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, 2007

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______

                        COMMISSION FILE NUMBER: 1-10398

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

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to the filing requirements for the past 90 days.

                           Yes [X]    No [ ]

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

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

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

                           Yes [ ]    No [X]

Number of Common Shares outstanding at May 1, 2007: 14,639,312 shares.


<PAGE>
                   GIANT INDUSTRIES, INC. AND SUBSIDIARIES
                                     INDEX


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

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

          Condensed Consolidated Balance Sheets at
          March 31, 2007 and December 31, 2006 (Unaudited)...........   1

          Condensed Consolidated Statements of Earnings for the
          Three Months Ended March 31, 2007 and 2006 (Unaudited).....   2

          Condensed Consolidated Statements of Comprehensive
          Income for the Three Months ended March 31, 2007
          and 2006 (Unaudited)                                          3

          Condensed Consolidated Statements of Cash Flows for the
          Three Months Ended March 31, 2007 and 2006(Unaudited)......  4-5

          Notes to Condensed Consolidated Financial Statements
          (Unaudited)................................................  6-27

Item 2  - Management's Discussion and Analysis of
          Financial Condition and Results of Operations.............. 28-52

Item 3  - Quantitative and Qualitative Disclosures
          About Market Risk..........................................  53

Item 4  - Controls and Procedures....................................  53

PART II - OTHER INFORMATION..........................................  54

Item 1  - Legal Proceedings..........................................  54

Item 1A - Risk Factors...............................................  54

Item 6  - Exhibits and Reports on Form 8-K...........................  60

SIGNATURE............................................................  61



<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,
                                                                 2007             2006
                                                              ----------      ------------
<S>                                                           <C>              <C>
ASSETS
Current assets:
  Cash and cash equivalents.............................      $   10,811       $   18,112
  Receivables, net......................................         212,476          213,570
  Inventories...........................................         168,156          175,436
  Prepaid expenses and other............................          18,257           22,169
                                                              ----------       ----------
    Total current assets................................         409,700          429,287
                                                              ----------       ----------
Property, plant and equipment...........................       1,055,060          995,710
Less accumulated depreciation and amortization..........        (339,554)        (327,460)
                                                              ----------       ----------
                                                                 715,506          668,250
                                                              ----------       ----------
Goodwill................................................          55,636           50,432
Other assets............................................          33,779           28,208
                                                              ----------       ----------
                                                              $1,214,621       $1,176,177
                                                              ==========       ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable......................................      $  164,763       $  143,586
  Accrued expenses......................................          66,275           67,590
  Deferred income taxes.................................          11,178           10,959
                                                              ----------       ----------
    Total current liabilities...........................         242,216          222,135
                                                              ----------       ----------
Long-term debt..........................................         330,526          325,387
Deferred income taxes...................................         118,067          117,149
Uncertain tax positions.................................           4,273                -
Other liabilities.......................................          27,828           27,138
Commitments and contingencies (Note 9)
Stockholders' equity:
  Preferred stock, par value $.01 per share,
    10,000,000 shares authorized, none issued
  Common stock, par value $.01 per share, 50,000,000
    shares authorized, 18,391,292 shares issued.........             184              184
  Additional paid-in capital............................         218,364          218,364
  Retained earnings.....................................         311,190          303,954
  Unearned compensation related to restricted stock.....          (1,415)          (1,511)
  Accumulated other comprehensive loss..................            (158)            (169)
                                                              ----------       ----------
                                                                 528,165          520,822
  Less common stock in treasury - at cost,
    3,751,980 shares....................................         (36,454)         (36,454)
                                                              ----------       ----------
    Total stockholders' equity..........................         491,711          484,368
                                                              ----------       ----------
                                                              $1,214,621       $1,176,177
                                                              ==========       ==========

See accompanying notes to Condensed Consolidated Financial Statements.

                                             1
</TABLE>


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

<CAPTION>
                                                                      Three Months Ended
                                                                           March 31,
                                                                    -----------------------
                                                                       2007         2006
                                                                    ----------   ----------
<S>                                                                 <C>          <C>
Net revenues......................................................  $1,020,070   $  863,025
                                                                    ----------   ----------
Cost of products sold (excluding depreciation and amortization)...     908,711      810,552
Operating expenses................................................      68,962       52,688
Depreciation and amortization.....................................      12,857        9,567
Selling, general and administrative expenses......................      12,682       10,006
Net loss/(gain) on disposal/write-down of assets..................          15         (640)
Gain from insurance settlement due to fire........................           -       (2,853)
                                                                    ----------   ----------
Operating income/(loss)...........................................      16,843      (16,295)
Interest expense..................................................      (5,701)      (4,682)
Amortization of financing costs...................................        (399)        (399)
Investment and other income.......................................         361        1,602
                                                                    ----------   ----------
Earnings/(loss) before income taxes...............................      11,104      (19,774)
Provision/(benefit) for income taxes..............................       3,868       (7,424)
                                                                    ----------   ----------
Net earnings/(loss)...............................................  $    7,236   $  (12,350)
                                                                    ==========   ==========
Net earnings/(loss) per common share:
  Basic...........................................................  $     0.50   $    (0.85)
                                                                    ==========   ==========
  Assuming dilution...............................................  $     0.49   $    (0.85)
                                                                    ==========   ==========

See accompanying notes to Condensed Consolidated Financial Statements.

                                             2
</TABLE>


<PAGE>
<TABLE>
                             GIANT INDUSTRIES, INC. AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                           (Unaudited)
                                          (In thousands)



<CAPTION>
                                                                    Three Months Ended
                                                                          March 31,
                                                                    -------------------
                                                                      2007       2006
                                                                    --------   --------
<S>                                                                 <C>        <C>
Net earnings/(loss)............................................     $  7,236   $(12,350)
                                                                    --------   --------
Retiree Medical Plan:
  Reclassification adjustment for loss included in
  net earnings, net of tax.....................................           11          -
                                                                    --------   --------
Other comprehensive income, net of tax.........................           11          -
                                                                    --------   --------
Total comprehensive income/(loss)..............................     $  7,247   $(12,350)
                                                                    ========   ========

See accompanying notes to Condensed Consolidated Financial Statements.

                                             3
</TABLE>


<PAGE>
<TABLE>
                                GIANT INDUSTRIES, INC. AND SUBSIDIARIES
                            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              (Unaudited)
                                            (In thousands)
<CAPTION>
                                                                         Three Months Ended
                                                                               March 31,
                                                                         -------------------
                                                                           2007       2006
                                                                         --------   --------
<S>                                                                      <C>        <C>
Cash flows from operating activities:
  Net earnings/(loss)................................................... $  7,236   $(12,350)
Adjustments to reconcile net earnings/(loss) to net cash
  provided by/(used in) operating activities:
  Depreciation and amortization.........................................   12,857      9,567
  Amortization of financing costs.......................................      399        399
  Compensation expense related to restricted stock awards...............       96        102
  Deferred income taxes.................................................     (180)    (4,163)
  Deferred crude oil purchase discounts.................................      277        165
  Payments to deferred compensation plan................................   (1,510)    (1,358)
  Net loss/(gain) on the disposal of assets.............................       15       (640)
  Gain from insurance settlement due to fire incident...................        -     (2,853)
    Changes in operating assets and liabilities:
    Decrease/(increase) in receivables..................................    7,129    (27,284)
    Decrease/(increase) in inventories..................................   10,280       (239)
    Decrease/(increase) in prepaid expenses.............................    4,690     (1,035)
    (Increase) in other assets..........................................   (1,924)    (3,194)
    Increase in accounts payable........................................   11,820     23,177
    Increase/(decrease) in accrued expenses.............................    6,591    (13,830)
    Increase in other liabilities.......................................    4,821      2,038
                                                                         --------   --------
Net cash provided by/(used in) operating activities.....................   62,597    (31,498)
                                                                         --------   --------
Cash flows from investing activities:
  Purchase of property, plant and equipment.............................  (62,903)   (59,697)
  Acquisition activity..................................................  (12,335)         -
  Proceeds from insurance settlement for property
    damage due to fire incident.........................................        -      9,850
  Proceeds from sale of property, plant and equipment and other assets..      340      1,539
                                                                         --------   --------
Net cash used in investing activities...................................  (74,898)   (48,308)
                                                                         --------   --------
Cash flows from financing activities:
  Proceeds from line of credit..........................................   75,000          -
  Payments on line of credit............................................  (70,000)         -
  Proceeds from exercise of stock options...............................        -          9
                                                                         --------   --------
Net cash provided by financing activities...............................    5,000          9
                                                                         --------   --------
Net decrease in cash and cash equivalents...............................   (7,301)   (79,797)
  Cash and cash equivalents:
    Beginning of period.................................................   18,112    164,280
                                                                         --------   --------
    End of period....................................................... $ 10,811   $ 84,483
                                                                         ========   ========

See accompanying notes to Condensed Consolidated Financial Statements.

                                             4
</TABLE>


<PAGE>
Significant Noncash Investing and Financing Activities.

     In the first quarter of 2007, we capitalized approximately
$2,082,000 of interest as part of construction in progress. At March 31,
2007, approximately $7,819,000 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 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.

See accompanying notes to Condensed Consolidated Financial Statements.






































                                  5


<PAGE>
            NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                              (Unaudited)

NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION 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, New Mexico and Southern
California.

     We have three business segments:

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

     See Note 8 for a further discussion of our business segments.

     On August 26, 2006, we entered into an Agreement and Plan of Merger
(the "Plan of Merger") with Western Refining, Inc. ("Western") and New
Acquisition Corporation ("Merger Sub"). On November 12, 2006, we entered
into an Amendment No. 1 to Agreement and Plan of Merger (the "Amendment")
with Western and Merger Sub. The Plan of Merger and Amendment are
collectively referred to as the "Agreement". If the transaction closes,
Western will acquire all of our outstanding shares of common stock for
$77.00 per share, and we will be merged with Merger Sub and became a
wholly-owned subsidiary of Western. The closing of the transaction is
subject to various conditions, including the removal of a temporary
restraining order obtained by the Federal Trade Commission (the "FTC") on
April 13, 2007, which prohibits the parties from closing the transaction
while the FTC seeks to obtain a preliminary injunction. A hearing on the
FTC's request for a preliminary injunction began on May 7, 2007. Our
stockholders approved the transaction on February 27, 2007.

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 ("GAAP"), for interim
financial information and with the instructions to Form 10-Q and Rule 10-



                                  6


<PAGE>
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.

     Operating results for the three months ended March 31, 2007 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2007. 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, 2006.

Current Pronouncements

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

     In September 2006, FASB issued the adoption of Statement of
Financial Accounting Standards 157, "Fair Value Measurements" ("SFAS
157"), which defines fair value, establishes a frame work for measuring
fair value in GAAP, and expands disclosures about fair value
measurements. This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007. This statement is
applied in conjunction with other accounting pronouncements that require
or permit fair value measurements and, accordingly, this statement does
not require any new fair value measurements. Therefore, we do not expect
the adoption of SFAS 157 to have a material impact on our financial
statements.

     In February 2007, FASB issued SFAS 159, "The Fair Value Option for
Financial Assets and Liabilities (including an amendment of SFAS 115)
("SFAS 159"). SFAS 159 permits entities to choose to measure many
financial instruments and certain other items at fair value that are not
currently required to be measured at fair value. SFAS 159 is effective as
of the beginning of an entity's first fiscal year that begins after
November 15, 2007. We do not expect the adoption of SFAS 159 to have a
material impact on our financial statements.








                                  7


<PAGE>
NOTE 2 - INVENTORIES:

     Our inventories consist of the following:

<TABLE>
<CAPTION>
                                                    March 31,    December 31,
                                                      2007           2006
                                                  -------------  ------------
                                                         (In thousands)
<S>                                                 <C>            <C>
First-in, first-out ("FIFO") method:
  Crude oil........................................ $ 71,679       $ 81,998
  Refined products.................................  136,634        131,364
  Refinery and shop supplies.......................   16,083         16,296
  Merchandise......................................   13,073         10,190
Retail method:
  Merchandise......................................   10,639         10,676
                                                    --------       --------
    Subtotal.......................................  248,108        250,524
Adjustment for last-in, first-out ("LIFO") method..  (79,952)       (75,088)
                                                    --------       --------
    Total.......................................... $168,156       $175,436
                                                    ========       ========
</TABLE>

     The portion of inventories valued on a LIFO basis totaled
$106,264,000 and $117,933,000 at March 31, 2007 and December 31, 2006,
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, 2007 and 2006, net earnings and diluted earnings per share would have
been higher as follows:

<TABLE>
<CAPTION>
                                              Three Months Ended
                                                   March 31,
                                              -------------------
                                                2007       2006
                                              --------   --------
                                     (In thousands, except per share data)
<S>                                           <C>        <C>
Net earnings..............................    $ 3,170    $10,396
Diluted earnings per share................    $  0.22    $  0.71
</TABLE>

     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.

                                  8


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

     At March 31, 2007 and December 31, 2006, we had goodwill of
$55,636,000 and $50,432,000, respectively.

     The changes in the carrying amount of goodwill for the three months
ended March 31, 2007 are as follows:

<TABLE>
<CAPTION>
                                           Refining Group    Retail Group  Wholesale Group   Total
                                         ------------------  ------------  ---------------  -------
                                                      Four
                                         Yorktown   Corners
                                         --------   -------
                                                              (In thousands)
<S>                                      <C>        <C>        <C>             <C>          <C>
Balance as of January 1, 2007..........  $ 21,028   $   125    $ 4,337         $ 24,942     $ 50,432
Goodwill associated with
  purchase of Empire Oil Co............                                           5,204        5,204
                                         --------   -------    -------         --------     --------
Balance as of March 31, 2007...........  $ 21,028   $   125    $ 4,337         $ 30,146     $ 55,636
                                         ========   =======    =======         ========     ========

 * See Note 10, "Acquisitions", for additional information regarding the Empire Oil Co.("Empire") purchase.
</TABLE>

     A summary of the intangible assets that are included in "Other
Assets" in the Condensed Consolidated Balance Sheets at March 31, 2007
and December 31, 2006 is presented below:

<TABLE>
<CAPTION>
                                                  March 31, 2007                       December 31, 2006
                                       ------------------------------------   ------------------------------------
                                         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.....................    $ 3,748       $ 2,976      $   772     $ 3,748       $ 2,933      $   815
  Contracts.........................         10            -            10       1,376         1,346           30
  Customer lists and non-compete
    agreements......................      3,364           168        3,196           -             -            -
  Licenses and permits..............*     1,010           566          444       1,096           625          471
                                        -------       -------      -------     -------       -------      -------
                                          8,132         3,710        4,422       6,220         4,904        1,316
                                        -------       -------      -------     -------       -------      -------
Unamortized intangible assets:
  Liquor licenses...................      9,614            -         9,614       9,614             -        9,614
                                        -------       -------      -------     -------       -------      -------
Total intangible assets.............    $17,746       $ 3,710      $14,036     $15,834       $ 4,904      $10,930
                                        =======       =======      =======     =======       =======      =======

</TABLE>

                                  9


<PAGE>
     Intangible asset amortization expense for the three months ended
March 31, 2007 and March 31, 2006 was approximately $258,800 and
$102,000, respectively. Estimated amortization expense for the rest of
this fiscal year and the next five fiscal years is as follows:

             2007 Remainder....................     $674,000
             2008..............................     $915,000
             2009..............................     $874,000
             2010..............................     $758,000
             2011..............................     $715,000
             2012..............................     $ 42,000

NOTE 4 - 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 $377,000 as of March 31, 2007 and are
included in "Other Assets" on our Condensed Consolidated Balance Sheets.
These assets are set aside to fund costs associated with the closure of
certain solid waste management facilities.

     In March 2005, 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



                                  10


<PAGE>
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:

     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, 2007
and the year ended December 31, 2006.

<TABLE>
<CAPTION>
                                          March 31,    December 31,
                                            2007           2006
                                        ------------   ------------
                                               (In thousands)
<S>                                        <C>            <C>
Liability beginning of year...........     $2,720         $2,625
Liabilities incurred..................         27            200
Liabilities settled...................         -            (133)
Accretion expense.....................         58             28
                                           ------         ------
Liability end of period...............     $2,805         $2,720
                                           ======         ======
</TABLE>

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

NOTE 5 - LONG-TERM DEBT:

     Our long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                         March 31,    December 31,
                                                           2007           2006
                                                       ------------   ------------
                                                             (In thousands)
<S>                                                     <C>             <C>
11% senior subordinated notes, due 2012, net of
  unamortized discount of $2,466 and $2,554,
  interest payable semi-annually...................     $127,535        $127,447
8% senior subordinated notes, due 2014, net of
  unamortized discount of $2,009 and $2,060,
  interest payable semi-annually...................      147,991         147,940
Senior secured revolving credit facility, due
  2010, floating interest rate, principal and
  interest payable monthly.........................       55,000          50,000
                                                        --------        --------
  Total                                                 $330,526        $325,387
                                                        ========        ========
</TABLE>
                                  11


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

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

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

     In addition, subject to certain conditions, we are obligated to
offer to repurchase a portion of the notes at a price equal to 100% of
the principal amount thereof, plus accrued and unpaid interest, if any,
to the date of repurchase, with the net cash proceeds of certain sales or
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.
As discussed in Note 1, "Organization, Basis of Presentation, and Current
Pronouncements", we have entered into a merger Agreement with Western. We
believe that the closing of the transaction contemplated by the Agreement
will constitute a change in control under the indentures. In addition,
pursuant to the Agreement, Western may require us to tender for the
notes. Western has, however, informed us that they do not intend to
request that we commence a cash tender offer for these notes, but that
they intend to call the notes for redemption pursuant to their terms,
including the payment of applicable premiums, promptly after the
effective time of the merger. The amount to be paid if the notes are
called will exceed the amount required to be offered in connection with
the change of control offer to repurchase.

     At March 31, 2007, retained earnings available for dividends under
the most restrictive terms of the indentures were approximately
$123,449,000. We are, however, prohibited by the terms of the Agreement
with Western from paying dividends without the consent of Western.

     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



                                  12


<PAGE>
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, 2007, this rate was
approximately 6.95% 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, 2007, there were $55,000,000 in direct borrowings
outstanding under the Credit Facility. At March 31, 2007, there also were
$4,679,000 of irrevocable letters of credit outstanding, primarily to
crude oil suppliers, insurance companies, and regulatory agencies. At
December 31, 2006, there were $50,000,000 in direct borrowings and
$27,832,000 of irrevocable letters of credit outstanding, primarily to
crude oil suppliers, insurance companies, and regulatory agencies.

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

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

     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;



                                  13


<PAGE>
     - 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. We do not anticipate that any of the terms of the
Credit Facility will prevent us from completing the transaction with
Western.

NOTE 6 - 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,
                                                    ---------------------
                                                       2007        2006
                                                    ---------   ---------
<S>                                                 <C>         <C>
Service cost...................................     $ 391,000   $ 376,000
Interest cost..................................       207,000     173,000
Expected return on plan assets.................      (192,000)   (114,000)
                                                    ---------   ---------
Net periodic benefit cost......................     $ 406,000   $ 435,000
                                                    =========   =========
</TABLE>

<TABLE>
<CAPTION>
                                                          Yorktown
                                                    Retiree Medical Plan
                                                    ---------------------
                                                     Three Months Ended
                                                           March 31,
                                                    ---------------------
                                                       2007        2006
                                                    ---------   ---------
<S>                                                 <C>         <C>
Service cost...................................     $  80,000   $  79,000
Interest cost..................................        84,000      75,000
Amortization of net loss.......................        17,000      25,000
                                                    ---------   ---------
Net periodic benefit cost......................     $ 181,000   $ 179,000
                                                    =========   =========
</TABLE>
                                  14


<PAGE>
     In September 2006, FASB issued SFAS 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans". We adopted the
provisions of SFAS 158 in 2006. In the first quarter of 2007, we
reclassed approximately $17,000 of net loss amortization ($11,000 net-of-
tax) from accumulated other comprehensive income to net periodic benefit
cost.

NOTE 7 - EARNINGS PER SHARE:

     The following table sets forth the computation of basic and diluted
earnings per share:

<TABLE>
<CAPTION>
                                                      Three Months Ended
                                                           March 31,
                                                    ----------------------
                                                       2007        2006
                                                    ----------  ----------
<S>                                                 <C>         <C>
Numerator                                               (In thousands)

Net earnings/(loss)..............................   $    7,236  $  (12,350)
                                                    ==========  ==========
</TABLE>

<TABLE>
<CAPTION>
                                                      Three Months Ended
                                                           March 31,
                                                    ----------------------
                                                       2007        2006
                                                    ----------  ----------
<S>                                                 <C>         <C>
Denominator

Basic - weighted average shares outstanding......   14,608,832  14,582,228
Effect of dilutive stock options.................       74,766           -*
Effect of dilutive restricted stock grants.......        7,982           -*
                                                    ----------  ----------
Diluted - weighted average shares outstanding....   14,691,580  14,582,228
                                                    ==========  ==========

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

<TABLE>
<CAPTION>
                                                      Three Months Ended
                                                           March 31,
                                                    ----------------------
                                                       2007        2006
                                                    ----------  ----------
<S>                                                 <C>         <C>
Basic earnings/(loss) per share
Net earnings/(loss)..............................   $     0.50  $    (0.85)
                                                    ==========  ==========
</TABLE>

                                  15


<PAGE>
<TABLE>
<CAPTION>
                                                      Three Months Ended
                                                           March 31,
                                                    ----------------------
                                                       2007        2006
                                                    ----------  ----------
<S>                                                 <C>         <C>
Diluted earnings/(loss) per share
Net earnings/(loss)..............................   $     0.49  $    (0.85)
                                                    ==========  ==========
</TABLE>

NOTE 8 - 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. 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, 2007,
our retail group operated 155 service stations with convenience stores or
kiosks.

WHOLESALE GROUP

     Our wholesale group consists of Phoenix Fuel Co., Inc. ("Phoenix
Fuel"), Dial Oil Co. ("Dial"), two bulk petroleum distribution plants
acquired from Amigo Petroleum Company ("Amigo") in August 2006, and



                                  16


<PAGE>
Empire, which was acquired on January 1, 2007. See Note 10,
"Acquisitions", for further discussion of the Empire acquisition. Our
wholesale group primarily distributes commercial wholesale petroleum
products. Our wholesale group includes several lubricant and bulk
petroleum distribution plants, unmanned fleet fueling operations, a bulk
lubricant terminal facility, and a fleet of finished product and
lubricant delivery trucks. In the second quarter of 2006, 12 service
stations acquired in the Dial transaction were transferred for reporting
purposes from the wholesale group to our retail group. Our wholesale
group purchases 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.

ACCOUNTING PRINCIPLES

     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, 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, 2007 and
2006, are presented below. The tables pertaining to the three months
ended March 31, 2007 include the results of Dial, which was acquired on
July 12, 2005; Amigo, the assets of which were acquired in August 2006;
and Empire, which was acquired on January 1, 2007. The tables pertaining
to the three months ended March 31, 2006 include the results of Dial, but
do not include the results of Amigo or Empire.

     We have also restated the tables pertaining to the three months
ended March 31, 2006 to conform to the current period presentation
because the results of 12 service stations that were part of the Dial
acquisition are currently reported in the results of operations
pertaining to our retail segment, but were previously reported in our
wholesale segment. These restatements had no effect on our results of
operations.






                                  17


<PAGE>
<TABLE>
<CAPTION>
                                                   As of and for the Three Months Ended March 31, 2007
                                            -------------------------------------------------------------------
                                            Refining     Retail   Wholesale           Reconciling
                                             Group        Group(1) Group(2)  Other       Items     Consolidated
                                            -------------------------------------------------------------------
                                                                     (In thousands)
<S>                                         <C>         <C>       <C>       <C>       <C>         <C>
Customer net revenues:
  Finished products:
    Four Corners operations..............   $  171,830
    Yorktown operations..................      385,197
                                            ----------
      Total..............................   $  557,027  $ 98,380  $281,799  $      -  $       -   $  937,206
  Merchandise and lubricants.............            -    39,247    33,695         -          -       72,942
  Other..................................        3,079     6,375       397        71          -        9,922
                                            ----------  --------  --------  --------  ---------   ----------
      Total..............................      560,106   144,002   315,891        71          -    1,020,070
                                            ----------  --------  --------  --------  ---------   ----------
Inter-segment net revenues:
  Finished products......................      113,002     7,337    34,771         -   (155,110)(3)        -
  Merchandise and lubricants.............            -         -        44         -        (44)(3)        -
  Other..................................        5,007         -       421         -     (5,428)(3)        -
                                            ----------  --------  --------  --------  ---------   ----------
      Total..............................      118,009     7,337    35,236         -   (160,582)           -
                                            ----------  --------  --------  --------  ---------   ----------
Total net revenues.......................   $  678,115  $151,339  $351,127  $     71  $(160,582)  $1,020,070
                                            ==========  ========  ========  ========  =========   ==========
Operating income/(loss):
  Four Corners operations................   $   19,800
  Yorktown operations....................          253
                                            ----------
      Total operating (loss)/income
        before corporate allocation......   $   20,053  $    889  $  4,573  $ (8,657) $     (15)  $   16,843
Corporate allocation.....................       (3,830)   (2,630)   (1,119)    7,579          -            -
                                            ----------  --------  --------  --------  ---------   ----------
  Operating income/(loss)................   $   16,223  $ (1,741) $  3,454  $ (1,078) $     (15)      16,843
                                            ==========  ========  ========  ========  =========
Interest expense.........................                                                             (5,701)
Amortization of financing costs..........                                                               (399)
Investment and other income..............                                                                361
                                                                                                  ----------
Earnings before income taxes.............                                                         $   11,104
                                                                                                  ==========
Depreciation and amortization:
  Four Corners operations................   $    4,291
  Yorktown operations....................        5,150
                                            ----------
      Total..............................   $    9,441  $  1,941  $  1,091  $    384  $      -    $   12,857
                                            ==========  ========  ========  ========  ========    ==========
Total assets.............................   $  848,052  $135,532  $188,634  $ 42,403  $      -    $1,214,621
Capital expenditures.....................   $   59,471  $  2,064  $    988  $    380  $      -    $   62,903

 (1) Includes the results of 12 convenience stores acquired in the Dial acquisition in July 2005 and 21
     operating convenience stores that were acquired from Amigo in August 2006.
 (2) Includes the results of wholesale operations of Dial that were acquired in July 2005, two bulk petroleum
     distribution plants that were acquired from Amigo in August 2006 and Empire, which was acquired in January
     2007.
 (3) These pertain to intersegment revenues that are eliminated.
</TABLE>

                                  18


<PAGE>
<TABLE>
<CAPTION>
                                             As of and for the Three Months Ended March 31, 2006 (Restated)
                                            -------------------------------------------------------------------
                                            Refining     Retail   Wholesale           Reconciling
                                             Group       Group      Group     Other      Items     Consolidated
                                            -------------------------------------------------------------------
                                                                     (In thousands)
<S>                                         <C>         <C>       <C>       <C>       <C>         <C>
Customer net revenues:
  Finished products:
    Four Corners operations..............   $  132,662
    Yorktown operations..................      325,544
                                            ----------
      Total..............................   $  458,206  $ 94,147  $240,070  $      -  $       -   $  792,423
  Merchandise and lubricants.............            -    35,531    18,345         -          -       53,876
  Other..................................       10,931     5,101       623        71          -       16,726
                                            ----------  --------  --------  --------  ---------   ----------
      Total..............................      469,137   134,779   259,038        71          -      863,025
                                            ----------  --------  --------  --------  ---------   ----------
Inter-segment net revenues:
  Finished products......................       92,075         -    23,640         -   (115,715)(1)        -
  Merchandise and lubricants.............            -         -        10         -        (10)(1)        -
  Other..................................        5,172         -       385         -     (5,557)(1)        -
                                            ----------  --------  --------  --------  ---------   ----------
      Total..............................       97,247         -    24,035         -   (121,282)           -
                                            ----------  --------  --------  --------  ---------   ----------
Total net revenues.......................   $  566,384  $134,779  $283,073  $     71  $(121,282)  $  863,025
                                            ==========  ========  ========  ========  =========   ==========
Operating income/(loss):
  Four Corners operations................   $   11,233
  Yorktown operations(2).................      (30,805)
                                            ----------
      Total operating (loss)/income
        before corporate allocation......   $  (19,572) $  1,711  $  4,175  $ (6,102) $   3,493(3)$  (16,295)
Corporate allocation.....................       (2,448)   (2,031)     (883)    5,362          -            -
                                            ----------  --------  --------  --------  ---------   ----------
  Operating income/(loss)................   $  (22,020) $   (320) $  3,292  $   (740) $   3,493      (16,295)
                                            ==========  ========  ========  ========  =========
Interest expense.........................                                                             (4,682)
Amortization of financing costs..........                                                               (399)
Investment and other income..............                                                              1,602
                                                                                                  ----------
Earnings before income taxes.............                                                         $  (19,774)
                                                                                                  ==========
Depreciation and amortization:
  Four Corners operations................   $    3,990
  Yorktown operations....................        2,510
                                            ----------
      Total..............................   $    6,500  $  2,075  $    763  $    229  $      -    $    9,567
                                            ==========  ========  ========  ========  ========    ==========
Total assets.............................   $  628,028  $100,089  $155,797  $105,867  $      -    $  989,781
Capital expenditures.....................   $   57,574  $    814  $  1,204  $    105  $      -    $   59,697

(1) These pertain to intersegment revenues that are eliminated.
(2) Excludes $2,853 of gain from insurance settlement due to the 2005 fire at the Yorktown refinery.
(3) Includes $2,853 of gain from insurance settlement due to the 2005 fire at the Yorktown refinery.
</TABLE>

                                  19


<PAGE>
NOTE 9 - COMMITMENTS AND CONTINGENCIES:

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

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

     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.

     Under circumstances in which environmental assessments and/or
remedial efforts are anticipated and relate to past events, we accrue for
the liability if associated costs are probable and can be reasonably



                                  20


<PAGE>
estimated. We record liabilities for litigation matters when it is
probable that the outcome of litigation will be adverse and damages 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, 2007 and December 31, 2006, we had environmental
liability accruals of approximately $3,808,000 and $3,991,000,
respectively, which are summarized below, and litigation accruals in the
aggregate of approximately $154,000 and $185,000, 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.

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

                                           December 31,   Increase               March 31,
                                               2006      (Decrease)   Payments     2007
                                           ------------  ----------   --------  ----------
<S>                                          <C>           <C>          <C>       <C>
Yorktown Refinery........................... $ 2,755       $   35       $ (294)   $ 2,496
Farmington Refinery.........................     570            -            -        570
Bloomfield Refinery.........................     229            -            -        229
Bloomfield Tank Farm (Old Terminal).........      30            -           (5)        25
Other Projects..............................     407          106          (25)       488
                                             -------       ------       ------    -------
   Totals..................................  $ 3,991       $  141       $ (324)   $ 3,808
                                             =======       ======       ======    =======
</TABLE>

                                  21


<PAGE>
     Approximately $3,320,000 of our environmental accrual is for the
following projects discussed below:

     - $2,496,000 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; and

     - $25,000 for remediation of hydrocarbon contamination on and
       adjacent to the 5.5 acres that we own in Bloomfield, New Mexico.

     The remaining $488,000 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.

     A detailed discussion of these environmental accruals is contained
in Note 17 "Commitments and Contingencies" in our Consolidated Financial
Statements included in our Form 10-K for the year ended December 31, 2006
(the "2006 Form 10-K"). The most significant of these matters as well as
recent developments related to these environmental accruals are discussed
below.

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.

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"). In August 2006, we agreed to the terms of the
final administrative consent order pursuant to which we will implement a
cleanup plan for the refinery. As required by the order, we are in the
process of finalizing the details of the cleanup plan with EPA.





                                  22


<PAGE>
     Our most current estimate of expenditures associated with the EPA
order is between approximately $30,000,000 ($22,500,000 of which we
believe is subject to reimbursement by BP) and $40,000,000 ($32,500,000
of which we believe is subject to reimbursement by BP). We anticipate
that these expenditures will be incurred over a period of approximately
35 years from August 2006. We believe that between approximately
$16,000,000 and $20,000,000 of this amount will be incurred over
approximately an initial four-year period, with the remainder spread
equally over the remaining years thereafter. These estimates assume that
EPA will agree with the design and specifications of our cleanup plan.
These estimates also could change as a result of factors such as changes
in costs of labor and materials. We currently have $2,496,000 recorded as
an environmental liability for this project, which reflects our belief
that BP is responsible for reimbursing us for expenditures on this
project that exceed this amount and also reflects expenditures previously
incurred in connection with this matter. BP's total liability for
reimbursement under the refinery purchase agreement, including liability
for environmental claims, is limited to $35,000,000.

     As part of the consent order cleanup plan, a portion of the
facility's underground sewer system will be cleaned, inspected, and
repaired as needed. 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, as well as sewer system inspection and repair,
will be completed approximately four to five years after EPA approves our
clean-up plan and authorizes its implementation.

OTHER MATTERS

     A detailed discussion of other matters affecting us for which we
have not recorded accruals also is contained in Note 17 "Commitments and
Contingencies", in our Consolidated Financial Statements included in our
2006 Form 10-K. The most significant of these matters as well as recent
developments related to these matters are discussed below.

FOUR CORNERS REFINERIES - SETTLEMENT AGREEMENTS

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

     The estimated compliance costs contained in our 2006 Form 10-K were
the best estimates available at the time of the July 2005 settlement. The
costs that we actually incur, however, may be substantially higher than
the estimates due to, among other things, changes in costs of labor,
materials, and chemical additives, and changes in cost efficiencies of
technology. In light of these factors, we believe more accurate estimates
of compliance costs will not be available until we are closer in time to
implementation of the required projects and have further considered all



                                  23


<PAGE>
operational options. 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.

BLOOMFIELD REFINERY - NEW MEXICO ENVIRONMENT DEPARTMENT ('NMED") DRAFT
ORDER

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

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

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

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

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

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

     The draft order recognizes that prior work we have satisfactorily
completed may fulfill some of the foregoing requirements. In that regard,
we have already put in place some remediation measures with the approval
of NMED or new Mexico Oil Conservation Division ("OCD").

     We submitted written comments on the draft order during the public
comment period and have received NMED's written response. We anticipate
further communications with NMED prior to issuance of the final order, which
may occur in the second quarter of 2007. We currently do not know the nature
and extent of any cleanup actions that may be required under the final order
and, accordingly, have not recorded a liability for this matter.

BLOOMFIELD REFINERY - EPA COMPLIANCE ORDER

     In October, 2005, we received an Administrative Compliance Order from
EPA in connection with a compliance evaluation inspection at the
Bloomfield refinery in 2000 and a follow-up inspection in early 2001. We
send waste water from the refinery's process units through an oil-water
separator, a series of aeration ponds that continue the treatment and
processing of oily water, and a series of evaporation ponds, before the




                                  24


<PAGE>
water is injected into a permitted deep well. EPA alleged that benzene
levels in the aeration ponds exceed permissible RCRA levels. EPA also
alleged that we failed to make a RCRA hazardous waste determination in
connection with waste water going into the aeration ponds. In May 2006, we
reached a settlement with EPA in the form of a consent agreement and paid
a civil penalty of $75,000. The settlement requires that we make equipment
modifications to reduce benzene levels in the waste water coming from the
refinery's process units. We currently estimate that we will incur capital
expenditures of between approximately $3,200,000 and $3,500,000 to comply
with the settlement, with the project to be completed by July 2007. Since
the settlement does not require us to undertake any cleanup activities, we
have not recorded an environmental liability for this matter.

MTBE LITIGATION

     Lawsuits have been filed in numerous states alleging that MTBE, a
blendstock used by many refiners in producing specially formulated
gasoline, has contaminated water supplies. MTBE contamination primarily
results from leaking underground or aboveground storage tanks. The suits
allege MTBE contamination of water supplies owned and operated by the
plaintiffs, who are generally water providers or governmental entities. The
plaintiffs assert that numerous refiners, distributors, or sellers of MTBE
and/or gasoline containing MTBE are responsible for the contamination. The
plaintiffs also claim that the defendants are jointly and severally liable
for compensatory and punitive damages, costs, and interest. Joint and
several liability means that each defendant may be liable for all of the
damages even though that party was responsible for only a small part of the
damages. We are a defendant in approximately 40 of these MTBE lawsuits
pending in Virginia, Connecticut, Massachusetts, New Hampshire, New York,
New Jersey, Pennsylvania, and New Mexico. Due to our historical operations
in New Mexico, including retail sites, we potentially have greater risk in
connection with the New Mexico litigation than in the litigation in the
Eastern states where we have only operated since 2002 and have no retail
operations. We intend to vigorously defend these lawsuits. Because
potentially applicable factual and legal issues have not been resolved, we
have yet to determine if a liability is probable and we cannot reasonably
estimate the amount of any loss associated with these matters. Accordingly,
we have not recorded a liability for these lawsuits.

CINIZA REFINERY FIRE INCIDENT (OCTOBER 2006)

     On October 5, 2006, a pump failure in the alkylation unit at our
Ciniza refinery resulted in a fire at the refinery. The fire caused
damage to the alkylation unit and an associated unit. The alkylation unit
produces high octane blending stock for gasoline. Repairs to the affected
units cost approximately $5,800,000 and the unit was restarted in mid-
December of 2006. We have property insurance coverage with a $1,000,000
deductible that should cover a significant portion of the costs of
repairing the unit and we are in the process of finalizing our property
insurance claim. We do not anticipate making a claim under our business
interruption insurance. As of March 31, 2007, we wrote-off approximately
$392,000 of property, plant and equipment to accounts receivable in
connection with the fire.


                                  25


<PAGE>
CINIZA REFINERY FIRE INCIDENT (DECEMBER 2006)

     On December 26, 2006, a fire occurred in a process heater in the
distillate hydrotreater ("DHT") unit. The DHT unit is used to manufacture
ultra low sulfur diesel fuel. Instrumentation and electrical cabling
associated with the DHT unit and other process units also were damaged.
All of the process units in the refinery were shutdown for safety
reasons. Repairs have been made that have enabled us to restart all of
the units at the refinery except for the portion of the DHT unit damaged
in the fire. We currently expect that the rest of the DHT unit will be
returned to service by the end of May.

     We currently expect that repairs to, and/or replacement of, the
units, instrumentation, and cabling damaged by the fire will cost
approximately $6,200,000, most of which has already been spent. We do not
anticipate receiving any insurance proceeds related to these repairs as
the cost of the repairs has not exceeded the associated $10,000,000
deductible of our current property insurance coverage. In addition, we do
not anticipate making a claim under our business interruption insurance.

YORKTOWN REFINERY FIRE INCIDENT (2005)

     As previously discussed in our 2006 Form 10-K, a fire occurred at
our Yorktown refinery on November 25, 2005. Repairs related to this fire
were completed in April 2006. Our property insurance covered a
significant portion of the costs of repairing the Yorktown refinery and
our business interruption insurance reimbursed us for a portion of the
financial impact of the fire.

YORKTOWN REFINERY FIRE INCIDENT (2006)

     On September 30, 2006, a fire occurred at our Yorktown refinery in
the processing unit required to produce ultra low sulfur diesel fuel.
Repairs to the unit cost approximately $11,000,000 and were completed in
February 2007.

     We have property insurance coverage with a $1,000,000 deductible
that should cover a significant portion of the costs of repairing the
ultra low sulfur diesel unit. We also have business interruption
insurance coverage that should cover a significant portion of the
financial impact of the fire that occurred after the policy's 45-day
waiting period. We have filed initial claims with our insurance carriers
and expect to file additional claims in the second quarter. To date, we
have received approximately $1,500,000 of insurance proceeds related to
this fire. As of March 31, 2007, we wrote-off approximately $5,000,000 of
property, plant and equipment to accounts receivable in connection with
the fire.

NEW MEXICO "HOT FUEL" LITIGATION

     In March 2007, a class action lawsuit was filed in New Mexico naming
numerous retail suppliers of motor fuel as defendants, including us.



                                  26


<PAGE>
Among other things, the lawsuit alleges that the defendants are
conspiring and engaging in deceptive practices by selling motor fuel to
consumers without using temperature-correction devices at the pumps.
These devices measure the volume of fuel being dispensed by correcting
for fluctuations in temperature. Similar class action lawsuits have been
filed in several other states. We intend to vigorously defend this
lawsuit. Because potentially applicable factual and legal issues have not
been resolved, we have yet to determine if a liability is probable and we
cannot reasonably estimate the amount of any loss associated with these
matters. Accordingly, we have not recorded a liability for this lawsuit.

NOTE 10 - ACQUISITIONS:

     In January 2007, we acquired 100% of the outstanding common stock of
Empire for approximately $12,335,000. We funded this acquisition with
cash on hand. Empire is a wholesale distributor of gasoline, diesel, and
lubricants in Southern California. Empire's assets include a bulk
petroleum distribution plant, cardlock fueling locations, and a fleet of
truck transports. The acquisition is accounted for using the purchase
method of accounting whereby the total purchase price is preliminarily
allocated to tangible and intangible assets acquired based on the fair
market values on the date of acquisition. We are in the process of
finalizing the allocation of the purchase price to the individual assets
acquired and liabilities assumed. The completion of the purchase price
allocation will result in adjustments to the carrying value of the
recorded assets and liabilities and the determination of any residual
amount that will be allocated to goodwill. The pro forma effect of the
acquisition on Giant's results of operations is immaterial.

NOTE 11 - INCOME TAXES:

     On January 1, 2007, we adopted the provisions of Financial Standards
Accounting Board Interpretation No. 48, "Accounting for Uncertainty in
Income Taxes -  an interpretation of SFAS 109 ("FIN 48"). As a result of
the implementation of FIN 48, we recognized no material adjustment in the
liability for unrecognized income tax benefits. As of the adoption date,
we had $4,005,000 of unrecognized tax benefits, of which $458,000 would
affect our tax rate if recognized. Certain amounts have been reclassified
in our Condensed Consolidated Balance Sheets in order to comply with the
provisions of FIN 48.

     As of the adoption date, we had accrued penalties and interest
related to the unrecognized tax benefits of $243,000. We recognize
interest and penalties related to uncertain tax positions in interest
expense. As of March 31, 2007, we have approximately $269,000 of accrued
interest and penalties related to uncertain tax positions.

     The tax years 2003-2006 remain open to examination by the major
taxing jurisdictions to which we are subject.






                                  27


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

COMPANY OVERVIEW

     We refine and sell petroleum products and operate service stations
and convenience stores. Our operations are divided into three strategic
business units: the refining group, the retail group, and the wholesale
group. The refining group operates two refineries in the Four Corners
area of New Mexico and one refinery in Yorktown, Virginia. The refining
group sells its products to wholesale distributors and retail chains. Our
retail group operated 155 service stations as of March 31, 2007. This
includes 12 service stations acquired in the Dial Oil Co. ("Dial")
transaction on July 12, 2005, whose results of operations had previously
been included in the wholesale group from the date of the acquisition,
and 21 operating convenience stores acquired from Amigo Petroleum Company
("Amigo") in August 2006. Our retail group sells its petroleum products
and merchandise to consumers in New Mexico, Arizona and Southern
Colorado. Our wholesale group consists of Phoenix Fuel Co., Inc.
("Phoenix Fuel"), Dial, two bulk petroleum distribution plants acquired
from Amigo Petroleum Company ("Amigo") in August 2006, and Empire Oil Co.
("Empire"), which was acquired in January 2007. Our wholesale group
distributes commercial wholesale petroleum products primarily in Arizona,
New Mexico and Southern California.

     In order to maintain and improve our financial performance, we are
focused on several critical and challenging objectives. Subject to the
provisions of the agreement with Western Refining, Inc. ("Western")
discussed below, 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:

     - improving the operating reliability of our refineries;

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

     - controlling 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.


                                  28


<PAGE>
     On August 26, 2006, we entered into an Agreement and Plan of Merger
(the "Plan of Merger") with Western and New Acquisition Corporation
("Merger Sub"). On November 12, 2006, we entered into an Amendment No. 1
to Agreement and Plan of Merger (the "Amendment") with Western and Merger
Sub. The Plan of Merger and Amendment are collectively referred to as the
"Agreement". If the transaction closes, Western will acquire all of our
outstanding shares of common stock for $77.00 per share and we will be
merged with Merger Sub and become a wholly-owned subsidiary of Western.
The transaction has been approved by our board of directors and the board
of directors of Western. The closing of the transaction is subject to
various conditions, including the removal of a temporary restraining
order obtained by the Federal Trade Commission (the "FTC") on April 13,
2007, which prohibits the parties from closing the transaction while the
FTC seeks to obtain a preliminary injunction. A hearing on the FTC's
request for a preliminary injunction began on May 7, 2007. The
transaction is not subject to any financing conditions. Our stockholders
approved the transaction on February 27, 2007.

     On November 22, 2006, Timothy Bisset filed a class action complaint
against us, our directors and Western in connection with our merger.
Among other things, Mr. Bisset alleges that he and other public
stockholders of our common stock are entitled to enjoin the proposed
amended transaction or, alternatively, to recover damages in the event
the transaction is completed.

     For a further discussion of these matters, see the discussion in our
Risk Factors section in Item 1A regarding the possibility that our merger
may not occur or could be set aside.

     Assuming that the FTC does not obtain a preliminary injunction, we
expect to complete our merger with Western as soon as reasonably possible
after the ruling on the preliminary injunction is received, which we
anticipate will be in the second quarter. We cannot specify when, or
assure you that, we and Western will satisfy or waive all conditions to
the merger, or that either party may not decide to exercise their
termination rights under the Agreement. Further, there can be no
assurance that the FTC, state antitrust authorities, or Mr. Bisset, will
not seek or obtain injunctive relief to prevent the merger from taking
place.

     Pursuant to the Agreement, we are required to conduct our business
in the ordinary course, subject to certain covenants. Among other things,
we agreed to take reasonable steps to preserve intact our business
organization and goodwill, certain limitations on making capital
expenditures, and certain limitations on acquiring new assets and
disposing of existing assets. As a result, our pursuit of the above
objectives is subject to compliance with the terms of the Agreement.

CRITICAL ACCOUNTING POLICIES

     A critical step in the preparation of our financial statements is
the selection and application of accounting principles, policies, and



                                  29


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

     Our significant accounting policies, including revenue recognition,
inventory valuation, and maintenance costs, are described in Note 1 to
our Consolidated Financial Statements included in our Annual Report on
Form 10-K for the year ended December 31, 2006. 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 2007.

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, 2006.

     Below is operating data for our operations:















                                  30


<PAGE>
<TABLE>
<CAPTION>
                                                      Three Months Ended
                                                           March 31,
                                                    -----------------------
                                                       2007         2006
                                                    ----------   ----------
<S>                                                  <C>          <C>
Refining Group Operating Data:
  Four Corners Operations:
    Crude Oil/NGL Throughput (BPD)..............       27,258       29,122
    Refinery Sourced Sales Barrels (BPD)........       27,791       28,471
    Average Crude Oil Costs ($/Bbl).............    $   57.74     $  62.30
    Refining Margins ($/Bbl)....................    $   16.03     $  10.84

  Yorktown Operations: (1)
    Crude Oil/NGL Throughput (BPD)..............       60,934       37,589
    Refinery Sourced Sales Barrels (BPD)........       59,343       33,466
    Average Crude Oil Costs ($/Bbl).............    $   56.07     $  59.02
    Refining Margins ($/Bbl)....................    $    6.10     $  (3.50)

Retail Group Operating Data:(2)(3)
  Fuel Gallons Sold (000's).....................      52,801        46,261
  Fuel Margins ($/gal)..........................    $   0.12      $   0.15
  Merchandise Sales ($ in 000's)................    $ 39,247      $ 35,531
  Merchandise Margins...........................          28%           27%
  Operating Retail Outlets at Period End........         155           134

Wholesale Group Operating Data:(4)
    Fuel Gallons Sold (000's)...................     161,899       140,748
    Fuel Margins ($/gal)........................    $   0.07      $   0.07
    Lubricant Sales ($ in 000's)................    $ 32,093      $ 17,644
    Lubricant Margins...........................          11%           13%

(1) Yorktown margins for quarter ended March 31, 2006 were negative primarily
    as a result of the fire that occurred in November 2005.
(2) Includes statistics for 12 retail stores purchased from Dial
     in July 2005.
(3) Includes statistics for 21 convenience stores purchased from Amigo in August
    2006.
(4) Includes statistics for wholesale operations of Dial and Amigo and the
    operations of Empire, which was purchased in January 2007.
</TABLE>













                                  31


<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,
                                                          -----------------------
                                                             2007         2006
                                                          ----------   ----------
<S>                                                       <C>          <C>
AVERAGE PER BARREL
------------------
Four Corners Operation
  Net sales...........................................    $    77.15   $    76.39
  Less cost of products...............................         61.12        65.55
                                                          ----------   ----------
  Refining margin.....................................    $    16.03   $    10.84
                                                          ==========   ==========
Yorktown Operation*
  Net sales...........................................    $    63.29   $    62.11
  Less cost of products...............................         57.19        65.61
                                                          ----------   ----------
  Refining margin.....................................    $     6.10   $    (3.50)
                                                          ==========   ==========
Consolidated
  Net sales...........................................    $    67.71   $    68.68
  Less cost of products...............................         58.44        65.59
                                                          ----------   ----------
  Refining margin.....................................    $     9.27   $     3.09
                                                          ==========   ==========

*Margins for the Yorktown refinery for the quarter ended March 31, 2006 were
 negative primarily as a result of the fire that occurred in November 2005.
</TABLE>










                                  32


<PAGE>
<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                                 March 31,
                                                          -----------------------
                                                             2007         2006
                                                          ----------   ----------
<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..........  $    77.15   $    76.39
  Times refinery sourced sales barrels per day..........      27,791       28,741
  Times number of days in period........................          90           90
                                                          ----------   ----------
  Refined product sales from produced products
    sold* (000's).......................................  $  192,967   $  195,741
                                                          ==========   ==========

Yorktown Operations
  Average sales price per produced barrel sold..........  $    63.29   $    62.11
  Times refinery sourced sales barrels per day..........      59,343       33,466
  Times number of days in period........................          90           90
                                                          ----------   ----------
  Refined product sales from produced products
    sold* (000's).......................................  $  338,024   $  187,072
                                                          ==========   ==========

Consolidated (000's)
  Sum of refined product sales from produced
    products sold*......................................  $  530,991   $  382,813
  Purchased product, transportation and other revenues..     147,124      183,571
                                                          ----------   ----------
  Net revenues..........................................  $  678,115   $  566,384
                                                          ==========   ==========

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

















                                  33


<PAGE>
<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                                 March 31,
                                                          -----------------------
                                                             2007         2006
                                                          ----------   ----------
<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...    $    61.12   $    65.55
  Times refinery sourced sales barrels per day........        27,791       28,471
  Times number of days in period......................            90           90
                                                          ----------   ----------
  Cost of products for produced products
    sold (000's)......................................    $  152,873   $  167,965
                                                          ==========   ==========

Yorktown Operations
  Average cost of products per produced barrel sold...    $    57.19   $    65.61
  Times refinery sourced sales barrels per day........        59,343       33,466
  Times number of days in period......................            90           90
                                                          ----------   ----------
  Cost of products for produced products
    sold (000's)......................................    $  305,444   $  197,613
                                                          ==========   ==========

Consolidated (000's)
  Sum of refined cost of produced products sold.......    $  458,317   $  365,578
  Purchased product, transportation and other
    cost of products sold.............................       139,156      175,210
                                                          ----------   ----------
  Total cost of products sold (excluding
    depreciation and amortization)....................    $  597,473   $  540,788
                                                          ==========   ==========
</TABLE>















                                  34


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

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

                                                            Three Months Ended
                                                                 March 31,
                                                          -----------------------
                                                             2007         2006
                                                          ----------   ----------
<S>                                                       <C>          <C>
(in 000's except fuel margin per gallon)

Fuel sales........................................        $  125,466   $  109,631
Less cost of fuel sold............................           119,035      102,913
                                                          ----------   ----------
Fuel margin.......................................             6,431        6,718
Number of gallons sold............................            52,801       46,261
Fuel margin per gallon............................        $     0.12   $     0.15

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

Fuel sales........................................        $  125,466   $  109,631
Excise taxes included in sales....................           (19,749)     (15,484)
                                                          ----------   ----------
Fuel sales, net of excise taxes...................           105,717       94,147
Merchandise sales.................................            39,247       35,531
Other sales.......................................             6,375        5,101
                                                          ----------   ----------
Net revenues......................................        $  151,339   $  134,779
                                                          ==========   ==========
Reconciliation of fuel cost of products sold to
total cost of products sold (excluding
depreciation and amortization) (000's)

Fuel cost of products sold........................        $  119,035   $  102,913
Excise taxes included in cost of products sold....           (19,749)     (15,484)
                                                          ----------   ----------
Fuel cost of products sold, net of excise taxes...            99,286       87,429
Merchandise cost of products sold.................            28,419       25,800
Other cost of products sold.......................             5,035        4,015
                                                          ----------   ----------
Total cost of products sold (excluding
  depreciation and amortization)..................        $  132,740   $  117,244
                                                          ==========   ==========

(1) Includes 12 retail stores acquired in the Dial transaction on July 12,
    2005.
(2) Includes 21 operating stores acquired from Amigo in August 2006.
</TABLE>


                                  35


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

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,
                                                          -----------------------
                                                             2007         2006
                                                          ----------   ----------
<S>                                                       <C>          <C>
(in 000's except fuel margin per gallon)

Fuel sales........................................        $  360,701   $  309,141
Less cost of fuel sold............................           348,845      299,502
                                                          ----------   ----------
Fuel margin.......................................        $   11,856   $    9,639
Number of gallons sold............................           161,899      140,748
Fuel margin per gallon............................        $     0.07   $     0.07

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

Fuel sales........................................        $  360,701   $  309,141
Excise taxes included in sales....................           (44,131)     (45,431)
                                                          ----------   ----------
Fuel sales, net of excise taxes...................           316,570      263,710
Lubricant sales...................................            32,093       17,644
Other sales.......................................             2,464        1,719
                                                          ----------   ----------
Net revenues......................................        $  351,127   $  283,073
                                                          ==========   ==========
Reconciliation of fuel cost of products sold to
total cost of products sold (excluding
depreciation and amortization) (000's)

Fuel cost of products sold........................        $  348,845   $  299,502
Excise taxes included in cost of products sold....           (44,131)     (45,431)
                                                          ----------   ----------
Fuel cost of products sold, net of excise taxes...           304,714      254,071
Lubricant cost of products sold...................            28,485       15,348
Other cost of products sold.......................             1,195          414
                                                          ----------   ----------
Total cost of products sold (excluding
  depreciation and amortization)..................        $  334,394   $  269,833
                                                          ==========   ==========

(1) The information presented for the quarter ended March 31, 2007 includes the
    results of Empire, which was acquired in January 2007.
</TABLE>

                                  36


<PAGE>
<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                                 March 31,
                                                          -----------------------
                                                             2007         2006
                                                          ----------   ----------
<S>                                                       <C>          <C>
CONSOLIDATED
------------
Reconciliation to net revenues reported in
  Condensed Consolidated Statements of Operations
  (000's)

Net revenues - Refinery Group.....................        $  678,115   $  566,384
Net revenues - Retail Group.......................           151,339      134,779
Net revenues - Wholesale Group....................           351,127      283,073
Net revenues - Other..............................                71           71
Eliminations......................................          (160,582)    (121,282)
                                                          ----------   ----------
Total net revenues reported in Condensed
  Consolidated Statements of Operation............        $1,020,070   $  863,025
                                                          ==========   ==========
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).......        $  597,473   $  540,788
Cost of products sold - Retail Group
  (excluding depreciation and amortization).......           132,740      117,244
Cost of products sold - Wholesale Group
  (excluding depreciation and amortization).......           334,394      269,833
Eliminations......................................          (160,582)    (121,282)
Other.............................................             4,686        3,969
                                                          ----------   ----------
Total cost of products sold (excluding
  depreciation and amortization) reported in
  Condensed Consolidated Statements of Operations.        $  908,711   $  810,552
                                                          ==========   ==========
</TABLE>

     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



                                  37


<PAGE>
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, 2007 with the same period in 2006
was affected by, among others, the following factors:

     -  weaker net refining margins for our Yorktown refinery in 2006,
        due primarily to the following:

        -  the fire at our Yorktown refinery in the fourth quarter of
           2005, which resulted in:

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

           -  the need to sell feedstocks for the unit damaged in the
              2005 fire at a lower margin as compared to sales of
              finished products while the refinery was operating at less
              than full capacity.

     -  net refining margins for our Yorktown refinery in 2007 were
        positively impacted by favorable market conditions, but were
        negatively impacted in January and February by repairs at the
        refinery related to the fire at the refinery in September 2006;

     -  stronger net refining margins for our Four Corners refineries in
        2007, primarily due to favorable market conditions in certain of
        our market areas;

     -  receipt of $9,850,000 of insurance proceeds in the first quarter
        of 2006 and the resulting gain of $2,853,000 as a result of the
        2005 Yorktown fire discussed above; and

     -  lower fuel margins per gallon for our retail group for the three
        months ended March 31, 2007.

     EARNINGS BEFORE INCOME TAXES

     Our earnings before income taxes increased $30,878,000 for the three
months ended March 31, 2007, compared to the same period in 2006. As noted
above, this increase was primarily due to an operating loss we sustained
in our Yorktown refinery operations in 2006, partially offset by a gain
from insurance proceeds received related to the 2005 Yorktown fire.

     YORKTOWN REFINERY

     Our Yorktown refinery operated at an average throughput rate of
approximately 60,934 barrels per day in the first quarter of 2007
compared to 37,589 barrels per day in the first quarter of 2006.



                                  38


<PAGE>
     Refining margins for the first quarter of 2007 were $6.10 per barrel
and were $(3.50) per barrel for the first quarter of 2006. The lower
refining margins in the first quarter of 2006 were due primarily to the
fire in the fourth quarter of 2005 discussed above. Net refining margins
for our Yorktown refinery in 2007 were positively impacted by favorable
market conditions in 2007, but were negatively impacted in January and
February by repairs at the refinery related to the fire at the refinery
in September 2006.

     Revenues for our Yorktown refinery increased for the three months
ended March 31, 2007 primarily due to market conditions in 2007 and
reduced operations in 2006 as described above.

     Operating expenses for our Yorktown refinery increased for the three
months ended March 31, 2007 primarily due to higher costs for
maintenance, utilities, and chemicals and catalyst as a result of higher
throughput in the first quarter of 2007 as compared to the first quarter
of 2006.

     Depreciation and amortization expense for our Yorktown refinery
increased for the three months ended March 31, 2007 primarily due to
depreciation of additional assets that were put into service during the
first quarter of 2007.

     FOUR CORNERS REFINERIES

     Our Four Corners refineries operated at an average throughput rate
of approximately 27,258 barrels per day in the first quarter of 2007,
compared to 29,122 barrels per day in the first quarter of 2006.

     Refining margins for the first quarter of 2007 were $16.03 per
barrel and were $10.84 per barrel for the first quarter of 2006 primarily
due to favorable market conditions in certain of our market areas.

     Revenues for our Four Corners refineries increased for the three
months ended March 31, 2007 primarily due to market conditions.

     Operating expenses for our Four Corners refineries increased for the
three months ended March 31, 2007 primarily due to higher insurance
costs, and additional maintenance and outside services used in connection
with our operations.

     Depreciation and amortization expense for our Four Corners
refineries increased for the three months ended March 31, 2007,  as
compared to the same period in 2006 due to assets that were put into
service during the first quarter of 2007.

     RETAIL GROUP

     The operations of our retail group currently include 12 convenience
stores acquired in the Dial acquisition in July 2005, and 21 operating
convenience stores acquired from Amigo in August 2006. Since the Amigo
stores were acquired in the third quarter of 2006, the comparative
statistics for the three months ended March 31, 2006, do not include the
Amigo stores.

                                  39


<PAGE>
     Average fuel margins were $0.12 per gallon for the three months
ended March 31, 2007 as compared to $0.15 per gallon for the same period
in 2006. Our retail fuel margin per gallon decreased for the three months
ended March 31, 2007 due to less favorable market conditions.

     Fuel volumes sold for the three months ended March 31, 2007
increased as compared to the same period a year ago primarily due to the
addition of the Amigo stores and growth in our existing stores.

     Average merchandise margins were 28% for the three months ended
March 31, 2007 and 27% for the three months ended March 31, 2006.

     Revenues for our retail group increased for the three months ended
March 31, 2007, compared to the same period in 2006, primarily due to an
increase in fuel volumes sold, and the addition of the Amigo stores.

     Operating expenses increased for the three months ended March 31,
2007 as compared with the same period in 2006, primarily due to the
addition of the Amigo stores and higher bank charges as a result of
higher fuel volumes and prices.

     Depreciation and amortization expense decreased for the three months
ended March 31, 2007 as compared to the same period in 2006 due to
certain assets being fully depreciated in 2006.

     WHOLESALE GROUP

     Our wholesale group includes Phoenix Fuel, Dial's wholesale
business, two bulk petroleum plants that were acquired from Amigo, and
Empire that was acquired in January 2007. Since the Amigo plants were
acquired in the third quarter of 2006 and Empire was acquired in January
2007, the comparative statistics for the three months ended March 31,
2006 do not include the results of these acquisitions.

     Average gasoline and diesel fuel margins for our wholesale group
were $0.07 per gallon for the three months ended March 31, 2007 and March
31, 2006.

     Fuel volumes for the three months ended March 31, 2007 increased as
compared to the same period in 2006 primarily due to the addition of
Empire's and Amigo's business to our operations and favorable market
conditions.

     Revenues for our wholesale group increased for the three months
ended March 31, 2007 primarily due to higher price per gallon sold, the
addition of Empire's business and Amigo's assets to our operations, and
favorable market conditions.

     Operating expenses for our wholesale group increased for the three
months ended March 31, 2007 primarily due to higher transportation costs,
higher employee payroll and benefit costs, and the addition of Empire's
business and Amigo's assets to our operations.



                                  40


<PAGE>
     Depreciation and amortization expense for our wholesale group
increased for the three months ended March 31, 2007 primarily due to the
addition of Empire's and Amigo's business to our operations.

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

     For the three months ended March 31, 2007, selling, general and
administrative expenses increased by approximately $2,676,000 as compared
to the same period in 2006 due primarily to an increase in accruals for
management bonuses, additional cost of outside legal services and higher
benefit costs.

     INTEREST EXPENSE

     For the three months ended March 31, 2007, interest expense
increased approximately $1,019,000, as compared to the same period in
2006 primarily due to interest incurred on additional borrowings from our
revolving credit line. We capitalized approximately $2,082,000 and
$2,046,000 of interest as part of construction in progress for the three
months ended March 31, 2007 and March 31, 2006, respectively.

     INCOME TAXES

     The effective tax rates for the three months ended March 31 2007,
and 2006 were approximately 34.8% and 37.5%, respectively. The decrease
was primarily due to our use of tax credits generated in accordance with
the American Jobs Creation Act of 2004. Small refiners also are allowed
to claim a credit against income tax of five cents on each gallon of
ultra low sulfur diesel fuel they produce, up to a maximum of 25% of the
capital costs incurred to comply with the regulations. We are producing
ultra low sulfur diesel that qualifies for the credit and began
benefiting from this credit starting in 2006.

     OUTLOOK

     Refining margins at our Four Corners refineries and our Yorktown
refinery are currently higher than the same time last year. We continue
to believe that strong product demand coupled with favorable market
conditions support a positive second quarter outlook for the industry as
well as the remainder of 2007. Same store fuel volumes for our retail
group currently are above the prior year's levels, however, fuel margins
are lower. In addition, same store merchandise sales for our retail group
are above the prior year's level, while same store merchandise margins
have remained stable. The wholesale group currently is experiencing
increased volumes and stable margins 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.






                                  41


<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

     CAPITAL STRUCTURE

     At March 31, 2007, we had long-term debt of $330,526,000. At
December 31, 2006, we had long-term debt of $325,387,000. There was no
current portion of long-term debt outstanding at March 31, 2007 or at
December 31, 2006.

     The amounts at March 31, 2007 and March 31, 2006 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.

     -  $55,000,000 on our revolving credit facility.

     The amount at December 31, 2006 includes:

     -  $150,000,000 before discount, of 8% Senior Subordinated Notes due
        2014;

     -  $130,001,000 before discount, of 11% Senior Subordinated Notes
        due 2012; and

     -  $50,000,000 on our revolving credit facility.

     At March 31, 2007, 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, 2007 and December 31, 2006, our long-term debt was
40.2% of total capital, respectively. Our net debt (long-term debt less
cash and cash equivalents) to total net capitalization (long-term debt
less cash and cash equivalents plus total stockholders' equity)
percentage at March 31, 2007, was 39.4%. At December 31, 2006, this
percentage was 38.8%.

     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



                                  42


<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 or higher than
anticipated capital expenditures could have a negative impact on our
ability to borrow funds and to make expenditures and could have an
adverse impact on compliance with our debt covenants. In addition, we
believe that the closing of the transaction contemplated by the Agreement
with Western will constitute a change of control under the indentures,
which would require us to offer to repurchase the notes at 101% of the
principal amount outstanding, plus accrued interest. Furthermore,
pursuant to the Agreement with Western, Western may require us to tender
for the notes. Western has, however, informed us that they do not intend
to request that we commence a cash tender offer for these notes, but that
they intend to call the notes for redemption pursuant to their terms,
including the payment of applicable premiums, promptly after the
effective time of the merger. The amount to be paid if the notes are
called will exceed the amount required to be offered in connection with
the change of control offer to repurchase.

     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 increased by $94,095,000 for the three
months ended March 31, 2007 compared to the three months ended March 31,
2006. This increase primarily resulted from a increase in our net
earnings due to the 2005 Yorktown fire that adversely affected 2006
results and 2007 improvements in changes in our working capital items.

     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. As noted above, assuming
that the FTC does not obtain a preliminary injunction, the transaction
with Western is expected to close in the second quarter of 2007. We



                                  43


<PAGE>
cannot specify when, or assure you that, we and Western will satisfy or
waive all conditions to the merger, or that either party may not decide
to exercise their termination rights under the Agreement. Further, there
can be no assurance that a third party will not seek or obtain injunctive
relief to prevent the merger from taking place.

     Working capital at March 31, 2007 consisted of current assets of
$409,700,000 and current liabilities of $242,216,000 or a current ratio
of 1.69:1. At December 31, 2006, the current ratio was 1.93:1, with
current assets of $429,287,000 and current liabilities of $222,135,000.

     CAPITAL EXPENDITURES AND RESOURCES

     During 2007, we currently expect to spend $258,685,000 on capital
expenditures, excluding any acquisitions. In addition, these expenditures
do not include the cost of linefill for the pipeline we are in the
process of re-commissioning. Net cash used in investing activities for
purchases of property, plant and equipment totaled approximately
$62,903,000 for the three months ended March 31, 2007 and $59,697,000 for
the three months ended March 31, 2006. Expenditures made in 2007
primarily were for operational and environmental projects for the
refineries.

     We received proceeds of approximately $340,000 from the sale of
property, plant and equipment and other assets in the first three months
of 2007 and $1,539,000 for the same period in 2006.

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

     In addition, we continue to investigate other capital improvements
to our existing facilities. The amount of capital projects that are
actually undertaken in 2007, and in future years, will depend on, among
other things, general business conditions and results of operation, and
the limits imposed by the Western Agreement.

     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, existing debt
covenants, and the terms of the Western Agreement. The Western Agreement
prohibits us from paying dividends without the consent of Western.

     RISK MANAGEMENT

     We are exposed to various market risks, including changes in certain
commodity prices and interest rates. To manage these normal business



                                  44


<PAGE>
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.
We do not have any open positions related to this matter at March 31,
2007. We also are prohibited from using derivative financial instruments
by the terms of the Western Agreement.

     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, 2007, there were $55,000,000 of direct
borrowings outstanding under this facility.

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

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

     ENVIRONMENTAL, HEALTH AND SAFETY

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

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


                                  45


<PAGE>
     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 substances, the number of other potentially responsible
parties involved, various defenses that may be available to us, and
changing environmental, health, and safety laws and regulations, and
their respective interpretations. We cannot give assurance that
compliance with such laws or regulations, such investigations or
cleanups, or such enforcement proceedings, or private-party claims will
not have a material adverse effect on our business, financial condition
or results of operations.

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

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

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

     -  the initiation or modification of cleanup activities.

     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


                                  46


<PAGE>
approximately 66% for the first three months of 2007. 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. In order to operate the pipeline, we will
have to obtain approximately 750,000 barrels of linefill.

     The work necessary to re-commission the line is nearly complete. It
currently is anticipated that the pipeline will become operational in the
second quarter of 2007 with new crude oil at the refineries by the end of
the second quarter.

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

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

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

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

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

     None of these options, however, may prove to be economically viable
and all are subject to the terms of the Western Agreement. 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



                                  47


<PAGE>
adverse effect on the operations of our Four Corners refineries and on
our overall operations.

     In October 2004, the President of the United States signed the
American Jobs Creation Act of 2004 (the "Act"), which includes energy
related tax provisions that are available to small refiners, including
us. Under the Act, small refiners are allowed to deduct for tax purposes
up to 75% of capital expenditures incurred to comply with the highway
diesel ultra low sulfur regulations adopted by the Environmental
Protection Agency. The deduction is taken in the year the capital
expenditure is made. We were able to use this deduction in 2006 and
expect to be able to use it in future years. Small refiners also are
allowed to claim a credit against income tax of five cents on each gallon
of ultra low sulfur diesel fuel they produce, up to a maximum of 25% of
the capital costs incurred to comply with the regulations. We were able
to use this credit in 2006 and expect to be able to use it in 2007 as
well as in future years.

     EPA has issued rules pursuant to the Clean Air Act that require
refiners to reduce the sulfur content of gasoline and diesel fuel. EPA
also has adopted regulations requiring the benzene content of gasoline to
be reduced and requiring the use of renewable fuels. For a further
discussion of matters relating to these regulations, 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.

     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:



                                  48


<PAGE>
     - the risk that the Western transaction will not close on schedule
       or at all, including the risk that the Federal Trade Commission or
       state antitrust authorities will obtain an order
       enjoining our merger transaction or take other action that will
       prevent the merger from occurring and the risk that we will be
       precluded from merging as a result of the class action lawsuit
       that has been filed against us;

     - 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;

     - the risk that amounts that we must pay to third parties in
       connection with the operation of our facilities may substantially
       increase, including potential pipeline tariff increases and
       potential electricity rate increases;

     - our ability to adequately control capital and operating expenses;

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

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

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

     - the adoption of new state, federal or tribal legislation or
       regulations; changes to existing legislation or regulations or
       their interpretation by regulators or the courts; regulatory or
       judicial findings, including penalties; as well as other future
       governmental actions that may affect our operations, including the
       impact of any further changes to government-mandated
       specifications for gasoline, diesel fuel and other petroleum
       products (such as proposed legislation designed to increase the
       use of biodiesel and proposed legislation and proposed regulations
       designed to increase the amount of renewable fuels, including



                                  49


<PAGE>
       ethanol, added to gasoline), the impact of any legislation
       designed to reduce greenhouse gases, the impact of any windfall
       profit, price gouging, or other legislation that may be adopted in
       reaction to the price of motor fuel at the retail level, the
       impact of any legislation that may restrict our ability to sell
       alcoholic beverages at our convenience stores, and the impact of
       any minimum wage legislation that may be adopted;

     - unplanned or extended shutdowns in refinery operations;

     - the risk that our discontinuance of the use of MTBE in 2006 will
       continue to require us to purchase more expensive blending
       components for our Yorktown refinery;

     - 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, including
       liability for which we do not have insurance coverage;

     - the occurrence of events that cause our insurance coverage to be
       cancelled or that cause losses for which we are not fully insured;

     - the risk that we will not be able to obtain insurance coverage in
       future years at affordable premiums, or under reasonable terms, or
       at all;

     - the risk that costs associated with environmental projects and
       other ongoing projects will be higher than currently estimated
       (including costs associated with the resolution of outstanding
       environmental matters, costs associated with reducing the
       sulfur content of motor fuel, and costs associated with moving or
       hardening existing structures as a result of new projects) or that



                                  50


<PAGE>
       we will be unable to complete such projects (including motor fuel
       sulfur reduction projects) by applicable regulatory compliance
       deadlines;

     - the risk that our current plans for the production of low sulfur
       fuels at our refineries (including the possible use of catalyst)
       may not work as anticipated, requiring us to spend more money to
       produce these fuels than currently anticipated;

     - the risk that we will not continue to qualify to produce and use
       diesel and gasoline credits under EPA's low sulfur programs;

     - the risk that we will need to purchase more diesel credits for our
       Yorktown refinery than currently anticipated;

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

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

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

     - the risk that we will need to purchase more gasoline credits for
       our Ciniza and Bloomfield refineries than currently anticipated;

     - the risk that, beginning in 2008, we will not be able to generate
       sufficient gasoline credits at our Yorktown refinery to cover any
       need to acquire credits for our Ciniza and Bloomfield refineries;

     - 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 or that we will determine that
       we have not properly calculated our tax liability;

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

     - the risk that we will not be able to renew pipeline
       rights-of-way or leases, including service station and tank
       leases, required in connection with our operations on affordable
       terms or at all;





                                  51


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

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

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

     - the risk that the quality of crude oil purchased for transportation
       through the pipeline to our Four Corners refineries will be different
       than anticipated and will adversely affect our refinery operations;

     - the risk that we will not receive anticipated amounts of insurance
       proceeds related to the 2006 fires;

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

     - the risk of increased costs due to the February 2007 EPA rule
       reducing the benzene content in gasoline beginning in 2011, either
       for substantial equipment modifications at all our refineries or
       for a combination of equipment modifications and credit purchases,
       including the risk that the cost of benzene credits will be
       greater than anticipated or that credits will not be available in
       sufficient quantities;

     - the risk that we will not be able to qualify for the use of a
       corporate guaranty to demonstrate our financial ability to
       complete remediation actions at our refineries and, as a result,
       will be required by regulatory agencies to use other, more
       expensive means of providing such financial assurance, including
       placing substantial sums of money into escrow accounts;

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

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

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

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

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

ITEM 4. CONTROLS AND PROCEDURES

     (a) Evaluation of Disclosure Controls and Procedures

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

     (b) Change in Internal Control Over Financial Reporting

         No change in our internal control over financial reporting
occurred during our most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal
control over financial reporting. We are currently in the process of
analyzing the internal controls over financial reporting for Empire Oil
Co., a 100% owned subsidiary that we acquired in January 2007.




























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<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 9 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 "Company Overview",
"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, 2006 (the "Form 10-K"). Set forth below are material
changes that have occurred to the risk factors disclosed in the Form 10-
K. Before investing in our shares, 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.

     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 from BP Corporation North
America Inc. and BP Products North America Inc. (collectively "BP").
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 reimburse BP for losses incurred in
connection with or related to the liabilities and obligations assumed by
us. We only have limited indemnification rights against BP.

     In connection with the Yorktown acquisition, we assumed BP's
obligations under an administrative order issued in 1991 by EPA under the
Resource Conservation and Recovery Act. In August 2006 we agreed to the
terms of the final administrative consent order pursuant to which we will
implement a cleanup plan for the refinery.


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<PAGE>
     Our most current estimate of expenses associated with the order is
between approximately $30,000,000 ($22,500,000 of which we believe is subject
to reimbursement by BP) and $40,000,000 ($32,500,000 of which we believe is
subject to reimbursement by BP). We anticipate that these expenses will be
incurred over a period of approximately 35 years from August 2006. We believe
that between approximately $16,000,000 and $20,000,000 of this amount will be
incurred over an initial four-year period, with the remainder spread equally
over the remaining years thereafter. These estimates assume that EPA will
agree with the design and specifications of our cleanup plan. These estimates
also could change as a result of factors such as changes in costs of labor
and materials. We currently have $2,496,000 recorded as an environmental
liability for this project, which reflects our belief that BP is responsible
for reimbursing us for expenditures on this project that exceed this amount
and also reflects expenditures previously incurred in connection with this
matter. BP's total liability for reimbursement under the refinery purchase
agreement, including liability for environmental claims, is limited to
$35,000,000.

     As part of the consent order clean-up plan, a portion of the
facility's underground sewer system will be cleaned, inspected and
repaired as needed. 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, as well as sewer system inspection and repair,
will be completed approximately four to five 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.

     As previously discussed in our Annual Report on Form 10-K for 2006,
a fire occurred at our Yorktown refinery on November 25, 2005. Repairs
related to this fire were completed in April 2006.

     Our property insurance covered a significant portion of the costs of
repairing the Yorktown refinery and our business interruption insurance
reimbursed us for a portion of the financial impact of the fire. As of
December 31, 2006, we had received $89,000,000 of insurance proceeds
consisting of $27,700,000 for property claims and $61,300,000 for
business interruption claims. No more proceeds will be received as all of
our claims have been resolved with our insurance carriers.

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<PAGE>
     On September 30, 2006, a fire occurred at our Yorktown refinery in
the processing unit required to produce ultra low sulfur diesel fuel.
Repairs to the unit cost approximately $11,000,000 and were completed in
January 2007. The unit was returned to operation in February 2007. Until
the unit became operational, we sold more heating oil than otherwise
would be the case, which was a less profitable product than ultra low
sulfur diesel.

     We have property insurance coverage with a $1,000,000 deductible
that should cover a significant portion of the costs of repairing the
ultra low sulfur diesel unit. We also have business interruption
insurance coverage that should cover a significant portion of the
financial impact of the fire that occurred after the policy's 45-day
waiting period. We have filed initial claims with our insurance carriers
and expect to file additional claims in the second quarter. To date, we
have received approximately $1,500,000 of insurance proceeds related to
this fire.

     On October 5, 2006, a pump failure in the alkylation unit at our
Ciniza refinery resulted in a fire at the refinery. The fire caused
damage to the alkylation unit and an associated unit. The alkylation unit
produces high octane blending stock for gasoline. Repairs to the affected
units cost approximately $5,800,000 and the unit was restarted in mid-
December of 2006. We have property insurance coverage with a $1,000,000
deductible that should cover a significant portion of the costs of
repairing the unit and we are in the process of finalizing our property
insurance claim. We do not anticipate making a claim under our business
interruption insurance.

     On December 26, 2006, a fire occurred in a process heater in the
distillate hydrotreater ("DHT") unit at the Ciniza refinery. The DHT unit
is used to manufacture ultra low sulfur diesel fuel. Instrumentation and
electrical cabling associated with the DHT unit and other process units
also were damaged. All of the process units in the refinery were shutdown
for safety reasons. Repairs have been made that have enabled us to
restart all of the units at the refinery except for the portion of the
DHT unit damaged in the fire. We currently expect that the rest of the
DHT unit will be returned to service by the end of May.

     We currently expect that repairs to, and/or replacement of, the
units, instrumentation and cabling damaged by the fire will cost
approximately $6,200,000, most of which has already been spent. We do not
anticipate receiving any insurance proceeds related to these repairs as
the cost of the repairs has not exceeded the associated $10,000,000
deductible of our current property insurance coverage. In addition, we do
not anticipate making a claim under our business interruption insurance.

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 laws. These laws apply to, among other things: the



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<PAGE>
discharge of pollutants into the soil, air and water; product
specifications; the generation, treatment, storage, transportation and
disposal of solid and hazardous waste; and employee health and safety. We
believe that all of our business units are operating in substantial
compliance with current environmental, health and safety laws. Despite
our efforts, actual or potential claims and lawsuits involving alleged
violations of law have been asserted against us from time to time and,
despite our efforts to comply with applicable laws, may be asserted in
the future.

     EPA has issued rules pursuant to the Clean Air Act that require
refiners to reduce the sulfur content of gasoline and highway diesel
fuel.

     We currently anticipate that we will spend between approximately
$195,000,000 to $220,000,000 to comply with EPA's low sulfur standards at
our Yorktown refinery. Through March 31, 2007, we have spent
approximately $105,000,000 at Yorktown for equipment modifications to
comply with these low sulfur standards. There are a number of factors
that could affect our cost of compliance with the low sulfur standards.
In particular, engineering and construction companies are busy and are
charging a premium for their services. Additionally, costs of materials,
such as steel and concrete, have increased as a result of demand. These
factors could continue to impact our compliance costs.

    We currently anticipate that we will spend between approximately
$50,000,000 to $60,000,000 to comply with EPA's low sulfur standards at
our Four Corners refineries, with the exception of costs associated with
the production of diesel fuel sold for certain non-highway purposes and
any additional costs associated with the crude oil we will be obtaining
when the 16-inch pipeline is operational. Through March 31, 2007, we have
spent approximately $45,000,000 at our Four Corners refineries. There are
a number of factors that could affect our cost of compliance with the low
sulfur standards. For example, the quality and quantity of the additional
crude oil we will be obtaining when the 16-inch pipeline is operational
may impact these costs. As a result of this factor alone, the costs that
we actually incur to comply with the low sulfur standards at our Four
Corners refineries may be substantially different from our estimates.
Furthermore, engineering and construction companies are busy and are
charging a premium for their services. Additionally, costs of materials,
such as steel and concrete, have increased as a result of demand. These
factors could continue to impact our compliance costs.

BENZENE REGULATIONS

     EPA adopted regulations in the first quarter of 2007 requiring the
benzene content of gasoline to be reduced beginning in 2011. We
anticipate that we will need to make equipment modifications to our
refineries to comply with these requirements and also may need to
purchase benzene credits. We have not fully evaluated the impact of these
regulations on our operations, but anticipate that our compliance costs
could be substantial.



                                  57


<PAGE>
RENEWABLE FUELS REGULATIONS

     EPA adopted regulations in April 2007 for the renewable fuels
program, which implements provisions of the Energy Policy Act of 2005.
Most refiners must blend a specified amount of renewable fuel into
gasoline each year. Refiners also may comply by purchasing renewable fuel
credits. Refineries with a capacity of 75,000 barrels per day or less are
exempt from these requirements until calendar year 2011. We believe all
three of our refineries qualify for this temporary exemption. We have not
fully evaluated the impact of these regulations on our operations, but it
is possible that our compliance costs could be substantial.

WE ARE INVOLVED IN A NUMBER OF MTBE LAWSUITS AND IN A "HOT FUEL" LAWSUIT.

     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 40
of these MTBE lawsuits pending in Virginia, Connecticut, Massachusetts,
New Hampshire, New York, New Jersey, Pennsylvania, and New Mexico. Due to
our historical operations in New Mexico, including retail sites, we
potentially have greater risk in connection with the New Mexico
litigation than in the litigation in the Eastern states where we have
only operated since 2002 and have no retail operations. We intend to
vigorously defend these lawsuits. If, however, we are found liable in any
of these lawsuits, such determination could have a material and adverse
effect on our business, financial condition and operating results.

     In March 2007, a class action lawsuit was filed in New Mexico naming
numerous retail suppliers of motor fuel as defendants, including us.
Among other things, the lawsuit alleges that the defendants are
conspiring and engaging in deceptive practices by selling motor fuel to
consumers without using temperature-correction devices at the pumps.
These devices measure the volume of fuel being dispensed by correcting
for fluctuations in temperature. Similar class action lawsuits have been
filed in several other states. We intend to vigorously defend this
lawsuit. Because potentially applicable factual and legal issues have not
been resolved, we have yet to determine if a liability is probable and we
cannot reasonably estimate the amount of any loss associated with these
matters. Accordingly, we have not recorded a liability for this lawsuit.






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<PAGE>
OUR MERGER WITH WESTERN MAY NOT OCCUR OR COULD BE SET ASIDE.

     On August 26, 2006, we entered into an Agreement and Plan of Merger
(the "Plan of Merger") with Western and New Acquisition Corporation
("Merger Sub"). On November 12, 2006, we entered into an Amendment No. 1
to Agreement and Plan of Merger (the "Amendment") with Western and Merger
Sub. The Plan of Merger and Amendment are collectively referred to as the
"Agreement". If the transaction closes, Western will acquire all of our
outstanding shares of common stock for $77.00 per share and we will be
merged with Merger Sub and become a wholly-owned subsidiary of Western.
The transaction has been approved by our Board of Directors and the Board
of Directors of Western. The closing of the transaction is subject to
various conditions, including the removal of a temporary restraining
order (the "TRO") obtained by the Federal Trade Commission (the "FTC") on
April 13, 2007, which prohibits the parties from closing the transaction
while the FTC seeks to obtain a preliminary injunction. A hearing on the
FTC's request for a preliminary injunction began on May 7, 2007. Our
stockholders approved the transaction on February 27, 2007. The
transaction is not subject to any financing conditions.

     On November 22, 2006, Timothy Bisset filed a class action complaint
in Arizona state court against us, our directors and Western in
connection with our merger. Among other things, Mr. Bisset alleges that
we and our directors breached our fiduciary duty in voting to amend the
Plan of Merger on November 12, 2006 to provide for, among other things, a
lower acquisition price of $77.00 per share. Mr. Bisset also alleges that
Western aided and abetted this breach of fiduciary duty. Among other
things, Mr. Bisset alleges that he and other public stockholders of our
common stock are entitled to enjoin the proposed amended transaction or,
alternatively, to recover damages in the event the transaction is
completed. As discussed in our Form 10-K for the year ended December 31,
2006, we think Mr. Bisset's lawsuit is without merit and intend to
vigorously defend it.

     Assuming that the FTC does not obtain a preliminary injunction, we
expect to complete our merger with Western as soon as reasonably possible
after the ruling on the preliminary injunction is received, which we
anticipate will be in the second quarter. We cannot specify when, or
assure you that, we and Western will satisfy or waive all conditions to
the merger, or that either party may not decide to exercise their
termination rights under the Agreement. Further, there can be no
assurance that the FTC, state antitrust authorities, or Mr. Bisset, will
not seek or obtain injunctive relief to prevent the merger from taking
place.











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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 January 19, 2007, we filed a Form 8-K dated January
           19, 2007, containing a press release relating to the
           acquisition of us by Western Refining, Inc. ("Western").

     (ii)  On February 27, 2007, we filed a Form 8-K dated February 27,
           2007, containing a press release detailing our earnings for
           the year and quarter ended December 31, 2006.

     (iii) On April 11, 2007, we filed a Form 8-K dated April 11, 2007,
           containing a press release relating to the Western
           transaction.

     (iv)  On May 8, 2007, we filed a Form 8-K dated May 8, 2007,
           containing a press release detailing our earnings for the
           quarter ended March 31, 2007.
















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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, 2007 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 9, 2007





































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