximately 28,658 barrels per day in the second quarter of 2006,
compared to 29,811 barrels per day in the second quarter of 2005. For the
six months ended June 30, 2006 and 2005, the average throughput rate was
28,889 and 29,313 barrels per day, respectively.



                                   48


<PAGE>
     Refining margins for the second quarter of 2006 were $21.97 per
barrel and were $13.48 per barrel for the second quarter of 2005.
Refining margins for the six months ended June 30, 2006 and 2005 were
$16.30 per barrel and $10.72 per barrel, respectively.

     Revenues for our Four Corners refineries increased for the three and
six months ended June 30, 2006 primarily due to an increase in finished
product prices as a result of favorable market conditions.

     Operating expenses for our Four Corners refineries increased for the
three and six months ended June 30, 2006 primarily due to higher employee
costs and additional outside services incurred in our operations.

     Depreciation and amortization expense for our Four Corners
refineries were relatively unchanged for the three and six months ended
June 30, 2006 as compared to the same period in 2005.

     RETAIL GROUP

     Our retail group includes Dial Oil's 12 convenience stores. Since
Dial Oil was acquired in the third quarter of 2005, the comparative
statistics for the three and six months ended June 30, 2005 do not
include Dial Oil's 12 convenience stores.

     Average fuel margins were $0.17 per gallon for the three months
ended June 30, 2006 and June 30, 2005. Average fuel margins were $0.16
per gallon for the six months ended June 30, 2006 as compared to $0.14
per gallon for the same period in 2005. Our retail fuel margin per gallon
increased slightly for the six months ended June 30, 2006 due to higher
finished product sales prices as a result of increased demand.

     Fuel volumes sold for the three and six months ended June 30, 2006
increased as compared to the same period a year ago due primarily to
favorable market conditions, improved demand over the same period in 2005
and the addition of Dial Oil's 12 convenience stores that were previously
included in our wholesale segment.

     Average merchandise margins were 27% for the three and six months
ended June 30, 2006 and June 30, 2005.

     Revenues for our retail group increased for the three and six months
ended June 30, 2006, compared to the same periods in 2005, primarily due
to an increase in fuel selling prices, an increase in fuel volumes sold
and the addition of Dial Oil's 12 convenience stores that were previously
included in our wholesale segment.

     Operating expenses increased for the three and six months ended June
30, 2006 as compared with the same periods in 2005, primarily due to an
increase in employee costs as a result of a change to existing law in our
primary market that required us to increase the number of employees,
higher bank charges as a result of higher fuel volumes and prices and the
addition of Dial Oil's 12 convenience stores that were previously
included in our wholesale segment.


                                   49


<PAGE>
     Depreciation and amortization expense decreased for the three and
six months ended June 30, 2006 as compared to the same period in 2005 due
to a reduction in amortization for our leasehold improvements.

     WHOLESALE GROUP

     Our wholesale group includes Phoenix Fuel and Dial Oil's wholesale
business. Since Dial Oil was acquired in the third quarter of 2005, the
comparative statistics for the three and six months ended June 30, 2005
do not include Dial Oil's wholesale business.

     Average gasoline and diesel fuel margins for our wholesale group
were $0.06 per gallon for both the three and six months ended June 30,
2006 and June 30, 2005.

     Fuel volumes for the three and six months ended June 30, 2006
increased as compared to the same period in 2005 primarily due to the
addition of Dial Oil's wholesale business to our operations.

     Revenues for our wholesale group increased for the three and six
months ended June 30, 2006 primarily due to higher average price per
gallon sold and the addition of Dial Oil's wholesale business to our
operations.

     Operating expenses for our wholesale group increased for the three
months and six ended June 30, 2006 primarily due to higher fuel costs,
higher employee payroll and benefit costs and the addition of Dial Oil's
wholesale business to our operations.

     Depreciation and amortization expense for our wholesale group
increased for the three months and six ended June 30, 2006 primarily due
to the addition of Dial Oil's wholesale business.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A) FROM CONTINUING
     OPERATIONS

     For the three and six months ended June 30, 2006, selling, general
and administrative expenses increased by approximately $1,362,000 and
$3,570,000, respectively, as compared to the same period in 2005 due
primarily to higher employee and outside services costs and the addition
of Dial Oil's operations to our business.

     INTEREST EXPENSE FROM CONTINUING OPERATIONS

     For the three and six months ended June 30, 2006, interest expense
decreased approximately $2,204,000 and $4,516,000, respectively, as
compared to the same period in 2005.  These decreases were primarily due
to an increase in interest capitalized to our long-term construction
projects, and a reduction in our long-term debt, which was part of our
debt reduction strategy implemented beginning in 2002.





                                   50


<PAGE>
     INCOME TAXES FROM CONTINUING OPERATIONS

     The effective tax rates for the three months ended June 30, 2006 and
2005 were approximately 37.4% and 41.6%, respectively. The effective tax
rates for the six months ended June 30, 2006 and 2005 were approximately
37.3% and 41.4%, respectively. The decrease was primarily due to our use
of tax credits generated under the American Jobs Creation Act of 2004
discussed below.

     DISCONTINUED OPERATIONS

     Discontinued operations include the operations of some of our retail
service station/convenience stores. See Note 4 to our Condensed
Consolidated Financial Statements included in Part I, Item 1 for
additional information relating to these operations.

OUTLOOK

     We currently believe that our refining fundamentals, overall, are
more positive now as compared to the same time last year. Further, we
anticipate that additional insurance proceeds will be received in
connection with the fire at our Yorktown refinery that occurred in the
fourth quarter of 2005. Same store fuel volumes for our retail group
currently are above the prior year's levels, however, fuel margins are
lower. In addition, same store merchandise sales for our retail group are
above the prior year's level, while same store merchandise margins have
remained stable. The wholesale group currently is experiencing stable
margins and volumes as compared to the same time last year. Our
businesses are, however, very volatile and there can be no assurance that
currently existing conditions will continue for any of our business
segments.

LIQUIDITY AND CAPITAL RESOURCES

     CAPITAL STRUCTURE

     At June 30, 2006, we had long-term debt of $275,119,000. At December
31, 2005, we had long-term debt of $274,864,000. There was no current
portion of long-term debt outstanding at June 30, 2006 or at December 31,
2005.

     The amounts at June 30, 2006 and December 31, 2005 include:

     -  $150,000,000 before discount of 8% senior subordinated notes due
        2014; and

     -  $130,001,000 before discount of 11% senior subordinated notes due
        2012.







                                   51


<PAGE>
     At June 30, 2006, we had a $175,000,000 revolving credit facility.
The availability of funds under this facility is the lesser of (i)
$175,000,000, or (ii) the amount determined under a borrowing base
calculation tied to eligible accounts receivable and inventories. We also
have options to increase the size of the facility to up to $250,000,000.

     At June 30, 2006, our long-term debt was 38.6% of total capital. At
December 31, 2005, it was 40.7%. Our net debt (long-term debt less cash
and cash equivalents) to total net capitalization (long-term debt less
cash and cash equivalents plus total stockholders' equity) percentage at
June 30, 2006, was 29.6%. At December 31, 2005, this percentage was
21.7%.

     The indentures governing our notes and our credit facility contain
restrictive covenants and other terms and conditions that if not
maintained, if violated, or if certain conditions are met, could result
in default, affect our ability to borrow funds, make certain payments, or
engage in certain activities. A default under any of the notes or the
credit facility could cause such debt, and by reason of cross-default
provisions, our other debt to become immediately due and payable. If we
are unable to repay such amounts, the lenders under our credit facility
could proceed against the collateral granted to them to secure that debt.
If those lenders accelerate the payment of the credit facility, we cannot
provide assurance that our assets would be sufficient to pay that debt
and other debt or that we would be able to refinance such debt or borrow
more money on terms acceptable to us, if at all. Our ability to comply
with the covenants, and other terms and conditions, of the indentures and
the credit facility may be affected by many events beyond our control,
and we cannot provide assurance that our operating results will be
sufficient to allow us to comply with the covenants.

     We expect to be in compliance with the covenants going forward, and
we do not believe that any presently contemplated activities will be
constrained. A prolonged period of low refining margins, however, would
have a negative impact on our ability to borrow funds and to make
expenditures and would have an adverse impact on compliance with our debt
covenants.

     We presently have senior subordinated ratings of "B3" from Moody's
Investor Services and "B-" from Standard & Poor's.

     CASH FLOW FROM OPERATIONS

     Our operating cash flow decreased by $18,150,000 for the six months
ended June 30, 2006 compared to the six months ended June 30, 2005. This
primarily resulted from changes in the levels of our working capital.









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<PAGE>
     WORKING CAPITAL

     We anticipate that working capital, including that necessary for
capital expenditures and debt service, will be funded through existing
cash balances, cash generated from operating activities, existing credit
facilities, and, if necessary, future financing arrangements. Future
liquidity, both short- and long-term, will continue to be primarily
dependent on producing or purchasing, and selling, sufficient quantities
of refined products at margins sufficient to cover fixed and variable
expenses. Based on the current operating environment for all of our
operations, we believe that we will have sufficient working capital to
meet our needs over the next 12-month period.

     Working capital at June 30, 2006 consisted of current assets of
$422,378,000 and current liabilities of $250,148,000 or a current ratio
of 1.69:1. At December 31, 2005, the current ratio was 2.12:1, with
current assets of $442,355,000 and current liabilities of $208,508,000.

     CAPITAL EXPENDITURES AND RESOURCES

     During 2006, we currently expect to spend $222,700,000 on capital
expenditures, excluding linefill for the recently acquired pipeline
discussed below and any potential acquisitions. Net cash used in
investing activities for purchases of property, plant and equipment
totaled approximately $128,620,000 for the six months ended June 30, 2006
and $27,697,000 for the six months ended June 30, 2005. Expenditures made
in 2006 primarily were for operational and environmental projects for the
refineries.

     We received proceeds of approximately $1,913,000 from the sale of
property, plant and equipment and other assets in the first half of 2006
and $1,124,000 for the same period in 2005. In addition, we received
$17,950,000 of insurance proceeds for property claims filed as a result
of the fire at our Yorktown refinery that occurred in the fourth quarter
of 2005. We also have received $25,000,000 of insurance proceeds for
claims filed under our business interruption insurance coverage. In July
2006, we received an additional $3,150,000 of insurance proceeds for
property claims. We expect to receive additional amounts on our insurance
claims. We believe that these reimbursements will continue to have a
significant impact on our 2006 earnings.

     We continue to monitor and evaluate our assets and may sell
additional non-strategic or underperforming assets that we identify as
circumstances allow. We also continue to evaluate potential acquisitions
in our strategic markets, including lease arrangements, as well as
projects that enhance the efficiency and safety of our operations.

     In addition, we continue to investigate other capital improvements
to our existing facilities. The amount of capital projects that are
actually undertaken in 2006, and in future years, will depend on, among
other things, general business conditions and results of operations.




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<PAGE>
     DIVIDENDS

     We currently do not pay dividends on our common stock. The board of
directors will periodically review our policy regarding the payment of
dividends. Any future dividends are subject to the results of our
operations, declaration by the board of directors, and existing debt
covenants.

     RISK MANAGEMENT

     We are exposed to various market risks, including changes in certain
commodity prices and interest rates. To manage these normal business
exposures, we may, from time to time, use commodity futures and options
contracts to reduce price volatility, to fix margins in our refining and
marketing operations, and to protect against price declines associated
with our crude oil and finished products inventories. Our policies for the
use of derivative financial instruments set limits on quantities, require
various levels of approval, and require review and reporting procedures.

     Our credit facility is floating-rate debt tied to various short-term
indices. As a result, our annual interest costs associated with this debt
may fluctuate. At June 30, 2006, there were no direct borrowings
outstanding under this facility.

     Our operations are subject to normal hazards of operations, including
fire, explosion, and weather-related perils. We maintain various insurance
coverages, including business interruption insurance, subject to certain
deductibles. We are not fully insured against some risks because some
risks are not fully insurable, coverage is unavailable, or premium costs,
in our judgment, do not justify such expenditures.

     Credit risk with respect to customer receivables is concentrated in
the geographic areas in which we operate and relates primarily to
customers in the oil and gas industry. To minimize this risk, we perform
ongoing credit evaluations of our customers' financial position and
require collateral, such as letters of credit, in certain circumstances.

     ENVIRONMENTAL, HEALTH AND SAFETY

     Federal, state and local laws and regulations relating to health,
safety and the environment affect nearly all of our operations. As is the
case with other companies engaged in similar industries, we face
significant exposure from actual or potential claims and lawsuits,
brought by either governmental authorities or private parties, alleging
non-compliance with environmental, health, and safety laws and
regulations, or property damage or personal injury caused by the
environmental, health, or safety impacts of current or historic
operations. These matters include soil and water contamination, air
pollution, and personal injuries or property damage allegedly caused by
substances manufactured, distributed, sold, handled, used, released, or
disposed of by us or by our predecessors.




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<PAGE>
     Applicable laws and regulations govern the investigation and
remediation of contamination at our current and former properties, as
well as at third-party sites to which we sent wastes for disposal. We may
be held liable for contamination existing at current or former
properties, notwithstanding that a prior operator of the site, or other
third party, caused the contamination. We also may be held responsible
for costs associated with contamination cleanup at third-party disposal
sites, notwithstanding that the original disposal activities were in
accordance with all applicable regulatory requirements at such time. We
currently are engaged in a number of such remediation projects.

     Future expenditures related to compliance with environmental,
health, and safety laws and regulations, the investigation and
remediation of contamination, and the defense or settlement of
governmental or private party claims and lawsuits cannot be reasonably
quantified in many circumstances for various reasons. These reasons
include the uncertain nature of remediation and cleanup cost estimates
and methods, imprecise and conflicting data regarding the hazardous
nature of various types of substances, the number of other potentially
responsible parties involved, various defenses that may be available to
us, and changing environmental, health, and safety laws and regulations,
and their respective interpretations. We cannot give assurance that
compliance with such laws or regulations, such investigations or
cleanups, or such enforcement proceedings or private-party claims will
not have a material adverse effect on our business, financial condition
or results of operations.

     Rules and regulations implementing federal, state, and local laws
relating to the environment, health, and safety will continue to affect
our operations. We cannot predict what new environmental, health, or
safety legislation or regulations will be enacted or become effective in
the future or how existing or future laws or regulations will be
administered or enforced with respect to products or activities to which
they have not been previously applied. Compliance with more stringent
laws or regulations, as well as more vigorous enforcement policies of
regulatory agencies, could have an adverse effect on our financial
position and the results of our operations and could require substantial
expenditures by us for, among other things:

     -  the installation and operation of refinery equipment, pollution
        control systems, and other equipment not currently possessed by
        us;

     -  the acquisition or modification of permits applicable to our
        activities; and

     -  the initiation or modification of clean-up activities.








                                   55


<PAGE>
     In May 2006, we entered into a consent order with the Environmental
Protection Agency and paid a civil penalty of $75,000 to settle an
Administrative Compliance Order related to our Bloomfield refinery. For a
further discussion of this settlement, see Note 10 to our Condensed
Consolidated Financial Statements, captioned "Commitments and
Contingencies".

     In June 2006, we received a draft administrative compliance order
from the New Mexico Environment Department related to soil and
groundwater contamination at our Bloomfield refinery. For a further
discussion of this draft order, see Note 10 to our Condensed Consolidated
Financial Statements, captioned "Commitments and Contingencies".

     OTHER

     Our Ciniza and Bloomfield refineries continue to be affected by
reduced crude oil production in the Four Corners area. The Four Corners
basin is a mature production area and as a result is subject to a natural
decline in production over time. This natural decline is being offset to
some extent by new drilling, field workovers, and secondary recovery
projects, which have resulted in additional production from existing
reserves.

     As a result of the declining production of crude oil in the Four
Corners area in recent years, we have not been able to cost-effectively
obtain sufficient amounts of crude oil to operate our Four Corners
refineries at full capacity. Crude oil utilization rates for our Four
Corners refineries have declined from approximately 67% for 2003 to
approximately 63% for the first six months of 2006. Our current
projections of Four Corners crude oil production indicate that our crude
oil demand will exceed the crude oil supply that is available from local
sources for the foreseeable future and that our crude oil capacity
utilization rates at our Four Corners refineries will continue to decline
unless circumstances change.

     On August 1, 2005, we acquired an idle crude oil pipeline system
that originates near Jal, New Mexico and is connected to a company-owned
pipeline network that directly supplies crude oil to the Bloomfield and
Ciniza refineries.  When operational, the pipeline will have sufficient
crude oil transportation capacity to allow us to again operate both
refineries at maximum rates.  Startup of the pipeline is subject to,
among other things, a final engineering evaluation of the system. The
hydrotesting of the pipeline was completed in July 2006, and we currently
are continuing to do the work necessary to re-commission the line. It
currently is anticipated that the pipeline will become operational before
the end of 2006.









                                   56


<PAGE>
     If additional crude oil or other refinery feedstocks become
available in the future via the new pipeline or otherwise, we may
increase production runs at our Four Corners refineries depending on the
demand for finished products and the refining margins attainable. We
continue to assess short-term and long-term options to address the
continuing decline in Four Corners crude oil production. The options
being considered include:

     -  evaluating potentially economic sources of crude oil produced
        outside the Four Corners area, including ways to reduce raw
        material transportation costs to our refineries;

     -  evaluating ways to encourage further production in the Four
        Corners area;

     -  changes in operation/configuration of equipment at one or both
        refineries to further the integration of the two refineries, and
        reduce fixed costs; and

     -  with sufficient further decline in raw material supply, the
        temporary, partial or permanent discontinuance of operations at
        one or both refineries.

     None of these options, however, may prove to be economically viable.
We cannot assure you that the Four Corners crude oil supply for our
Ciniza and Bloomfield refineries will continue to be available at all or
on acceptable terms for the long term, that the new pipeline will become
operational, or that the additional crude oil supplies accessible via the
new pipeline will be available on acceptable terms. Because large
portions of the refineries' costs are fixed, any significant interruption
or decline in the supply of crude oil or other feedstocks would have an
adverse effect on our Four Corners refinery operations and on our overall
operations.

     In October 2004, the President signed the American Jobs Creation Act
of 2004 (the "Act"), which includes energy related tax provisions that
are available to small refiners, including us. Under the Act, small
refiners are allowed to deduct for tax purposes up to 75% of capital
expenditures incurred to comply with the highway diesel ultra low sulfur
regulations adopted by EPA. The deduction is taken in the year the
capital expenditure is made. Small refiners also are allowed to claim a
credit against income tax of five cents on each gallon of ultra low
sulfur diesel fuel they produce, up to a maximum of 25% of the capital
costs incurred to comply with the regulations. We are producing ultra low
sulfur diesel that qualifies for the credit and expect to be able to
benefit from this credit starting in 2006.









                                   57


<PAGE>
     EPA has issued a rule pursuant to the Clean Air Act that requires
refiners to reduce the sulfur content of gasoline and highway diesel
fuel. Some refiners began producing gasoline that satisfies low sulfur
gasoline standards in 2004, with most refiners required to be in full
compliance for all production in 2006. Most refiners also were required
to begin producing highway diesel fuel that satisfies ultra low sulfur
diesel standards by June 2006. All refiners and importers must be in full
compliance with the new standards by the end of 2010 without exception.
Our Yorktown and Ciniza refineries did not meet the June 2006 start date
for the low sulfur diesel standards. In May 2006, we received temporary
relief from EPA that allows us, subject to certain conditions, to remain
in compliance with the low sulfur diesel standards. For a further
discussion of this matter, refer to the discussion under Risk Factors in
Item 1A in Part II of this Report on Form 10-Q.

     In August 2006, Congress passed the Pension Protection Act of 2006
(the "Pension Act"), which we expect will be signed into law by the
President. We are currently assessing the impact of the Pension Act on
our benefit programs, but we have not completed our assessment.

     FORWARD-LOOKING STATEMENTS

     This report contains forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act.
These statements are included throughout this report. These forward-
looking statements are not historical facts, but only predictions, and
generally can be identified by use of statements that include phrases
such as "believe," "expect," "anticipate," "estimate," "could," "plan,"
"intend," "may," "project," "predict," "will" and terms and phrases of
similar import.

     Although we believe the assumptions upon which these forward-looking
statements are based are reasonable, any of these assumptions could prove
to be inaccurate, and the forward-looking statements based on these
assumptions could be incorrect. While we have made these forward-looking
statements in good faith and they reflect our current judgment regarding
such matters, actual results could vary materially from the forward-
looking statements. The forward-looking statements included in this
report are made only as of their respective dates and we undertake no
obligation to publicly update these forward-looking statements to reflect
new information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events might or might
not occur. Actual results and trends in the future may differ materially
depending on a variety of important factors.

     These important factors include the following:

     - the availability of crude oil and the adequacy and costs of raw
       material supplies generally;

     - our ability to negotiate new crude oil supply contracts;




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<PAGE>
     - our ability to successfully manage the liabilities, including
       environmental liabilities, that we assumed in the Yorktown
       acquisition;

     - our ability to obtain anticipated levels of indemnification
       associated with prior acquisitions and sales of assets;

     - competitive pressures from existing competitors and new entrants,
       and other actions that may impact our markets;

     - our ability to adequately control capital and operating expenses;

     - the risk that we will be unable to draw on our lines of credit,
       secure additional financing, access the public debt or equity
       markets or sell sufficient assets if we are unable to fund
       anticipated capital expenditures from cash flow generated by
       operations;

     - the risk of increased costs resulting from employee matters,
       including increased employee benefit costs;

     - continuing shortages of qualified personnel and contractors,
       including engineers and truck drivers;

     - the adoption of new state, federal or tribal legislation or
       regulations; changes to existing legislation or regulations or
       their interpretation by regulators or the courts; regulatory or
       judicial findings, including penalties; as well as other future
       governmental actions that may affect our operations, including the
       impact of any further changes to government-mandated
       specifications for gasoline, diesel fuel and other petroleum
       products (such as the proposed federal regulations relating to the
       benzene content of gasoline), and the impact of any windfall
       profit, price gouging, or other legislation that may be adopted in
       reaction to the current price of motor fuel at the retail level;

     - unplanned or extended shutdowns in refinery operations;

     - the risk that future changes in operations to address issues
       raised by threatened or pending litigation, customer preferences,
       or other factors, including those related to the use of MTBE as a
       motor fuel additive, may have an adverse impact on our results of
       operations.

     - the risk that we will not remain in compliance with covenants, and
       other terms and conditions, contained in our notes and credit
       facility;

     - the risk that we will not be able to post satisfactory letters of
       credit;





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<PAGE>
     - general economic factors affecting our operations, markets,
       products, services and prices;

     - unexpected environmental remediation costs;

     - weather conditions affecting our operations or the areas in which
       our products are refined or marketed;

     - the risk we will be found to have substantial liability in
       connection with existing or pending litigation;

     - the occurrence of events that cause losses for which we are not
       fully insured;

     - the risk that costs associated with environmental projects and
       other ongoing projects will be higher than currently estimated
       (including costs associated with the resolution of outstanding
       environmental matters and costs associated with reducing the
       sulfur content of motor fuel) or that we will be unable to
       complete such projects (including motor fuel sulfur reduction
       projects) by applicable regulatory compliance deadlines;

     - the risk that EPA will deny our request to vacate the election by
       our Bloomfield and Ciniza refineries under EPA's geographic phase-
       in area regulations (the "GPA Election") under EPA's low sulfur
       gasoline and low sulfur diesel programs;

     - the risk that we will not qualify to produce diesel credits under
       EPA's low sulfur program;

     - the risk that EPA will deny our request to utilize gasoline
       credits generated in prior years at our Ciniza and Bloomfield
       refineries;

     - the risk that the value of the diesel credits that we expect to
       generate at our Ciniza and Bloomfield refineries will not exceed
       the cost of purchasing the gasoline credits we may need as a
       result of vacating the GPA Election;

     - the risk that the cost of diesel credits needed for our Yorktown
       refinery will be greater than anticipated;

     - the risk that we will not produce sufficient quantities of ultra
       low sulfur diesel to comply with our Yorktown compliance plan, or
       to comply with requirements applicable to our other refineries;

     - the risk that we will need to sell more high sulfur heating oil at
       a lower margin as a result of EPA's ultra low sulfur diesel
       program;






                                   60


<PAGE>
     - the risk that we will be added as a defendant in additional MTBE
       lawsuits, and that we will incur substantial liabilities and
       substantial defense costs in connection with these suits;

     - the risk that tax authorities will challenge the positions we have
       taken in preparing our tax returns;

     - the risk that changes in manufacturer promotional programs may
       adversely impact our retail operations;

     - the risk that the cost of placing into service the crude oil
       pipeline that we purchased from Texas-New Mexico Pipe Line
       Company during the third quarter of 2005 (the "Pipeline") will be
       considerably more than our current estimates;

     - the risk that the timetable for placing the Pipeline in service
       will be different than anticipated, or that it will not be
       possible to place the Pipeline in service at all;

     - the risk that it will not be possible to obtain additional crude
       oil at cost effective prices to either fill the Pipeline or
       transport through the Pipeline for processing at our
       Bloomfield and Ciniza refineries;

     - the risk that we will not receive the anticipated amount of
       insurance proceeds in connection with the fire at our Yorktown
       refinery in the fourth quarter of 2005;

     - the risk that we will be required or chose to undertake additional
       projects to enhance the safety of our operations;

     - the risk that Pension Protection Act of 2006 will have a
       significant impact on us; and

     - other risks described elsewhere in this report or described from
       time to time in our other filings with the Securities and Exchange
       Commission.

     All subsequent written and oral forward-looking statements
attributable to us or persons acting on our behalf are expressly
qualified in their entirety by the previous statements. Forward-looking
statements we make represent our judgment on the dates such statements
are made. We assume no obligation to update any information contained in
this report or to publicly release the results of any revisions to any
forward-looking statements to reflect events or circumstances that occur,
or that we become aware of, after the date of this report.









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<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The information required by this item is incorporated herein by
reference to the section entitled "Risk Management" in the Company's
Management's Discussion and Analysis of Financial Condition and Results
of Operations in Part I, Item 2.

ITEM 4. CONTROLS AND PROCEDURES

     (a) Evaluation of Disclosure Controls and Procedures

         Our management, with the participation of our chief executive
officer and chief financial officer, evaluated the effectiveness of our
disclosure controls and procedures as of the end of the period covered by
this report. Based on that evaluation, the chief executive officer and
chief financial officer concluded that our disclosure controls and
procedures as of the end of the period covered by this report were
effective as of the date of that evaluation.

     (b) Change in Internal Control Over Financial Reporting

         No change in our internal control over financial reporting
occurred during our most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal
control over financial reporting. We are currently in the process of
analyzing the internal control over financial reporting for Dial Oil, a
100% owned subsidiary that was acquired in the third quarter of 2005.




























                                   62


<PAGE>
                                PART II

                           OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     We are a party to ordinary routine litigation incidental to our
business. We also incorporate by reference the information regarding
contingencies in Note 10 to the Condensed Consolidated Financial
Statements set forth in Part I, Item 1, the discussion of legal matters
contained in Part I, Item 2, under the headings "Liquidity and Capital
Resources - Environmental, Health and Safety" and "Liquidity and Capital
Resources - Other", and the discussion of legal matters contained in Part
II, Item 1A.

ITEM 1A.  RISK FACTORS

     An investment in our common shares involves risk. A discussion of
these risks can be found in our Annual Report on Form 10-K for the year
ended December 31, 2005 (the "Form 10-K") and our Quarterly Report on
Form 10-Q for the quarter ended March 31, 2006 (the "Form 10-Q"). Set
forth below are material changes that have occurred to the risk factors
disclosed in the Form 10-K and the Form 10-Q. Before investing in our
shares, you should carefully consider the specific factors described
below and in the Form 10-K and the Form 10-Q, together with the
cautionary statements under the caption "Forward-Looking Statements" in
Item 2 of this Report, and the other information included in this report.

     The risks described below and in the Form 10-K and the Form 10-Q are
not the only ones that we face. Additional risks that are not yet known
to us or that we currently think are immaterial could also impair our
business, financial condition, or results of operations. If any of the
risks actually occurs, our business, financial condition, or results of
operations could be adversely affected. In such case, the trading price
of our common shares could decline, and you may lose all or part of your
investment.

WE ASSUMED LIABILITIES IN CONNECTION WITH THE ACQUISITION OF OUR YORKTOWN
REFINERY

     We assumed certain liabilities and obligations in connection with
our purchase of the Yorktown refinery in 2002. Among other things, and
subject to certain exceptions, we assumed responsibility for all costs,
expenses, liabilities and obligations under environmental, health, and
safety laws caused by, arising from, incurred in connection with, or
relating to the ownership of the Yorktown refinery or its operation. We
agreed to indemnify the seller for losses incurred in connection with or
related to the liabilities and obligations we have assumed. We only have
limited indemnification rights against the seller.






                                   63


<PAGE>
     Environmental obligations assumed by us include the seller's
responsibilities related to the Yorktown refinery under a consent decree
among various parties covering many locations (the "Consent Decree"). As
applicable to the Yorktown refinery, the Consent Decree requires, among
other things, a reduction of nitrous oxides, sulfur dioxide, and
particulate matter emissions and upgrades to the refinery's leak detection
and repair program. In our Form 10-K and Form 10-Q, we estimated that we
would incur capital expenditures of between $20,000,000 and $27,000,000 to
comply with the Consent Decree through 2006. We have expended
approximately $18,000,000 through the second quarter of 2006. We do not
anticipate any significant increase in current operating expenses when all
equipment modifications required by the Consent Decree are completed.

     In connection with the Yorktown acquisition, we also assumed the
seller's obligations under an administrative order issued in 1991 by EPA
under RCRA. The order requires an investigation of certain areas of the
refinery and the development of measures to correct any releases of
contaminants or hazardous substances found in these areas. A Resource
Conservation and Recovery Act Facility Investigation was conducted and
approved conditionally by EPA in 2002. Following the investigation, a
Risk Assessment/Corrective Measures Study ("RA/CMS") was finalized in
2003, which summarized the remediation measures agreed upon by us, EPA,
and the Virginia Department of Environmental Quality ("VDEQ"). The RA/CMS
proposes investigation, sampling, monitoring, and cleanup measures,
including the construction of an on-site corrective action management
unit that would be used to consolidate hazardous solid materials
associated with these measures. These proposed actions relate to soil,
sludge, and remediation wastes relating to solid waste management units.
Groundwater in the aquifers underlying the refinery, and surface water
and sediment in a small pond and tidal salt marsh on the refinery
property, also are addressed in the RA/CMS.

     Based on the RA/CMS, EPA issued a proposed cleanup plan for public
comment in December 2003 setting forth preferred corrective measures for
remediating soil, groundwater, sediment, and surface water contamination
at the refinery. Following the public comment period, EPA issued its
final remedy decision and response to comments in April 2004. In August
2006, we agreed to the terms of an administrative consent order with EPA,
pursuant to which we will implement our cleanup plan.

     Our most current estimate of expenses associated with the order is
between $25,000,000 ($17,500,000 of which we believe is subject to
reimbursement by BP) and $27,000,000 ($19,500,000 of which we believe is
subject to reimbursement by BP). We anticipate that these expenses will be
incurred over a period of approximately 35 years from the date of the order
(expected to be August 2006). We believe that between approximately
$9,500,000 and $10,500,000 of this amount will be incurred over an initial
four-year period, and additional expenditures of approximately $7,500,000
will be incurred over the following four-year period, with the remainder
thereafter. We may, however, be able to receive reimbursement for some of the
expenditures associated with the plan due to the environmental reimbursement
provisions included in the purchase agreement for the refinery.



                                   64


<PAGE>
     As part of the cleanup plan, the facility's underground sewer system
will be cleaned, inspected and repaired as needed. A portion of this
sewer work is scheduled to begin during the construction of the
corrective action management unit and related remediation work and is
included in our associated cost estimate. We anticipate that the balance
of the sewer work will cost between approximately $1,500,000 and
$3,500,000 over a period of three to five years, beginning around the
time the construction of the corrective action management unit and
related remediation work is nearing completion. We anticipate that
construction of the corrective action management unit and related
remediation work will be completed approximately seven to eight years
from the date of the order (expected to be August 2006).

ANY SIGNIFICANT INTERRUPTIONS IN THE OPERATIONS OF ANY OF OUR REFINERIES
COULD MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION
AND OPERATING RESULTS

      Our refining activities are conducted at our two refinery locations
in New Mexico and the Yorktown refinery in Virginia. The refineries
constitute a significant portion of our operating assets, and our two New
Mexico refineries supply a significant portion of our retail operations.
As a result, our operations would be subject to significant interruption
if any of the refineries were to experience a major accident, be damaged
by severe weather or other natural disaster, or otherwise be forced to
shut down. If any of the refineries were to experience an interruption in
supply or operations, our business, financial condition and operating
results could be materially and adversely affected.

     On November 25, 2005, a fire occurred at our Yorktown refinery.
Damage was primarily done to the gas plant that supports the fluid
catalytic cracker ("FCC"), a unit that alters the molecular composition
of materials sent into the unit in order to produce gasoline, diesel,
fuel oil, heating oil, and other products. Some piping and
instrumentation cables for other operating units in the refinery were
also damaged by the fire. All of the units at the refinery were shut down
to assess the scope of work needed to return the refinery to safe and
efficient operations. The refinery was brought back to operation in two
stages. Certain units, including the crude unit, began operations in
January 2006. The gas plant and the FCC returned to operation in April
2006, and the refinery has returned to its normal operating level of
approximately 62,000 barrels per day.

     We have property insurance coverage with a $1,000,000 deductible
that should cover a significant portion of the costs of repairing the
Yorktown refinery. We also have business interruption insurance coverage
for the financial impact of the fire after the policy's 45-day waiting
period is exceeded. As of June 30, 2006, we have received $42,950,000 of
insurance proceeds for our property and business interruption claims. In
July 2006, we received an additional $3,150,000 of insurance proceeds for
property claims. We expect to receive additional amounts for our claims,
but do not yet know exactly when we will be receiving additional payments
under these policies or ultimately how much we will receive.



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<PAGE>
COMPLIANCE WITH VARIOUS REGULATORY AND ENVIRONMENTAL LAWS AND REGULATIONS
WILL INCREASE THE COST OF OPERATING OUR BUSINESS

     Our operations are subject to a variety of federal, state, and local
environmental, health, and safety laws and regulations governing the
discharge of pollutants into the soil, air and water, product
specifications, the generation, treatment, storage, transportation and
disposal of solid and hazardous waste and materials, and employee health
and safety. Violations of such laws and regulations can lead to
substantial fines and penalties. Also, these laws and regulations have
become, and are becoming, increasingly stringent. Moreover, we cannot
predict the nature, scope or effect of legislation or regulatory
requirements that could be imposed, or how existing or future laws or
regulations will be administered or interpreted, with respect to products
or activities to which they have not been previously applied. Compliance
with more stringent laws or regulations, as well as more vigorous
enforcement policies of the regulatory agencies, could require us to make
substantial expenditures for, among other things, the installation and
operation of refinery equipment, pollution control systems and other
equipment we do not currently possess, or the acquisition or modification
of permits applicable to our activities.

     EPA has issued rules pursuant to the Clean Air Act that requires
refiners to reduce the sulfur content of gasoline and highway diesel
fuel. Some refiners began producing gasoline that satisfies low sulfur
gasoline standards in 2004, with most refiners required to be in full
compliance for all production in 2006. Most refiners also were required
to begin producing highway diesel fuel that satisfies ultra low sulfur
diesel standards by June 2006. All refiners and importers must be in full
compliance with the new standards by the end of 2010.

     We currently anticipate that we will spend between approximately
$130,000,000 to $155,000,000 to comply with EPA's low sulfur standards at
our Yorktown refinery and between approximately $40,000,000 to
$55,000,000 at our Four Corners refineries. Through June 30, 2006, we
have spent approximately $78,000,000 at Yorktown and approximately
$32,000,000 at our Four Corners refineries. There are a number of factors
that could affect our cost of compliance with the low sulfur standards.
Among others, engineering and construction companies are busy and are
charging a premium for their services. Additionally, costs of materials,
such as steel and concrete, have increased as a result of demand.  These
factors could continue to impact our compliance costs.

     In March 2003, EPA approved a compliance plan for our Yorktown
refinery that provided us with temporary relief from the low sulfur
gasoline standards at this refinery. The compliance plan allowed us to
postpone certain capital expenditures for up to three years from the date
when they otherwise would have been made. Under the original compliance
plan, we were to be in full compliance with the ultra low diesel sulfur
standards by June 1, 2006, and the gasoline sulfur standards by January
1, 2008.  We believe that we are on schedule to produce low sulfur
gasoline at Yorktown by that date.




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<PAGE>
     The Yorktown compliance plan requires us to provide EPA with reports
on our adherence to the compliance plan and on our progress in meeting
the low sulfur standards. If we fail to comply with the conditions set by
EPA, the compliance plan could be modified or revoked. Further, EPA
reserved the right to modify or revoke the compliance plan for other
reasons. EPA must, however, provide us with reasonable notice of any
anticipated changes in the plan and reasonable lead time to implement any
modifications due to changes in the compliance plan. Modifications to or
revocation of the compliance plan could increase the quantity of high
sulfur products, including product components, that do not meet the new
standards. This would likely reduce our Yorktown refining earnings.

     With respect to our Ciniza and Bloomfield refineries, we previously
applied for and received approval under EPA's geographic phase-in area
("GPA") regulations for a two-year extension, through 2008, of the time
in which we can sell gasoline that does not satisfy low sulfur standards
in most of the geographic area served by these refineries (the "GPA
Election"). In return, we agreed that 95% of the highway diesel fuel
produced at the Ciniza and Bloomfield refineries would satisfy the ultra
low sulfur diesel standards beginning June 1, 2006. In the absence of
this extension, we would have become subject to the low sulfur gasoline
standards in the GPA area in 2007, and would only have had to produce 80%
ultra low sulfur highway diesel at our Ciniza and Bloomfield refineries
by the June 1, 2006 deadline.

     Our Yorktown refinery was not able to meet the June 1, 2006 date
specified in the compliance plan for the production of 100% ultra low
sulfur diesel as a result of: (1) the combined effects of Hurricanes
Katrina and Rita on the availability of contractors and hardware as well
as other similar effects; and (2) the time and effort required to repair
damage resulting from the 2005 fire. We were concerned that our Ciniza
refinery also would not be able to satisfy the GPA Election ultra low
sulfur diesel production requirements that became effective on June 1,
2006 as a result of Hurricanes Katrina and Rita. Accordingly, we applied
for temporary relief from the ultra low sulfur diesel standards at both
our Yorktown and Ciniza refineries, which EPA granted.

     EPA imposed a number of conditions on us in return for relieving us
from the June 1, 2006 deadline. These conditions include a requirement that
we must produce specified volumes of ultra low sulfur highway diesel at
each refinery.  Additionally, in order to satisfy a Yorktown condition, we
have been purchasing diesel credits in connection with diesel fuel
production that does not satisfy the ultra low sulfur diesel standards. We
have spent approximately $500,000 on credits to date, and currently believe
that we will purchase up to one million dollars of credits in the future.
We currently do not anticipate purchasing any diesel credits for Ciniza.

     We may sell more high sulfur heating oil and less diesel fuel at
Yorktown than otherwise would be the case as a result of the Yorktown
compliance plan, including the additional conditions imposed on us by EPA.
At most times, high sulfur heating oil sells for a lower margin than ultra
low sulfur diesel fuel. This may have an impact on our results of
operation.



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<PAGE>
     Our Ciniza refinery began producing ultra low sulfur diesel fuel in
mid-June, and our Yorktown refinery began producing ultra low sulfur
diesel in early August. Our Bloomfield refinery began producing ultra low
sulfur diesel prior to June 1, 2006.

     After evaluating our operations at the Ciniza and Bloomfield
refineries, we recently asked EPA to vacate our GPA Election, as well as
the associated temporary relief from the June 1, 2006 deadline that we
received for our Ciniza refinery. We believe that vacating our GPA
Election will provide us with additional operational flexibility at our
Ciniza and Bloomfield refineries, as well as provide us with the
potential to generate diesel credits. In general, diesel credits can be
generated, and sold to others, if more ultra low sulfur diesel fuel is
produced at a refinery than is required by the applicable standards. If
EPA grants our request to vacate our GPA Election, we should be able to
generate diesel credits at Ciniza and Bloomfield through 2009.

     We will, however, need to use gasoline credits at our Ciniza and
Bloomfield refineries if EPA vacates our GPA Election. These credits
would be used to satisfy the low sulfur gasoline standards that, as a
result of this action, will apply to our GPA sales beginning in 2007. We
would need to use gasoline credits until refinery modifications are
completed at both refineries that would enable all of their gasoline
production to satisfy the low sulfur standards. These modifications are
currently planned to be completed in 2007.

     Both our Ciniza and Bloomfield refineries may have generated
gasoline credits in connection with prior year operations. If EPA agrees
with us that prior year credits have been generated, we should be able to
use these credits to satisfy the low sulfur gasoline standards until the
planned refinery modifications are completed. If EPA does not grant our
request, we would need to purchase gasoline credits from third parties.
It is possible that some third party credits would have to be purchased
even if our gasoline credit request is granted.

     We anticipate that the potential value of the diesel credits that we
expect to generate at Ciniza and Bloomfield as a result of vacating our
GPA Election will exceed the cost of purchasing gasoline credits. There
can be no assurance, however, that EPA will grant our request to vacate
our GPA Election, that we will qualify to produce diesel credits, or that
EPA will agree that we have generated prior year gasoline credits. There
can also be no assurance that the value of any diesel credits that we
generate will exceed the cost of any gasoline credits that we may need to
purchase as, among other things, we expect the market price of gasoline
and diesel credits to fluctuate. It is possible that net effect of these
purchases and sales could have a material positive or negative effect on
our operations.








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<PAGE>
     Diesel fuel sold for certain non-highway purposes must comply with
the ultra low sulfur diesel standards beginning in June 2010. We have
already made, or are in the process of making, the equipment
modifications at our Yorktown and Ciniza refineries that should enable us
to satisfy this requirement. Additional equipment modifications, however,
will be necessary at our Bloomfield refinery. Our planning has not
progressed to the point where an accurate estimate of these Bloomfield
costs can be made.















































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<PAGE>
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Our annual meeting of stockholders was held on April 10, 2006.
Proxies for the meeting were solicited under Regulation 14A. There were
no matters submitted to a vote of security holders other than the
election of two directors and the ratification of our independent
registered public accounting firm as specified in our Proxy Statement.
There was no solicitation in opposition to management's nominees to the
Board of Directors.

     Fred L. Holliger was elected as a director of the Company. The vote
was as follows:

Shares Voted "For"   Shares Voted "Withholding"
------------------   --------------------------
    11,564,270                498,110

     Brooks J. Klimley was elected as a director of the Company. The vote
was as follows:

Shares Voted "For"   Shares Voted "Withholding"
------------------   --------------------------
    11,736,054                326,326

     Deloitte & Touche LLP was ratified as our independent registered
public accounting firm for the Company for the year ending December 31,
2006. The vote was as follows:

Shares Voted "For"     Shares Voted "Against"   Shares Voted "Abstaining"
------------------     ----------------------   -------------------------
    11,710,056                345,050                     7,274

     In addition to the two directors elected above, other members of our
Board of Directors include Larry L. DeRoin, George M. Rapport, and Donald
M. Wilkinson.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

     10.1*  First Amendment to Employment Agreement, dated August 4,
            2006, between Giant Industries, Inc. and Mark B. Cox.

     10.2*  First Amendment to Employment Agreement, dated August 4,
            2006, between Giant Industries, Inc. and Kim H. Bullerdick.

     31.1*  Certification of Principal Executive Officer Pursuant to
            Section 302 of the Sarbanes-Oxley Act of 2002.

     31.2*  Certification of Principal Financial Officer Pursuant to
            Section 302 of the Sarbanes-Oxley Act of 2002.




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<PAGE>
     32.1*  Certification of Principal Executive Officer Pursuant to 18
            U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
            the Sarbanes-Oxley Act of 2002.

     32.2*  Certification of Principal Financial Officer Pursuant to 18
            U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
            the Sarbanes-Oxley Act of 2002.

     *Filed herewith.

(b)  Reports on Form 8-K: We filed the following reports on Form
     8-K during the quarter for which this report is being filed and
     subsequently:

     (i)  On May 4, 2006, we filed a Form 8-K dated May 4, 2006,
          containing a press release detailing our earnings for the
          quarter ended March 31, 2006.

     (ii) On August 8, 2006, we filed a Form 8-K dated August 8,
          2006, containing a press release detailing our earnings for the
          quarter ended June 30, 2006.


































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<PAGE>

                                SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report on Form 10-Q for the quarter
ended June 30, 2006 to be signed on its behalf by the undersigned
thereunto duly authorized.

                        GIANT INDUSTRIES, INC.


                        /s/ MARK B. COX
                        -------------------------------------------------
                        Mark B. Cox, Executive Vice President, Treasurer,
                        Chief Financial Officer and Assistant Secretary,
                        on behalf of the Registrant and as the
                        Registrant's Principal Financial Officer

Date: August 8, 2006




































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