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 MARCH 31, 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 an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                              Yes [X]    No [ ]

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 May 1, 2006: 14,642,212 shares.


<PAGE>
                   GIANT INDUSTRIES, INC. AND SUBSIDIARIES
                                     INDEX


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

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

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

          Condensed Consolidated Statements of Operations for the
          Three Months Ended March 31, 2006 and 2005 (Unaudited).....   2

          Condensed Consolidated Statements of Cash Flows for
          the Three Months Ended March 31, 2006 and 2005
          (Unaudited)................................................  3-4

          Notes to Condensed Consolidated Financial Statements
          (Unaudited)................................................  5-33

Item 2  - Management's Discussion and Analysis of
          Financial Condition and Results of Operations.............. 34-57

Item 3  - Quantitative and Qualitative Disclosures
          About Market Risk..........................................   58

Item 4  - Controls and Procedures....................................   58

PART II - OTHER INFORMATION..........................................   59

Item 1  - Legal Proceedings..........................................   59

Item 1A - Risk Factors............................................... 59-64

Item 4  - Submission of Matters to a Vote of Security Holders........   65

Item 6  - Exhibits and Reports on Form 8-K...........................   66

SIGNATURE............................................................   67



<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>
                                                              March 31,       December 31,
                                                                2006              2005
                                                              ---------       ------------
<S>                                                           <C>              <C>
ASSETS
Current assets:
  Cash and cash equivalents.............................      $  84,483        $ 164,280
  Receivables, net......................................        162,412          142,125
  Inventories...........................................        124,359          124,105
  Prepaid expenses and other............................         11,564           10,449
  Deferred income taxes.................................          1,559            1,396
                                                              ---------        ---------
    Total current assets................................        384,377          442,355
                                                              ---------        ---------
Property, plant and equipment...........................        826,478          764,788
Less accumulated depreciation and amortization..........       (300,354)        (297,962)
                                                              ---------        ---------
                                                                526,124          466,826
                                                              ---------        ---------
Goodwill................................................         50,588           50,607
Other assets............................................         28,692           24,684
                                                              ---------        ---------
                                                              $ 989,781        $ 984,472
                                                              =========        =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable......................................      $ 166,493        $ 139,710
  Accrued expenses......................................         59,917           68,798
                                                              ---------        ---------
    Total current liabilities...........................        226,410          208,508
                                                              ---------        ---------
Long-term debt..........................................        274,990          274,864
Deferred income taxes...................................         72,834           76,834
Other liabilities.......................................         26,485           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, 18,394,192 and
    18,366,077 shares issued............................            184              184
  Additional paid-in capital............................        218,391          216,917
  Retained earnings.....................................        208,853          221,203
  Unearned compensation related to restricted stock.....         (1,912)          (2,014)
                                                              ---------        ---------
                                                                425,516          436,290
  Less common stock in treasury - at cost,
    3,751,980 shares....................................        (36,454)         (36,454)
                                                              ---------        ---------
    Total stockholders' equity..........................        389,062          399,836
                                                              ---------        ---------
                                                              $ 989,781        $ 984,472
                                                              =========        =========

See accompanying notes to Condensed Consolidated Financial Statements.

                                             1
</TABLE>


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

<CAPTION>
                                                                      Three Months Ended
                                                                           March 31,
                                                                   ------------------------
                                                                      2006          2005
                                                                   ----------    ----------
<S>                                                                <C>           <C>
Net revenues.....................................................  $  863,025    $  711,726
                                                                   ----------    ----------
Cost of products sold (excluding depreciation and amortization)..     810,552       625,790
Operating expenses...............................................      52,688        46,244
Depreciation and amortization....................................       9,567        10,970
Selling, general and administrative expenses.....................      10,006         7,799
Net gain on the disposal/write-down of assets....................        (640)          (13)
Gain from insurance settlement due to fire incident..............      (2,853)       (3,492)
                                                                   ----------    ----------
Operating (loss)/income..........................................     (16,295)       24,428
Interest expense.................................................      (4,682)       (6,993)
Amortization of financing costs..................................        (399)         (504)
Interest and investment income...................................       1,602           120
                                                                   ----------    ----------
(Loss)/earnings from continuing operations before income taxes...     (19,774)       17,051
(Benefit)/provision for income taxes.............................      (7,424)        6,993
                                                                   ----------    ----------
(Loss)/earnings from continuing operations.......................     (12,350)       10,058

Loss from discontinued operations, net of income
  tax benefit of $4..............................................           -            (7)
                                                                   ----------    ----------
Net (loss)/earnings..............................................  $  (12,350)   $   10,051
                                                                   ==========    ==========
Net (loss)/earnings per common share:
  Basic
    Continuing operations........................................  $    (0.85)   $     0.81
    Discontinued operations......................................           -             -
                                                                   ----------    ----------
                                                                   $    (0.85)   $     0.81
                                                                   ==========    ==========
  Assuming dilution
    Continuing operations........................................  $    (0.85)   $     0.80
    Discontinued operations......................................           -             -
                                                                   ----------    ----------
                                                                   $    (0.85)   $     0.80
                                                                   ==========    ==========

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>
                                                                               Three Months Ended
                                                                                   March 31,
                                                                            -----------------------
                                                                               2006         2005
                                                                            ---------     ---------
<S>                                                                         <C>           <C>
Cash flows from operating activities:
  Net (loss)/earnings...................................................    $ (12,350)    $  10,051
Adjustments to reconcile net (loss)/earnings to net cash provided by
  operating activities:
  Depreciation and amortization from continuing operations..............        9,567        10,970
  Amortization of financing costs.......................................          399           504
  Compensation expense related to restricted stock award................          102             -
  Deferred income taxes.................................................       (4,163)        5,417
  Deferred crude oil purchase discounts.................................          165           306
  Payments to deferred compensation plan................................       (1,358)            -
  Net gain on the disposal of assets from continuing operations.........         (640)          (13)
  Gain from insurance settlement due to fire incident...................       (2,853)       (3,492)
    Changes in operating assets and liabilities
    (Increase) in receivables...........................................      (27,284)      (35,291)
    (Increase) in inventories...........................................         (239)      (25,278)
    (Increase)/decrease in prepaid expenses.............................       (1,035)        4,194
    (Increase) in other assets..........................................       (3,194)         (264)
    Increase in accounts payable........................................       23,177        47,866
    (Decrease)/increase in accrued expenses.............................      (13,830)        7,423
    Increase in other liabilities.......................................        2,038           622
                                                                            ---------     ---------
Net cash (used in)/provided by operating activities.....................      (31,498)       23,015
                                                                            ---------     ---------
Cash flows from investing activities:
  Purchase of property, plant and equipment.............................      (59,697)      (12,826)
  Proceeds from insurance settlement of fire incident...................        9,850         3,492
  Proceeds from sale of property, plant and equipment and other assets..        1,539           981
  Funding of restricted cash escrow funds...............................            -       (21,883)
                                                                            ---------     ---------
Net cash used in investing activities...................................      (48,308)      (30,236)
                                                                            ---------     ---------
Cash flows from financing activities:
  Proceeds from line of credit..........................................            -        15,000
  Payments on line of credit............................................            -       (15,000)
  Net proceeds from issuance of common stock............................            -        22,328
  Proceeds from exercise of stock options...............................            9            64
  Deferred financing costs..............................................            -            (5)
                                                                            ---------     ---------
Net cash provided by financing activities...............................            9        22,387
                                                                            ---------     ---------
Net (decrease)/increase in cash and cash equivalents....................      (79,797)       15,166
  Cash and cash equivalents:
    Beginning of period.................................................      164,280        23,714
                                                                            ---------     ---------
    End of period.......................................................    $  84,483     $  38,880
                                                                            =========     =========

                                             3
</TABLE>


<PAGE>
Significant Noncash Investing and Financing Activities.

In the first quarter of 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 $2,046,000 of interest as part of construction in progress.
At March 31, 2006, approximately $20,657,000 of purchases of property
plant and equipment had not been paid and, accordingly, were accrued in
accounts payable and accrued liabilities.

In the first quarter of 2005, we transferred $118,000 of property, plant
and equipment to other assets.

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). Operating results for the three
months ended March 31, 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
had no material impact on our financial statements for the quarter ended
March 31, 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 months ended March 31, 2005.

<TABLE>
<CAPTION>
                                              Three Months Ended
                                                March 31, 2005
                                              ------------------
                                     (In thousands, except per share data)
<S>                                                <C>
Net earnings, as reported...................       $10,051
Deduct: Total stock-based employee
  compensation expense determined
  under the fair value based method
  for all awards, net of related
  tax effect................................           (17)
                                                   -------
Pro forma net earnings......................       $10,034
                                                   =======
Earnings per share:
  Basic - as reported.......................       $  0.81
                                                   =======
  Basic - pro forma.........................       $  0.81
                                                   =======
  Diluted - as reported.....................       $  0.80
                                                   =======
  Diluted - pro forma.......................       $  0.80
                                                   =======
</TABLE>

                                    6


<PAGE>
Current Pronouncements

     In November 2004, The 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 had no material impact on our
financial statements for the quarter ended March 31, 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". The
provision of this EITF Issue is to be applied 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 deemed necessary in our
financial statements.

     In March 2006, the 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 evaluated the impact this
proposed statement would have on our financial statements.




















                                    7


<PAGE>
NOTE 2 ? INVENTORIES:

     Our inventories consist of the following:

<TABLE>
<CAPTION>
                                            March 31,     December 31,
                                              2006            2005
                                            ---------     ------------
                                                    (In thousands)
<S>                                         <C>             <C>
First-in, first-out ("FIFO") method:
  Crude oil............................     $ 54,743        $ 77,188
  Refined products.....................      136,564          97,150
  Refinery and shop supplies...........       14,078          13,790
  Merchandise..........................        6,616           7,259
Retail method:
  Merchandise..........................        9,256           8,982
                                            --------        --------
    Subtotal...........................      221,257         204,369
Adjustment for last-in,
  first-out ("LIFO") method............      (96,898)        (80,264)
                                            --------        --------
    Total..............................     $124,359        $124,105
                                            ========        ========
</TABLE>

     The portion of inventories valued on a LIFO basis totaled
$73,426,135 and $76,299,000 at March 31, 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 March
31, 2006 and 2005, net earnings and diluted earnings per share would have
been higher as follows:

<TABLE>
<CAPTION>
                                            Three Months Ended
                                                 March 31,
                                          -----------------------
                                             2006         2005
                                          -----------  ----------
                                  (In thousands, except per share data)
<S>                                       <C>          <C>
Net earnings..........................     $10,396       $7,752
Diluted earnings per share............     $  0.71       $ 0.62
</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 March 31, 2006 and December 31, 2005, we had goodwill of
$50,588,000 and $50,607,000, respectively.

     The changes in the carrying amount of goodwill for the three months
ended March 31, 2006 are as follows:

<TABLE>
<CAPTION>
                                             Refining        Retail       Wholesale
                                              Group           Group          Group           Total
                                         -----------------   -------   -----------------    -------
                                                     Four              Phoenix    Dial
                                         Yorktown  Corners              Fuel      Oil
                                         --------  -------             -------   -------
                                                        (In thousands)
<S>                                      <C>       <C>       <C>       <C>       <C>        <C>
Balance as of January 1, 2006..........  $ 21,028    $ 125   $ 4,414   $ 14,736  $ 10,304   $ 50,607
Goodwill written off related to the
   sale of retail unit.................         -        -       (19)         -         -        (19)
                                         --------  -------   -------   --------  --------   --------
Balance as of March 31, 2006...........  $ 21,028    $ 125   $ 4,395   $ 14,736  $ 10,304   $ 50,588
                                         ========  =======   =======   ========  ========   ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                  March 31, 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.....................    $ 3,844       $ 2,910      $   934     $ 3,729       $ 2,870      $   859
  Contracts.........................      1,376         1,257          119       1,376         1,227          149
  Licenses and permits..............      1,096           535          561       1,096           503          593
                                        -------       -------      -------     -------       -------      -------
                                          6,316         4,702        1,614       6,201         4,600        1,601
                                        -------       -------      -------     -------       -------      -------
Unamortized intangible assets:
  Liquor licenses...................      8,363             -        8,363       8,335             -        8,335
                                        -------       -------      -------     -------       -------      -------
Total intangible assets.............    $14,679       $ 4,702      $ 9,977     $14,536       $ 4,600      $ 9,936
                                        =======       =======      =======     =======       =======      =======
</TABLE>

                                    10


<PAGE>
     Intangible asset amortization expense for the three months ended
March 31, 2006 and March 31, 2005 was approximately $102,000 and
$109,000, respectively. Estimated amortization expense for the rest of
this fiscal year and the next five fiscal years is as follows:

             2006 Remainder....................     $ 309,000
             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
                                                      March 31,
                                                 ------------------
                                                  2006        2005
                                                 ------      ------
                                                    (In thousands)
<S>                                              <C>         <C>
Net revenues..................................   $    -      $    -
                                                 ------      ------
Net operating income/(loss)...................   $    -      $  (11)
                                                 ------      ------
Gain/(loss) before income taxes...............   $    -      $  (11)
                                                 ------      ------
Net earnings/(loss)...........................   $    -      $   (7)
</TABLE>

     In the first quarter of 2006, we sold a piece of land and recorded a
gain of approximately $117,000. During the first quarter of 2005, we
transferred a closed store from property, plant and equipment to assets
held for sale. This store was sold in April 2005.



























                                    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 $361,000 as of March 31, 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.

     We identified the following conditional ARO:





                                    13


<PAGE>
     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 three months ended March 31, 2006
and the year ended December 31, 2005.

<TABLE>
<CAPTION>
                                           March 31,   December 31,
                                             2006          2005
                                           ---------   ------------
                                                (In thousands)
<S>                                        <C>            <C>
Liability beginning of year...........     $2,625         $2,272
Liabilities incurred..................          -            322
Liabilities settled...................          -           (150)
Accretion expense.....................          5            181
                                           ------         ------
Liability end of period...............     $2,630         $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>
                                                        March 31,   December 31,
                                                          2006          2005
                                                        ---------   ------------
                                                             (In thousands)
<S>                                                     <C>           <C>
11% senior subordinated notes, due 2012, net of
  unamortized discount of $2,803 and $2,882,
  interest payable semi-annually.....................   $127,198      $127,119
8% senior subordinated notes, due 2014, net of
  unamortized discount of $2,208 and $2,255,
  interest payable semi-annually.....................    147,792       147,745
                                                        --------      --------
  Total                                                 $274,990      $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.










                                    15


<PAGE>
     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
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 March 31, 2006, retained earnings available for dividends under the
most restrictive terms of the indentures were approximately $72,276,000.

     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 March 31, 2006, this rate was
approximately 6.4% per annum. We are required to pay a quarterly
commitment fee of .25% per annum of the unused amount of the facility.

     At March 31, 2006, there were no direct borrowings outstanding under
the Credit Facility. At March 31, 2006, there were, however, $16,406,000
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;






                                    16


<PAGE>
     - trademarks;
     - copyrights;
     - patents;
     - license rights;
     - deposits; and
     - investment accounts and general intangibles.

     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
                                                           March 31,
                                                    ----------------------
                                                       2006        2005
                                                    ----------  ----------
<S>                                                 <C>         <C>
Service cost.....................................   $  376,103  $  339,131
Interest cost....................................      173,109     167,780
Expected return on plan assets...................     (114,020)    (69,345)
Amortization of prior service cost...............           73     (26,618)
Amortization of net loss.........................            -      14,992
                                                    ----------  ----------
Net periodic benefit cost........................   $  435,265  $  425,940
                                                    ==========  ==========
</TABLE>

<TABLE>
<CAPTION>
                                                           Yorktown
                                                     Retiree Medical Plan
                                                    ----------------------
                                                      Three Months Ended
                                                           March 31,
                                                    ----------------------
                                                       2006        2005
                                                    ----------  ----------
<S>                                                 <C>         <C>
Service cost.....................................   $   78,639  $   54,924
Interest cost....................................       74,914      55,166
Amortization of net loss.........................       24,887       4,001
                                                    ----------  ----------
Net periodic benefit cost........................   $  178,440  $  114,091
                                                    ==========  ==========
</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
                                                           March 31,
                                                    ----------------------
                                                       2006        2005
                                                    ----------  ----------
<S>                                                 <C>         <C>
Numerator                                               (In thousands)

(Loss)/earnings from continuing operations.......   $  (12,350) $   10,058
Loss from discontinued operations................            -          (7)
                                                    ----------  ----------
Net (loss)/earnings..............................   $  (12,350) $   10,051
                                                    ==========  ==========
</TABLE>

<TABLE>
<CAPTION>
                                                      Three Months Ended
                                                           March 31,
                                                    ----------------------
                                                       2006        2005
                                                    ----------  ----------
<S>                                                 <C>         <C>
Denominator

Basic - weighted average shares outstanding......   14,582,228  12,381,540
Effect of dilutive stock options.................            -*    197,661
                                                    ----------  ----------
Diluted ? weighted average shares outstanding....   14,582,228  12,579,201
                                                    ==========  ==========

*The additional shares would be antidilutive due to the net loss.
</TABLE>














                                    19


<PAGE>
<TABLE>
<CAPTION>
                                                      Three Months Ended
                                                           March 31,
                                                    ----------------------
                                                       2006        2005
                                                    ----------  ----------
<S>                                                 <C>         <C>
Basic (loss)/earnings per share

(Loss)/earnings from continuing operations.......   $    (0.85) $     0.81
                                                    ----------  ----------
Net (loss)/earnings..............................   $    (0.85) $     0.81
                                                    ==========  ==========
</TABLE>

<TABLE>
<CAPTION>
                                                      Three Months Ended
                                                           March 31,
                                                    ----------------------
                                                       2006        2005
                                                    ----------  ----------
<S>                                                 <C>         <C>
Diluted (loss)/earnings per share

(Loss)/earnings from continuing operations.......   $    (0.85) $     0.80
                                                    ----------  ----------
Net (loss)/earnings..............................   $    (0.85) $     0.80
                                                    ==========  ==========
</TABLE>

     In March 2006, we contributed 25,115 newly issued shares of our
common stock 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.


















                                    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 March 31, 2006,
our retail group operated 122 service stations with convenience stores or
kiosks.

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, a fleet of
finished product and lubricant delivery trucks, and 12 service stations
acquired in the Dial Oil acquisition. We purchase petroleum fuels and
lubricants from suppliers and to a lesser extent from our refining group.

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.



                                    21


<PAGE>
     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 months ended March 31, 2006 and
2005, are presented below. The tables pertaining to the three months
ended March 31, 2005 do not include the results of Dial Oil.





































                                    22


<PAGE>
<TABLE>
<CAPTION>
                                                      As of and for the Three Months Ended March 31, 2006
                                            -------------------------------------------------------------------------
                                                                Wholesale Group
                                                                ---------------
                                            Refining   Retail   Phoenix    Dial             Reconciling
                                              Group    Group      Fuel     Oil      Other      Items     Consolidated
                                            -------------------------------------------------------------------------
                                                                          (In thousands)
<S>                                         <C>       <C>       <C>       <C>       <C>       <C>           <C>
Customer net revenues:
  Finished products:
    Four Corners operations..............   $132,662
    Yorktown operations..................    325,544
                                            --------
      Total..............................   $458,206  $ 81,693  $201,241  $ 51,283  $      -  $       -     $ 792,423
  Merchandise and lubricants.............          -    33,312    10,276    10,288         -          -        53,876
  Other..................................     10,931     4,960       327       437        71          -        16,726
                                            --------  --------  --------  --------  --------  ---------     ---------
      Total..............................    469,137   119,965   211,844    62,008        71          -       863,025
                                            --------  --------  --------  --------  --------  ---------     ---------
Inter-segment net revenues:
  Finished products......................     92,075         -    23,640         -         -   (115,715)            -
  Merchandise and lubricants.............          -         -         -        10         -        (10)            -
  Other..................................      5,172         -       175       210         -     (5,557)            -
                                            --------  --------  --------  --------  --------  ---------     ---------
      Total..............................     97,247         -    23,815       220         -   (121,282)            -
                                            --------  --------  --------  --------  --------  ---------     ---------
Total net revenues from
  continuing operations..................   $566,384  $119,965  $235,659  $ 62,228  $     71  $(121,282)    $ 863,025
                                            ========  ========  ========  ========  ========  =========     =========
Operating income/(loss):
  Four Corners operations................   $ 11,233
  Yorktown operations....................    (30,805)
                                            --------
      Total operating (loss)/income
        before corporate allocation......   $(19,572) $    990  $  2,987  $  1,909  $ (6,102) $   3,493     $ (16,295)
Corporate allocation.....................     (2,448)   (2,031)     (739)     (144)    5,362          -             -
                                            --------  --------  --------  --------  --------  ---------     ---------
  Operating (loss)/income from
    continuing operations................   $(22,020) $ (1,041) $  2,248  $  1,765  $   (740) $   3,493       (16,295)
                                            ========  ========  ========  ========  ========  =========
Interest expense.........................                                                                      (4,682)
Amortization and write-offs of
  financing costs........................                                                                        (399)
Investment and other income..............                                                                       1,602
                                                                                                            ---------
Loss from continuing operations
  before income taxes....................                                                                   $ (19,774)
                                                                                                            =========
Depreciation and amortization:
  Four Corners operations................   $  3,990
  Yorktown operations....................      2,510
                                            --------
      Total from continuing operations...   $  6,500  $  1,969  $    441  $    428  $    229  $       -     $   9,567
                                            ========  ========  ========  ========  ========  =========     =========
Total assets.............................   $628,028  $100,089  $103,276  $ 52,521  $105,867  $       -     $ 989,781
Capital expenditures.....................   $ 57,574  $    814  $  1,048  $    156  $    105  $       -     $  59,697
</TABLE>

                                    23


<PAGE>
<TABLE>
<CAPTION>
                                                          As of and for the Three Months March 31, 2005
                                            ----------------------------------------------------------------
                                            Refining   Retail   Phoenix            Reconciling
                                              Group    Group      Fuel     Other      Items     Consolidated
                                            ----------------------------------------------------------------
                                                                     (In thousands)
<S>                                         <C>       <C>       <C>       <C>        <C>          <C>
Customer net revenues:
  Finished products:
    Four Corners operations..............   $120,874
    Yorktown operations..................    314,706
                                            --------
      Total..............................   $435,580  $ 61,810  $166,741  $      -   $      -     $ 664,131
  Merchandise and lubricants.............          -    31,287     9,022         -          -        40,309
  Other..................................      2,771     3,829       588        98          -         7,286
                                            --------  --------  --------  --------   --------     ---------
      Total..............................    438,351    96,926   176,351        98          -       711,726
                                            --------  --------  --------  --------   --------     ---------
Inter-segment net revenues:
  Finished products......................     50,315         -    15,313         -    (65,628)            -
  Other..................................      4,361         -         -         -     (4,361)            -
                                            --------  --------  --------  --------   --------     ---------
      Total..............................     54,676         -    15,313         -    (69,989)            -
                                            --------  --------  --------  --------   --------     ---------
Total net revenues from
  continuing operations..................   $493,027  $ 96,926  $191,664  $     98   $(69,989)    $ 711,726
                                            ========  ========  ========  ========   ========     =========
Operating income/(loss):
  Four Corners operations................   $  6,285
  Yorktown operations....................     17,650
                                            --------
      Total operating income/(loss)
        before corporate allocation......   $ 23,935  $ (1,679) $  3,699  $ (5,043)  $  3,505     $  24,417
Corporate allocation.....................     (2,738)   (1,564)     (532)    4,834          -             -
                                            --------  --------  --------  --------   --------     ---------
Total operating income/(loss) after
  corporate allocation...................     21,197    (3,243)    3,167      (209)     3,505        24,417
Discontinued operations loss.............          -        11         -         -          -            11
                                            --------  --------  --------  --------   --------     ---------
  Operating income/(loss) from
    continuing operations................   $ 21,197  $ (3,232) $  3,167  $   (209)  $  3,505        24,428
                                            ========  ========  ========  ========   ========
Interest expense.........................                                                            (6,993)
Amortization and write-offs of
  financing costs........................                                                              (504)
Investment and other income..............                                                               120
                                                                                                  ---------
Earnings from continuing operations
  before income taxes....................                                                         $  17,051
                                                                                                  =========
Depreciation and amortization:
  Four Corners operations................   $  4,070
  Yorktown operations....................      2,659
                                            --------
      Total from continuing operations...   $  6,729  $  3,547  $    516  $    178   $      -     $  10,970
                                            ========  ========  ========  ========   ========     =========
Total assets.............................   $517,431  $105,485  $ 96,343  $ 78,249   $      -     $ 797,508
Capital expenditures.....................   $ 11,004  $    780  $    458  $    584   $      -     $  12,826
</TABLE>

                                    24


<PAGE>
NOTE 10 - COMMITMENTS AND CONTINGENCIES:

     We have various legal actions, claims, assessments and other
contingencies arising in the normal course of our business, including
those matters described below, pending against us. 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.







                                    25


<PAGE>
     Under circumstances in which environmental expenditures, or losses
associated with litigation, are anticipated or 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 March 31, 2006 and December 31, 2005, we had environmental
liability accruals of approximately $4,783,000 and $4,941,000,
respectively, which are summarized below, and litigation accruals in the
aggregate of approximately $781,000 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.















                                    26


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

                                           December 31,   Increase                March 31,
                                               2005      (Decrease)   Payments      2006
                                           ------------  ----------   --------    ---------
<S>                                          <C>           <C>          <C>        <C>
Yorktown Refinery........................... $ 3,540       $    -       $  (98)    $ 3,442
Bloomfield Refinery.........................     229            -            -         229
Farmington Refinery.........................     570            -            -         570
Bloomfield - River Terrace..................      46            6          (11)         41
Bloomfield Tank Farm (Old Terminal).........      42            -           (4)         38
Other Projects..............................     514            -          (51)        463
                                             -------       ------       ------     -------
   Totals..................................  $ 4,941       $    6       $ (164)    $ 4,783
                                             =======       ======       ======     =======
</TABLE>

     Approximately $4,320,000 of our environmental accrual is for the
following projects discussed below:

     - $3,442,000 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;

     - $41,000 for remediation of the river terrace area of the
       Bloomfield refinery; and

     - $38,000 for remediation of hydrocarbon contamination on and
       adjacent to the 5.5 acres that we own in Bloomfield, New Mexico.

     The remaining $463,000 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

     - amounts for smaller remediation projects.








                                    27


<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. EPA
currently is developing the administrative consent order pursuant to
which we will implement our cleanup plan.









                                    28


<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 after EPA approves
our clean-up plan. 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 $3,442,000 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.

     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 after EPA approves
our cleanup plan and authorizes its implementation. 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 the Resource Conservation and Recovery Act. As of March 31, 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.

FARMINGTON REFINERY MATTERS

     In 1973, we constructed the Farmington refinery that 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






                                    29


<PAGE>
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 March 31, 2006, we had
$570,000 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 completed construction of an underground barrier with a
pollutant extraction and collection system in the second quarter of 2005.

     In connection with the underground barrier at the west outfall, OCD
required more investigation of elevated hydrocarbon levels in an area of
the Bloomfield refinery site known as the river terrace. With the
approval of OCD, we installed sheet piling in this area in 1999 to block
migration of groundwater contaminants. Monitoring wells were also
installed, with annual sampling results submitted to OCD. 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 March 31, 2006, we
had $41,000 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, including
groundwater monitoring and testing, until natural attenuation has
completed the process of groundwater remediation.






                                    30


<PAGE>
YORKTOWN CONSENT DECREE

     In addition to the 1991 Order discussed above, in connection with
the acquisition of the Yorktown refinery, we also assumed BP's Yorktown
refinery responsibilities under a consent decree among various parties
covering many locations (the "Consent Decree"). We estimate that we will
incur capital expenditures of between $20,000,000 and $27,000,000 to
comply with the Consent Decree through 2006, and have expended
approximately $14,045,000 of this amount through the first 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 ? 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 New Mexico Hazardous Waste Bureau, we
cannot reasonably estimate the cost of any associated remediation
activities.

FOUR CORNERS REFINERIES - SETTLEMENT AGREEMENTS

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

     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.





                                    31


<PAGE>
BLOOMFIELD REFINERY ? EPA COMPLIANCE ORDER

     On October 12, 2005, we received an Administrative Compliance Order
from EPA in connection with a 2000 Bloomfield refinery compliance
evaluation inspection 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 alleges that benzene
levels in the aeration ponds exceed permissible RCRA levels. EPA also
alleges that we failed to make a RCRA hazardous waste determination in
connection with waste water going into the aeration ponds. The Order
seeks a civil penalty of $890,000 in connection with this matter, but EPA
has indicated it would consider settling for a lesser amount if we commit
to operational changes that would reduce benzene levels in the aeration
ponds. As part of any settlement, we may be required to undertake one or
more environmentally beneficial projects known as supplemental
environmental projects. We are continuing settlement discussions with
EPA. Since we do not anticipate incurring any cleanup costs in connection
with this matter, we have not recorded an environmental liability for
this project.

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. We were named as a
defendant in two new MTBE lawsuits filed in Massachusetts in the first
quarter of 2006. 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 this matter,
we have not recorded a liability for these lawsuits.










                                    32


<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 March 31, 2006, we have received $9,850,000 of
insurance proceeds for property claims filed and recorded a gain of
$2,853,000 as a result of the fire. We expect to receive additional
amounts on our property insurance claims, and we have not yet received
any insurance proceeds for claims filed under our business interruption
insurance coverage. We believe that these reimbursements will have a
significant impact on our 2006 earnings.



























                                    33


<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 (formerly known as Phoenix Fuel). 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 122 service
stations at March 31, 2006. 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.

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






                                    34


<PAGE>
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.

















                                    35


<PAGE>
     Below is operating data for our operations:

<TABLE>
<CAPTION>
                                                      Three Months Ended
                                                           March 31,
                                                    -----------------------
                                                       2006         2005
                                                    ----------   ----------
<S>                                                  <C>          <C>
Refining Group Operating Data:
  Four Corners Operations:
    Crude Oil/NGL Throughput (BPD)...........          29,122       28,810
    Refinery Sourced Sales Barrels (BPD).....          28,471       28,559
    Average Crude Oil Costs ($/Bbl)..........        $  62.30     $  47.46
    Refining Margins ($/Bbl).................        $  10.84     $   7.86

  Yorktown Operations:
    Crude Oil/NGL Throughput (BPD)...........          37,589       65,740
    Refinery Sourced Sales Barrels (BPD).....          33,466       62,726
    Average Crude Oil Costs ($/Bbl)..........        $  59.02     $  44.96
    Refining Margins ($/Bbl).................        $  (3.50)    $   6.78

Retail Group Operating Data:
(Continuing operations only)
  Fuel Gallons Sold (000's)..................          40,386       39,469
  Fuel Margins ($/gal).......................        $   0.14     $   0.11
  Merchandise Sales ($ in 000's).............        $ 33,312     $ 31,287
  Merchandise Margins........................              27%          27%
  Operating Retail Outlets at Period End.....             122          125

Wholesale Group Operating Data:
  Phoenix Fuel:
    Fuel Gallons Sold (000's)................         120,681      120,865
    Fuel Margins ($/gal).....................        $   0.06     $   0.06
    Lubricant Sales ($ in 000's).............        $  9,564     $  8,412
    Lubricant Margins........................              14%          14%

  Dial Oil:
    Fuel Gallons Sold (000's)................          25,942            -
    Fuel Margins ($/gal).....................        $   0.14            -
    Lubricant Sales ($ in 000's).............        $  8,080            -
    Lubricant Margins........................              11%           -
    Merchandise Sales* ($ in 000's)..........        $  2,219            -
    Merchandise Margins*.....................              30%           -
    Operating Retail Outlets at Period End...              12            -

*Includes only retail store merchandise sales.
</TABLE>





                                    36


<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
                                                                 March 31,
                                                          -----------------------
                                                             2006         2005
                                                          ----------   ----------
<S>                                                       <C>          <C>
AVERAGE PER BARREL
------------------
Four Corners Operation
  Net sales...........................................    $    76.39   $    59.15
  Less cost of products...............................         65.55        51.29
                                                          ----------   ----------
  Refining margin.....................................    $    10.84   $     7.86
                                                          ==========   ==========
Yorktown Operation
  Net sales...........................................    $    62.11   $    52.63
  Less cost of products...............................         65.61        45.85
                                                          ----------   ----------
  Refining margin.....................................    $    (3.50)  $     6.78
                                                          ==========   ==========
Consolidated
  Net sales...........................................    $    68.68   $    54.67
  Less cost of products...............................         65.59        47.55
                                                          ----------   ----------
  Refining margin.....................................    $     3.09   $     7.12
                                                          ==========   ==========
</TABLE>











                                    37


<PAGE>
<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                                 March 31,
                                                          -----------------------
                                                             2006         2005
                                                          ----------   ----------
<S>                                                       <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..........  $    76.39   $    59.15
  Times refinery sourced sales barrels per day..........      28,471       28,559
  Times number of days in period........................          90           90
                                                          ----------   ----------
  Refined product sales from produced products
    Sold* (000's).......................................  $  195,741   $  152,034
                                                          ==========   ==========
Yorktown Operations
  Average sales price per produced barrel sold..........  $    62.11   $    52.63
  Times refinery sourced sales barrels per day..........      33,466       62,726
  Times number of days in period........................          90           90
                                                          ----------   ----------
  Refined product sales from produced products
    Sold* (000's).......................................  $  187,072   $  297,114
                                                          ==========   ==========
Consolidated (000's)
  Sum of refined product sales from produced
    products sold*......................................  $  382,813   $  449,148
  Purchased product, transportation and other revenues..     183,571       43,879
                                                          ----------   ----------
  Net revenues..........................................  $  566,384   $  493,027
                                                          ==========   ==========

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

















                                    38


<PAGE>
<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                               March 31,
                                                        -----------------------
                                                           2006         2005
                                                        ----------   ----------
<S>                                                     <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...  $    65.55   $    51.29
  Times refinery sourced sales barrels per day........      28,471       28,559
  Times number of days in period......................          90           90
                                                        ----------   ----------
  Cost of products for produced products
    sold (000's)......................................  $  167,965   $  131,831
                                                        ==========   ==========

Yorktown Operations
  Average cost of products per produced barrel sold...  $    65.61   $    45.85
  Times refinery sourced sales barrels per day........      33,466       62,726
  Times number of days in period......................          90           90
                                                        ----------   ----------
  Cost of products for produced products
    sold (000's)......................................  $  197,613   $  258,839
                                                        ==========   ==========

Consolidated (000's)
  Sum of refined cost of produced products sold.......  $  365,578   $  390,670
  Purchased product, transportation and other
    cost of products sold.............................     175,210       36,398
                                                        ----------   ----------
  Total cost of products sold (excluding
    depreciation and amortization)....................  $  540,788   $  427,068
                                                        ==========   ==========
</TABLE>














                                    39


<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
                                                             March 31,
                                                      -----------------------
                                                         2006         2005
                                                      ----------   ----------
<S>                                                   <C>          <C>
(in 000's except fuel margin per gallon)

Fuel sales........................................    $   97,177   $   76,697
Less cost of fuel sold............................        91,485       72,209
                                                      ----------   ----------
Fuel margin.......................................    $    5,692   $    4,488
Number of gallons sold............................        40,386       39,469
Fuel margin per gallon............................    $     0.14   $     0.11

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

Fuel sales........................................    $   97,177   $   76,697
Excise taxes included in sales....................       (15,484)     (14,887)
                                                      ----------   ----------
Fuel sales, net of excise taxes...................        81,693       61,810
Merchandise sales.................................        33,312       31,287
Other sales.......................................         4,960        3,829
                                                      ----------   ----------
Net revenues......................................    $  119,965   $   96,926
                                                      ==========   ==========
Reconciliation of fuel cost of products sold to
total cost of products sold (excluding
depreciation and amortization) (000's)

Fuel cost of products sold........................    $   91,485   $   72,209
Excise taxes included in cost of products sold....       (15,484)     (14,887)
                                                      ----------   ----------
Fuel cost of products sold, net of excise taxes...        76,001       57,322
Merchandise cost of products sold.................        24,239       22,785
Other cost of products sold.......................         4,015        3,068
                                                      ----------   ----------
Total cost of products sold (excluding
  depreciation and amortization)..................    $  104,255   $   83,175
                                                      ==========   ==========
</TABLE>


                                    40


<PAGE>
<TABLE>
<CAPTION>
WHOLESALE GROUP
---------------

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

Phoenix Fuel
------------
                                                        Three Months Ended
                                                             March 31,
                                                      -----------------------
                                                         2006         2005
                                                      ----------   ----------
<S>                                                   <C>          <C>
(in 000's except fuel margin per gallon)

Fuel sales........................................    $  270,312   $  222,887
Less cost of fuel sold............................       263,362      215,434
                                                      ----------   ----------
Fuel margin.......................................    $    6,950   $    7,453
Number of gallons sold............................       120,681      120,865
Fuel margin per gallon............................    $     0.06   $     0.06

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

Fuel sales........................................    $  270,312   $  222,887
Excise taxes included in sales....................       (45,431)     (40,832)
                                                      ----------   ----------
Fuel sales, net of excise taxes...................       224,881      182,055
Lubricant sales...................................         9,564        8,412
Other sales.......................................         1,214        1,197
                                                      ----------   ----------
Net revenues......................................    $  235,659   $  191,664
                                                      ==========   ==========
Reconciliation of fuel cost of products sold to
total cost of products sold excluding
(depreciation and amortization) (000's)

Fuel cost of products sold........................    $  263,362   $  215,434
Excise taxes included in cost of products sold....       (45,431)     (40,832)
                                                      ----------   ----------
Fuel cost of products sold, net of excise taxes...       217,931      174,602
Lubricant cost of products sold...................         8,179        7,242
Other cost of products sold.......................           216          332
                                                      ----------   ----------
Total cost of products sold (excluding
  depreciation and amortization)..................    $  226,326   $  182,176
                                                      ==========   ==========
</TABLE>

                                    41


<PAGE>
<TABLE>
<CAPTION>
Dial Oil(1)
-----------
                                                        Three Months Ended
                                                             March 31,
                                                      -----------------------
                                                         2006         2005
                                                      ----------   ----------
<S>                                                   <C>          <C>
(in 000's except fuel margin per gallon)
Fuel sales........................................    $   51,283   $        -
Less cost of fuel sold............................        47,567            -
                                                      ----------   ----------
Fuel margin.......................................    $    3,716   $        -
Number of gallons sold............................        25,942            -
Fuel margin per gallon............................    $     0.14   $        -

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

Fuel sales........................................    $   51,283   $        -
Lubricant and merchandise sales...................        10,298            -
Other sales.......................................           647            -
                                                      ----------   ----------
Net revenues......................................    $   62,228   $        -
                                                      ==========   ==========
Reconciliation of cost of fuel sold to total
cost of products sold (excluding depreciation
and amortization)(000's)


Fuel cost of products sold........................    $   47,567   $        -
Lubricant and merchandise cost of products sold...         8,730            -
Other cost of products sold.......................           199            -
                                                      ----------   ----------
Total cost of products sold (excluding
  depreciation and amortization)..................    $   56,496   $        -
                                                      ==========   ==========

(1) Dial Oil presents sales and cost of sales, net of excise taxes.
</TABLE>












                                    42


<PAGE>
<TABLE>
<CAPTION>
                                                        Three Months Ended
                                                             March 31,
                                                      -----------------------
                                                         2006         2005
                                                      ----------   ----------
<S>                                                   <C>          <C>
Consolidated
------------
Reconciliation to net revenues reported in
  Condensed Consolidated Statements of Operations
  (000's)

Net revenues ? Refinery Group.....................    $  566,384   $  493,027
Net revenues ? Retail Group.......................       119,965       96,926
Net revenues ? Wholesale Group:
   Net revenues ? Phoenix Fuel....................       235,659      191,664
   Net revenues ? Dial Oil........................        62,228            -
Net revenues ? Other..............................            71           98
Eliminations......................................      (121,282)     (69,989)
                                                      ----------   ----------
Total net revenues reported in Condensed
  Consolidated Statements of Operation............    $  863,025   $  711,726
                                                      ==========   ==========
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).......    $  540,788   $  427,068
Cost of products sold ? Retail Group
  (excluding depreciation and amortization).......       104,255       83,175
Cost of products sold ? Wholesale Group:
  Cost of products sold ? Phoenix Fuel
    (excluding depreciation and amortization).....       226,326      182,176
  Cost of products sold ? Dial Oil
    (excluding depreciation and amortization).....        56,496            -
Eliminations......................................      (121,282)     (69,989)
Other.............................................         3,969        3,360
                                                      ----------   ----------
Total cost of products sold (excluding
  depreciation and amortization) reported in
  Condensed Consolidated Statements of Operations.    $  810,552   $  625,790
                                                      ==========   ==========
</TABLE>








                                    43


<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 months ended March 31, 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 mid-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

        -  timing issues with respect to the receipt of the bulk of
           anticipated insurance proceeds.

     These negative factors were partially offset by the positive
following 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;

-	receipt of $9,850,000 in insurance proceeds and the resulting
   gain of $2,853,000 as a result of the Yorktown fire discussed
   above, and

     -  higher fuel margins per gallon for our retail group for the
        three months ended March 31, 2006.




                                    44


<PAGE>
     EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

     Our earnings from continuing operations before income taxes
decreased $36,825,000 for the three months ended March 31, 2006, compared
to the same period in 2005. As noted above, this decrease was primarily
due to a decrease in operating income before corporate allocations from
our refinery operations of $43,507,000 primarily due to lower volumes and
margins realized as a result of the Yorktown fire;

     This decrease was partially offset by the following factors:

        - a $2,669,000 increase in operating income from our retail
          operations as a result of increased fuel margins and volumes;
          and

        - the implementation of our debt reduction strategy that resulted
          in a $2,311,000 or 33% decrease in interest expense.

     YORKTOWN REFINERY

     Our Yorktown refinery operated at an average throughput rate of
approximately 37,589 barrels per day in the first quarter of 2006
compared to 65,740 barrels per day in the first quarter of 2005.

     Refining margins for the first quarter of 2006 were $(3.50) per
barrel and were $6.78 for the first quarter of 2005. As noted above, this
decrease in refining margins was due primarily to the disruption of our
refinery operations caused by the fire and the resulting sale of
feedstocks that would otherwise have been processed into higher value
(higher priced) gasoline and diesel;

     Revenues for our Yorktown refinery decreased for the three months
ended March 31, 2006 due primarily to the Yorktown fire which resulted in
a shutdown of refinery operations and the resulting sale of feedstocks at
a lower price as compared to gasoline and diesel products.

     Depreciation and amortization expense for our Yorktown refinery
decreased for the three months ended March 31, 2006 due in part to
certain assets being fully depreciated in 2005.

     FOUR CORNERS REFINERIES

     Our Four Corners refineries operated at an average throughput rate
of approximately 29,122 barrels per day in the first quarter of 2006,
compared to 28,810 barrels per day in the first quarter of 2005.

     Refining margins for the first quarter of 2006 were $10.84 per
barrel and were $7.86 for the first quarter of 2005.






                                    45


<PAGE>
     Revenues for our Four Corners refineries increased for the three
months ended March 31, 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 months ended March 31, 2006 primarily due to higher employee costs,
fuel costs, and additional outside services incurred in our operations.

     Depreciation and amortization expense for our Four Corners
refineries were relatively unchanged for the three months ended March 31,
2006 as compared to the same period in 2005.

     RETAIL GROUP

     Average fuel margins were $0.14 per gallon for the three months
ended March 31, 2006 as compared to $0.11 per gallon for the same period
in 2005. Fuel volumes sold for the three months ended March 31, 2006
increased as compared to the same period a year ago due primarily to
favorable market conditions and improved demand over the same period in
2005. Average merchandise margins were 27% for each of the three months
ended March 31, 2006 and March 31, 2005.

     Revenues for our retail group increased for the three months ended
March 31, 2006, compared to the same periods in 2005, primarily due to an
increase in fuel selling prices and an increase in fuel volumes sold.

     Our retail fuel margin per gallon increased for the three months
ended March 31, 2006 due to higher finished product sales prices as a
result of increased demand.

     Operating expenses increased for the three months ended March 31,
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 in
these areas.

     Depreciation expense decreased for the three months ended March 31,
2006 as compared to the same period in 2005 due to a reduction in
amortization for our leasehold improvements.

     WHOLESALE GROUP

     Phoenix Fuel
     ------------

     Average gasoline and diesel fuel margins for Phoenix Fuel were $0.06
per gallon in both the first quarter of 2006 and 2005.

     Revenues for Phoenix Fuel increased for the three months ended March
31, 2006 primarily due to higher average price per gallon sold.




                                    46


<PAGE>
     Operating expenses for Phoenix Fuel increased for the three months
ended March 31, 2006 primarily due to higher fuel costs and higher
employee payroll and benefit costs.

     Dial Oil
     --------

     No comparative analysis is presented for Dial Oil because it was
acquired in the third quarter of 2005 and no prior period statistics are
included above.

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

     For the three months ended March 31, 2006, selling, general and
administrative expenses increased by approximately $2,207,000 as compared
to the same period in 2005 due primarily to higher legal costs in 2006 as
a result of reimbursement of legal expenses that occurred in 2005.

     INTEREST EXPENSE FROM CONTINUING OPERATIONS

     For the three months ended March 31, 2006, interest expense
decreased approximately $2,311,000 as compared to the same period in
2005.  These decreases were primarily due to a reduction in our long-term
debt, which was part of our debt reduction strategy implemented beginning
in 2002.

     INCOME TAXES FROM CONTINUING OPERATIONS

     The effective tax rates for the three months ended March 31, 2006
and 2005 were approximately 37.5% and 41.0%, respectively. The decrease
was primarily due to additional tax credits associated with low sulfur
diesel production in 2006.

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

     Overall, we currently believe that our refining fundamentals 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 in the fourth quarter
of 2005. Same store fuel volumes for our retail group currently are above






                                    47


<PAGE>
the prior year's levels, however, fuel margins are lower. In addition,
merchandise sales for our retail group are above the prior year?s level,
while merchandise margins have remained stable. The wholesale group
currently continues to see stronger 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 March 31, 2006, we had long-term debt of $274,990,000. At
December 31, 2005, we had long-term debt of $274,864,000. There was no
current portion of long-term debt outstanding at March 31, 2006 or at
December 31, 2005.

     The amounts at March 31, 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.

     At March 31, 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 March 31, 2006, our long-term debt was 41.4% 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 shareholders' equity) percentage at
March 31, 2006, was 32.9%. 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






                                    48


<PAGE>
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 $54,513,000 for the three
months ended March 31, 2006 compared to the three months ended March 31,
2005. This resulted primarily from the net loss incurred in the first
quarter of 2006 compared to the net earnings reported in the first
quarter of 2005.

     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 March 31, 2006 consisted of current assets of
$384,377,000 and current liabilities of $226,410,000 or a current ratio
of 1.70:1. 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.











                                    49


<PAGE>
     CAPITAL EXPENDITURES AND RESOURCES

     During the first quarter of 2006, we increased our budget for
capital expenditures in 2006, excluding any potential acquisitions and
linefill for the recently acquired pipeline, from approximately
$201,000,000 to approximately $209,000,000. The increase is primarily due
to the timing of budgeted expenditures on certain projects. A portion of
these costs may not be spent in 2006. Net cash used in investing
activities for purchases of property, plant and equipment totaled
approximately $59,697,000 for the three months ended March 31, 2006 and
$12,826,000 for the three months ended March 31, 2005. Expenditures made
in 2006 primarily were for operational and environmental projects for the
refineries.

     We received proceeds of approximately $1,539,000 from the sale of
property, plant and equipment and other assets in the first three months
of 2006 and $981,000 for the same period in 2005. In addition, we
received $9,850,000 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 expect to receive additional amounts on our property
insurance claims and we have not yet received any insurance proceeds for
claims filed under our business interruption insurance coverage. We
believe that these reimbursements will 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.

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

     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.












                                    50


<PAGE>
     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 March 31, 2006, there were no direct borrowings
outstanding under this facility.

     Our operations are subject to the normal hazards, 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, handled, used, released, or disposed of by us or
by our predecessors.










                                    51


<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 may also 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
are currently 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, 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.

     In March 2006, we entered into a consent order with the New Mexico
Oil Conservation Division and paid a civil penalty of $30,000 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".


                                    52


<PAGE>
     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 60% for the first three 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.  It
currently is anticipated that the pipeline will become operational before
the end of 2006.

     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




                                    53


<PAGE>
     -  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 low sulfur
regulations adopted by the Environmental Protection Agency (?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 low sulfur diesel fuel they produce, up to a
maximum of 25% of the capital costs incurred to comply with the
regulations. We may be able to use this credit in 2006.

     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 must begin
producing highway diesel fuel that satisfies 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. We currently
anticipate that our Yorktown and Ciniza refineries will not be able to
meet the June 2006 start date for 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.

     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.




                                    54


<PAGE>
     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;

     - 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;

     - 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 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;


                                    55


<PAGE>
     - 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;

     - 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 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 our anticipated inability to reduce the sulfur
       content of diesel fuel at our Yorktown and Ciniza refineries by
       the applicable regulatory deadline will cause us to incur
       substantial costs or will have other significant consequences on
       our operations;

     - 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;





                                    56


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

     - the risk that the cost of testing the crude oil pipeline that we
       purchased from Texas-New Mexico Pipe Line Company during the third
       quarter of 2005, and the cost of placing it in service, will be
       considerably more than our current estimates;

     - the risk that the timetable for placing the crude oil pipeline
       that we purchased in the third quarter of 2005 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 crude oil pipeline
       that we purchased in the third quarter of 2005 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; 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.



















                                    57


<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 controls over financial reporting for Dial Oil, a
100% owned subsidiary that was acquired in the third quarter of 2005.



























                                    58


<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"). Set forth below are the
material changes to the risk factors disclosed in the Form 10-K. You
should carefully consider the specific factors described below and in the
Form 10-K, 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, before purchasing our common shares.

     The risks described below and in the Form 10-K 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 sellers 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.








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<PAGE>
     Environmental obligations assumed by us include the seller's
Yorktown refinery responsibilities under a consent decree among various
parties covering many locations (the "Consent Decree"). Parties to the
Consent Decree include the United States, BP Exploration and Oil Co.,
Amoco Oil Company, and Atlantic Richfield Company. 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. We estimate that we will incur capital expenditures of between
$20,000,000 and $27,000,000 to comply with the Consent Decree through
2006, and have expended approximately $14,045,000 of this amount through
the first 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 the Resource Conservation and Recovery Act. 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. EPA
currently is developing the administrative consent order pursuant to
which we will implement our cleanup plan.












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<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 after EPA approves
our cleanup plan. 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. EPA is requiring financial assurance of our ability to perform
the plan, such as a certification that we satisfy certain financial
tests, depositing funds into a trust, or posting a letter of credit or
performance bond. If we cannot agree with EPA regarding financial
assurance and, as a result, do not sign the consent order being developed
by EPA, EPA has indicated it will consider its enforcement option.

     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
after EPA approves our clean-up plan and authorizes its implementation.

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.








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<PAGE>
     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. We do not yet know exactly when we will be receiving
payments under these policies or ultimately how much we will receive.

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 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 must begin
producing highway diesel fuel that satisfies 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.



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<PAGE>
     We applied for temporary relief from the low sulfur gasoline
standards at the Yorktown refinery. In March 2003, EPA approved our
application and issued a compliance plan. This compliance plan allowed us
to postpone certain capital expenditures for up to three years from the
date we would otherwise have begun these expenditures. We must be in full
compliance with the diesel sulfur standards by June 1, 2006, and the
gasoline sulfur standards by January 1, 2008. The compliance plan
requires us to provide EPA with an annual report 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 the Ciniza and Bloomfield refineries, we applied for
and received approval under existing regulations for an extension of the
low sulfur gasoline standards until 2007, the date when the annual
average sulfur content of our Four Corners gasoline must begin to be
reduced. Full compliance is, however, required by 2008. In order to
receive this extension of low sulfur diesel standards, we agreed to be in
full compliance with the diesel sulfur standards by June 1, 2006.

     We are currently installing equipment and/or developing projects
necessary to produce low sulfur gasoline and diesel fuel at our
refineries.

     There are a number of factors that could affect our cost of
compliance with the low sulfur standards. In particular, because these
standards affect the entire industry and because of the damage to
refineries caused by Hurricanes Katrina and Rita, engineering and
construction companies are busy and are charging a premium for their
services. The relatively short time left to comply has resulted in
increased costs to expedite ordering for otherwise long delivery items
and added overtime by contractors to attempt to meet the implementation
schedule. Increases in metal and concrete prices have impacted, and could
further impact, costs.

     We currently anticipate that our Ciniza and Yorktown refineries will
not be able to meet the June 2006 start date for the low sulfur highway
diesel standards as a result of the combined effects of Hurricanes
Katrina and Rita on the availability of contractors, hardware, and other
similar effects and the time and, at Yorktown, the effort required to
repair damage resulting from the 2005 fire.






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<PAGE>
     We have been in communication with EPA concerning our anticipated
inability to meet the June start date at our Ciniza refinery. We are
uncertain how our anticipated inability to produce low sulfur highway
diesel by the start date will affect our refinery?s ability to comply
with the low sulfur highway diesel standards, as we still may be able to
comply with EPA?s requirements even though we are not able to initially
make one hundred percent low sulfur fuel for highway use.  For example,
we may be able to make use of compliance period averaging, which is
permitted by the low sulfur diesel standards. Additionally, it is
possible that EPA will provide us with additional time to begin producing
low sulfur highway diesel.

     At our Yorktown refinery, we will not be able to satisfy the current
requirements of our compliance plan if we do not produce low sulfur
highway diesel fuel by the start date. We are pursuing a modification to
our compliance plan with EPA. While we currently anticipate reaching a
satisfactory agreement with EPA, we cannot assure you that such an
agreement will be reached.

     Our inability to produce low sulfur highway diesel at our Ciniza and
Yorktown refineries could result in a reduction in the quantity of
highway diesel fuel that we otherwise would have available for sale, and
an increase in the quantity of refinery products available for sale that
are not subject to the low sulfur highway diesel standards, such as non-
highway diesel fuel and heating oil. Further, depending on the market for
such products as compared to the market for low sulfur highway diesel, we
might need to make other modifications to the refineries' operations,
including reducing production. Such circumstances would likely reduce
refining earnings.

     In addition to the consequences noted above, our inability to meet
the start date may have other consequences, such as no longer qualifying
us for an extension of low sulfur gasoline standards at our Four Corners
refineries and/or requiring us to purchase sulfur credits.

     Until our discussions with EPA are concluded, we will be unable to
fully evaluate the potential impact of our inability to meet the
regulatory start date. At this time, however, we do not anticipate that
our inability to produce low sulfur highway diesel fuel by the June start
date will impact our timetable for producing low sulfur gasoline at our
refineries.













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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 Anthony J. Bernitsky, Larry L. DeRoin, George
M. Rapport, and Donald M. Wilkinson.



















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<PAGE>
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

     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.

     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 February 28, 2006, we filed a Form 8-K dated February 28,
          2006, containing a press release detailing our earnings for the
          year and quarter ended December 31, 2005.

     (ii) 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.























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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 March 31, 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: May 4, 2006




































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