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 SEPTEMBER 30, 2006

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

                        COMMISSION FILE NUMBER: 1-10398

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

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

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

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

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

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

                           Yes [X]    No [ ]

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

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

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

                           Yes [ ]    No [X]

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


<PAGE>
                   GIANT INDUSTRIES, INC. AND SUBSIDIARIES
                                     INDEX


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

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

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

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

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

          Notes to Condensed Consolidated Financial Statements
          (Unaudited)................................................  5-38

Item 2  - Management's Discussion and Analysis of
          Financial Condition and Results of Operations.............. 39-66

Item 3  - Quantitative and Qualitative Disclosures
          About Market Risk..........................................  66

Item 4  - Controls and Procedures....................................  66

PART II - OTHER INFORMATION..........................................  67

Item 1  - Legal Proceedings..........................................  67

Item 1A - Risk Factors............................................... 67-74

Item 6  - Exhibits and Reports on Form 8-K........................... 75-76

SIGNATURE............................................................  77



<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>
                                                             September 30,    December 31,
                                                                 2006             2005
                                                             -------------    ------------
<S>                                                           <C>              <C>
ASSETS
Current assets:
  Cash and cash equivalents.............................      $   51,895       $ 164,280
  Receivables, net......................................         200,267         142,125
  Inventories...........................................         151,135         124,105
  Prepaid expenses and other............................           5,103          10,449
  Deferred income taxes.................................           1,882           1,396
                                                              ----------       ---------
    Total current assets................................         410,282         442,355
                                                              ----------       ---------
Property, plant and equipment...........................         951,574         764,788
Less accumulated depreciation and amortization..........        (318,127)       (297,962)
                                                              ----------       ---------
                                                                 633,447         466,826
                                                              ----------       ---------
Goodwill................................................          50,432          50,607
Other assets............................................          29,698          24,684
                                                              ----------       ---------
                                                              $1,123,859       $ 984,472
                                                              ==========       =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable......................................      $  149,023       $ 139,710
  Accrued expenses......................................          77,120          68,798
                                                              ----------       ---------
    Total current liabilities...........................         226,143         208,508
                                                              ----------       ---------
Long-term debt..........................................         275,251         274,864
Deferred income taxes...................................         114,306          76,834
Other liabilities.......................................          25,628          24,430
Commitments and contingencies (Note 10)
Stockholders' equity:
  Preferred stock, par value $.01 per share,
    10,000,000 shares authorized, none issued
  Common stock, par value $.01 per share,
    50,000,000 shares authorized, 18,391,292 and
    18,366,077 shares issued............................             184             184
  Additional paid-in capital............................         218,296         216,917
  Retained earnings.....................................         302,134         221,203
  Unearned compensation related to restricted stock.....          (1,629)         (2,014)
                                                              ----------       ---------
                                                                 518,985         436,290
  Less common stock in treasury - at cost,
    3,751,980 shares....................................         (36,454)        (36,454)
                                                              ----------       ---------
    Total stockholders' equity..........................         482,531         399,836
                                                              ----------       ---------
                                                              $1,123,859       $ 984,472
                                                              ==========       =========

See accompanying notes to Condensed Consolidated Financial Statements.

                                             1
</TABLE>


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

<CAPTION>
                                                         Three Months Ended      Nine Months Ended
                                                            September 30,          September 30,
                                                       ----------------------   ----------------------
                                                          2006        2005        2006        2005
                                                       ----------  ----------   ----------  ----------
<S>                                                    <C>         <C>          <C>         <C>
Net revenues.........................................  $1,165,948  $1,085,225   $3,174,252  $2,660,309
                                                       ----------  ----------   ----------  ----------
Cost of products sold (excluding depreciation
  and amortization)..................................   1,052,131     920,408    2,879,390   2,295,082
Operating expenses...................................      60,609      53,901      168,619     148,889
Depreciation and amortization........................      11,972       9,973       32,508      30,435
Selling, general and administrative expenses.........      12,836      15,431       36,047      35,072
Net (gain)/loss on disposal/write-down of assets.....        (450)      1,055       (1,041)        835
Gain from insurance settlement due to fire...........     (46,050)          -      (82,003)     (3,688)
                                                       ----------  ----------   ----------  ----------
Operating income.....................................      74,900      84,457      140,732     153,684
Interest expense.....................................      (5,153)     (5,783)     (14,014)    (19,159)
Costs associated with early debt extinguishment......           -          17            -      (2,082)
Amortization of financing costs......................        (399)       (398)      (1,197)     (2,398)
Investment and other income..........................       1,156         479        3,838         967
                                                       ----------  ----------   ----------  ----------
Earnings from continuing operations
  before income taxes................................      70,504      78,772      129,359     131,012
Provision for income taxes...........................      26,461      32,132       48,428      53,776
                                                       ----------  ----------   ----------  ----------
Earnings from continuing operations..................      44,043      46,640       80,931      77,236

Earnings from discontinued operations, net of
  income tax provision of $9.........................           -           -            -          15
                                                       ----------  ----------   ----------  ----------
Net earnings.........................................  $   44,043  $   46,640   $   80,931  $   77,251
                                                       ==========  ==========   ==========  ==========
Net earnings per common share:
  Basic
    Continuing operations............................  $     3.02  $     3.43   $     5.55  $     5.88
    Discontinued operations..........................           -           -            -           -
                                                       ----------  ----------   ----------  ----------
                                                       $     3.02  $     3.43   $     5.55  $     5.88
                                                       ==========  ==========   ==========  ==========
  Assuming dilution
    Continuing operations...........................   $     3.00  $     3.38   $     5.51  $     5.80
    Discontinued operations.........................            -           -            -           -
                                                       ----------  ----------   ----------  ----------
                                                       $     3.00  $     3.38   $     5.51  $     5.80
                                                       ==========  ==========   ==========  ==========

See accompanying notes to Condensed Consolidated Financial Statements.

                                             2

</TABLE>


<PAGE>
<TABLE>
                                GIANT INDUSTRIES, INC. AND SUBSIDIARIES
                            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              (Unaudited)
                                            (In thousands)
<CAPTION>
                                                                               Nine Months Ended
                                                                                 September 30,
                                                                            -----------------------
                                                                               2006         2005
                                                                            ---------     ---------
<S>                                                                         <C>           <C>
Cash flows from operating activities:
  Net earnings..........................................................    $  80,931     $  77,251
Adjustments to reconcile net earnings to net cash provided by
  operating activities:
  Depreciation and amortization from continuing operations..............       32,508        30,435
  Amortization of financing costs.......................................        1,197         2,398
  Compensation expense related to restricted stock awards...............          291             -
  Deferred income taxes.................................................       36,996        27,566
  Deferred crude oil purchase discounts.................................          789           925
  Payments to deferred compensation plan................................       (1,597)            -
  Net (gain)/loss on the disposal of assets from continuing operations..       (1,041)          835
  Net gain on the disposal of assets from discontinuing operations,
    including assets held for sale......................................            -           (22)
  Gain from insurance settlement due to fire incident...................      (82,003)       (3,688)
  Proceeds from insurance settlement for business
    interruption due to fire incident...................................       48,940             -
  Income tax benefit from exercise of stock options.....................            -           838
  Cash balance pension plan contribution................................       (3,078)       (2,039)
    Changes in operating assets and liabilities:
    (Increase) in receivables...........................................      (46,579)      (98,408)
    (Increase) in inventories...........................................      (23,585)      (31,810)
    Decrease in prepaid expenses........................................        5,315         8,341
    (Increase) in other assets..........................................       (3,346)         (170)
    Increase in accounts payable........................................        9,052        68,022
    Increase in accrued expenses........................................        3,964        20,938
    Increase in other liabilities.......................................        3,564         1,521
                                                                            ---------     ---------
Net cash provided by operating activities...............................       62,318       102,933
                                                                            ---------     ---------
Cash flows from investing activities:
  Purchase of property, plant and equipment.............................     (181,562)      (48,390)
  Acquisition activity..................................................      (22,907)      (39,405)
  Proceeds from assets held for sale....................................            -         1,948
  Proceeds from insurance settlement for property
    damage due to fire incident.........................................       26,800         3,688
  Proceeds from sale of property, plant and equipment and other assets..        2,957         2,213
  Funding of restricted cash escrow funds...............................            -       (21,883)
  Release of restricted cash escrow funds...............................            -        21,883
                                                                            ---------     ---------
Net cash used in investing activities...................................     (174,712)      (79,946)
                                                                            ---------     ---------
Cash flows from financing activities:
  Payments of long-term debt............................................            -       (18,828)
  Proceeds from line of credit..........................................       10,000        51,245
  Payments on line of credit............................................      (10,000)      (53,959)
  Net proceeds from issuance of common stock............................            -        74,406
  Proceeds from exercise of stock options...............................            9           564
  Deferred financing costs..............................................            -        (1,167)
                                                                            ---------     ---------
Net cash provided by financing activities...............................            9        52,261
                                                                            ---------     ---------
Net (decrease)/increase in cash and cash equivalents....................     (112,385)       75,248
  Cash and cash equivalents:
    Beginning of period.................................................      164,280        23,714
                                                                            ---------     ---------
    End of period.......................................................    $  51,895     $  98,962
                                                                            =========     =========
                                             3
</TABLE>


<PAGE>
Significant Noncash Investing and Financing Activities.

In March 2006, we contributed 25,115 newly issued shares of our common
stock, valued at $1,465,000, to our 401(k) plan as a discretionary
contribution for the year 2005. We also capitalized approximately
$4,648,000 of interest as part of construction in progress. At September
30, 2006, approximately $16,188,000 of purchases of property, plant and
equipment had not been paid and, accordingly, were recorded in accounts
payable and accrued liabilities. We also recorded a gain of $13,260,000
in connection with the receipt of the final payments from our insurance
carriers related to the fire that occurred at our Yorktown refinery in
2005. These payments were received in October 2006.

In the first quarter of 2005, we transferred $118,000 of property, plant
and equipment to other assets. In the second quarter of 2005, we
contributed 34,196 newly issued shares of our common stock, valued at
$972,000, to our 401(k) plan as a discretionary contribution for the year
2004. In connection with our acquisition activity in the third quarter of
2005, we assumed approximately $18,362,000 of liabilities. At September
30, 2005, approximately $5,810,000 of purchases of property, plant and
equipment had not been paid and accordingly, were accrued in accounts
payable and accrued liabilities.

See accompanying notes to Condensed Consolidated Financial Statements.































                                  4


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

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

Organization

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

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

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

     We have three business segments:

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

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

     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.

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-
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.



                                  5


<PAGE>
     Operating results for the three and nine months ended September 30,
2006 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2006. The accompanying financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in our Annual Report on Form 10-K
for the year ended December 31, 2005.

Stock-Based Employee Compensation:

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

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

<TABLE>
<CAPTION>
                                              Three Months Ended    Nine Months Ended
                                              September 30, 2005    September 30, 2005
                                              ------------------    ------------------
                                               (In thousands, except per share data)
<S>                                                <C>                  <C>
Net earnings, as reported...................       $46,640              $77,251
Deduct: Total stock-based employee
  compensation expense determined
  under the fair value based method
  for all awards, net of related
  tax effect................................             -                  (24)
                                                   -------              -------
Pro forma net earnings......................       $46,640              $77,227
                                                   =======              =======
Earnings per share:
  Basic - as reported.......................       $  3.43              $  5.88
                                                   =======              =======
  Basic - pro forma.........................       $  3.43              $  5.88
                                                   =======              =======
  Diluted - as reported.....................       $  3.38              $  5.80
                                                   =======              =======
  Diluted - pro forma.......................       $  3.38              $  5.80
                                                   =======              =======
</TABLE>

                                  6


<PAGE>
Current Pronouncements

     In November 2004, Financial Accounting Standards Board ("FASB")
issued SFAS 151, "Inventory Costs - An Amendment of ARB No. 43, Chapter
4", which is effective for fiscal years beginning after June 15, 2005.
This Statement requires that idle capacity expense, freight, handling
costs, and wasted materials (spoilage), regardless of whether these costs
are considered abnormal, be treated as current period charges. In
addition, this statement requires that allocation of fixed overhead to the
costs of conversion be based on the normal capacity of the production
facilities. The adoption of SFAS 151 on January 1, 2006 did not have a
material impact on our financial statements for the three and nine months
ended September 30, 2006.

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

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

     In September 2006, FASB issued FASB Staff Position ("FSP") No. AUG
AIR-1, "Accounting for Planned Major Maintenance Activities", that
disallowed the accrue-in-advance method for planned major maintenance
activities. Our scheduled turnaround activities are considered planned
major maintenance activities. Since we do not use the accrue-in-advance
method of accounting for our turnaround activities, this FSP has no
impact on our financial statements.

     In September 2006, FASB issued SFAS 157, "Fair Value Measurements",
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



                                  7


<PAGE>
fair value measurements and, accordingly, this statement does not require
any new fair value measurements. Therefore, the adoption of this SFAS 157
is not expected to have a material impact on our financial statements.

     In September 2006, FASB issued SFAS 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans", which requires
an employer to recognize the overfunded or underfunded position of a
defined benefit postretirement plan (other than a multiemployer plan) as
an asset or a liability in its statement of financial position and to
recognize changes in the funded status in the year in which the changes
occur through comprehensive income. With limited exceptions, this
statement also requires an employer to measure the funded status of a
plan as of the date of its year-end statement of financial position. This
statement is effective for fiscal years ending after December 15, 2006.
We anticipate that the provisions of SFAS 158 will require us to
recognize an additional $1,540,000 in long-term pension liability with a
corresponding charge to accumulated other comprehensive income.






































                                  8


<PAGE>
NOTE 2 - INVENTORIES:

     Our inventories consist of the following:

<TABLE>
<CAPTION>
                                          September 30,   December 31,
                                              2006            2005
                                          -------------   ------------
                                                    (In thousands)
<S>                                         <C>             <C>
First-in, first-out ("FIFO") method:
  Crude oil............................     $ 74,806        $ 77,188
  Refined products.....................      145,785          97,150
  Refinery and shop supplies...........       14,732          13,790
  Merchandise..........................        9,871           7,259
Retail method:
  Merchandise..........................        9,063           8,982
                                            --------        --------
    Subtotal...........................      254,257         204,369
Adjustment for last-in,
  first-out ("LIFO") method............     (103,122)        (80,264)
                                            --------        --------
    Total..............................     $151,135        $124,105
                                            ========        ========
</TABLE>

     The portion of inventories valued on a LIFO basis totaled
$97,693,000 and $76,299,000 at September 30, 2006 and December 31, 2005,
respectively. The information in the following paragraph will facilitate
comparison with the operating results of companies using the FIFO method
of inventory valuation.

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

<TABLE>
<CAPTION>
                                   Three Months Ended     Nine Months Ended
                                     September 30,          September 30,
                                   ------------------    ------------------
                                     2006       2005       2006       2005
                                   -------    -------    -------    -------
                                     (In thousands, except per share data)
<S>                                <C>        <C>        <C>        <C>
Net earnings...................    $(7,419)   $14,285    $14,289    $26,531
Diluted earnings per share.....    $ (0.51)   $  1.04    $  0.97    $  1.99
</TABLE>






                                  9


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















































                                  10


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

     At September 30, 2006 and December 31, 2005, we had goodwill of
$50,432,000 and $50,607,000, respectively.

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

<TABLE>
<CAPTION>
                                           Refining Group    Retail Group  Wholesale Group   Total
                                         ------------------  ------------  ---------------  -------
                                                      Four
                                         Yorktown   Corners
                                         --------   -------
                                                              (In thousands)
<S>                                      <C>        <C>        <C>             <C>          <C>
Balance as of January 1, 2006..........  $ 21,028   $   125    $ 4,414         $ 25,040     $ 50,607
Goodwill written off related to the
  sale of retail unit..................         -         -        (77)               -          (77)
Goodwill associated with
  purchase of lubricating business*....         -         -          -              500          500
Goodwill reduction associated
  with Dial Oil purchase**.............         -         -          -             (598)        (598)
                                         --------   -------    -------         --------     --------
Balance as of September 30, 2006.......  $ 21,028   $   125    $ 4,337         $ 24,942     $ 50,432
                                         ========   =======    =======         ========     ========

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

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

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


















                                  11


<PAGE>
<TABLE>
<CAPTION>
                                                 September 30, 2006                      December 31, 2005
                                       ------------------------------------   ------------------------------------
                                         Gross                        Net       Gross                        Net
                                       Carrying     Accumulated    Carrying   Carrying     Accumulated    Carrying
                                         Value      Amortization     Value      Value      Amortization     Value
                                       --------     ------------   --------   --------     ------------   --------
                                                                      (In thousands)
<S>                                     <C>           <C>          <C>         <C>           <C>          <C>
Amortized intangible assets:
  Rights-of-way.....................    $ 3,748       $ 2,890      $   858     $ 3,729       $ 2,870      $   859
  Contracts.........................      1,376         1,317           59       1,376         1,227          149
  Licenses and permits..............      1,096           597          499       1,096           503          593
                                        -------       -------      -------     -------       -------      -------
                                          6,220         4,804        1,416       6,201         4,600        1,601
                                        -------       -------      -------     -------       -------      -------
Unamortized intangible assets:
  Liquor licenses...................      9,617             -        9,617       8,335             -        8,335
                                        -------       -------      -------     -------       -------      -------
Total intangible assets.............    $15,837       $ 4,804      $11,033     $14,536       $ 4,600      $ 9,936
                                        =======       =======      =======     =======       =======      =======
</TABLE>

     Intangible asset amortization expense for the three and nine months
ended September 30, 2006 was approximately $101,000 and $309,000,
respectively. Intangible asset amortization expense for the three and
nine months ended September 30, 2005 was approximately $121,000 and
$320,000, respectively. Estimated amortization expense for the rest of
this fiscal year and the next five fiscal years is as follows:

             2006 Remainder....................     $ 101,000
             2007..............................       263,000
             2008..............................       221,000
             2009..............................       219,000
             2010..............................        94,000
             2011..............................        45,000


















                                  12


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

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

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































                                  13


<PAGE>
NOTE 5 - ASSET RETIREMENT OBLIGATIONS:

     SFAS No. 143, "Accounting for Asset Retirement Obligations",
addresses financial accounting and reporting obligations associated with
the retirement of tangible long-lived assets and the associated asset
retirement costs. This statement requires that the fair value of a
liability for an asset retirement obligation ("ARO") be recognized in the
period in which it is incurred if a reasonable estimate of fair value can
be made. The associated asset retirement cost ("ARC") is capitalized as
part of the carrying amount of the long-lived asset. Our legally
restricted assets that are set aside for purposes of settling ARO
liabilities are approximately $367,000 as of September 30, 2006 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
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:





                                  14


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

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

<TABLE>
<CAPTION>
                                        September 30,   December 31,
                                            2006            2005
                                        -------------   ------------
                                                (In thousands)
<S>                                        <C>             <C>
Liability beginning of year...........     $2,625          $2,272
Liabilities incurred..................        176             322
Liabilities settled...................        (54)           (150)
Accretion expense.....................         12             181
                                           ------          ------
Liability end of period...............     $2,759          $2,625
                                           ======          ======
</TABLE>

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





























                                  15


<PAGE>
NOTE 6 - LONG-TERM DEBT:

     Our long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                      September 30,   December 31,
                                                          2006            2005
                                                      -------------   ------------
                                                             (In thousands)
<S>                                                     <C>             <C>
11% senior subordinated notes, due 2012, net of
  unamortized discount of $2,640 and $2,882,
  interest payable semi-annually...................     $127,361        $127,119
8% senior subordinated notes, due 2014, net of
  unamortized discount of $2,110 and $2,255,
  interest payable semi-annually...................      147,890         147,745
                                                        --------        --------
  Total                                                 $275,251        $274,864
                                                        ========        ========
</TABLE>

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

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

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

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




                                  16


<PAGE>
amount thereof, plus accrued interest, if any, to the date of purchase.
As discussed in Note 1, "Organization, Basis of Presentation, Stock-based
Employee Compensation 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. The terms of such a
tender could be different than the terms of an offer to repurchase
pursuant to the notes. At September 30, 2006, retained earnings available
for dividends under the most restrictive terms of the indentures were
approximately $118,917,000. 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
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 September 30, 2006, this rate was
approximately 6.7% per annum. We are required to pay a quarterly
commitment fee of .25% per annum of the unused amount of the facility.

     At September 30, 2006, there were no direct borrowings outstanding
under the Credit Facility. At September 30, 2006, there were, however,
$45,024,000 of irrevocable letters of credit outstanding, primarily to
crude oil suppliers, insurance companies, and regulatory agencies. At
December 31, 2005, there were no direct borrowings and $66,771,000 of
irrevocable letters of credit outstanding primarily to crude oil
suppliers, insurance companies, and regulatory agencies.

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

     - accounts receivable;
     - inventory;
     - contracts;




                                  17


<PAGE>
     - 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;
     - 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 described in Note 1, "Organization, Basis of Presentation, Stock-
based Employee Compensation and Current Pronouncements".















                                  18


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

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

<TABLE>
<CAPTION>
                                                         Yorktown
                                                     Cash Balance Plan
                                      ----------------------------------------------
                                       Three Months Ended       Nine Months Ended
                                         September 30,            September 30,
                                      --------------------    ----------------------
                                        2006        2005        2006         2005
                                      --------    --------    --------    ----------
<S>                                   <C>         <C>         <C>         <C>
Service cost........................  $376,000    $339,000    $1,129,000  $1,017,000
Interest cost.......................   173,000     168,000       519,000     504,000
Expected return on plan assets......  (114,000)    (69,000)     (342,000)   (208,000)
Amortization of prior service cost..         -     (27,000)            -     (80,000)
Amortization of net loss............         -      15,000             -      45,000
                                      --------    --------    ----------  ----------
Net periodic benefit cost...........  $435,000    $426,000    $1,306,000  $1,278,000
                                      ========    ========    ==========  ==========
</TABLE>

<TABLE>
<CAPTION>
                                                        Yorktown
                                                  Retiree Medical Plan
                                      --------------------------------------------
                                       Three Months Ended      Nine Months Ended
                                         September 30,           September 30,
                                      --------------------    --------------------
                                        2006        2005        2006        2005
                                      --------    --------    --------    --------
<S>                                   <C>         <C>         <C>         <C>
Service cost........................  $ 79,000    $ 55,000    $ 236,000   $165,000
Interest cost.......................    75,000      55,000      225,000    165,000
Amortization of net loss............    25,000       4,000       75,000     12,000
                                      --------    --------    ---------   --------
Net periodic benefit cost...........  $179,000    $114,000    $ 536,000   $342,000
                                      ========    ========    =========   ========
</TABLE>

     In September 2006, we made a cash contribution of $3,078,000 to the
Cash Balance Plan for the 2005 plan year.

     In September 2006, FASB issued SFAS 158, "Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans". See Note 1,
"Organization, Basis of Presentation, Stock-Based Employee Compensation
and Current Pronouncements", for a further discussion of this new
pronouncement.



                                  19


<PAGE>
NOTE 8 - EARNINGS PER SHARE:

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

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

Earnings from continuing operations..............   $   44,043  $  46,640  $   80,931  $  77,236
Earnings from discontinued operations............            -          -           -         15
                                                    ----------  ---------  ----------  ---------
Net earnings.....................................   $   44,043  $  46,640  $   80,931  $  77,251
                                                    ==========  =========  ==========  =========
</TABLE>

<TABLE>
<CAPTION>
                                                     Three Months Ended       Nine Months Ended
                                                        September 30,            September 30,
                                                    ---------------------   ----------------------
                                                       2006        2005        2006        2005
                                                    ----------  ---------   ----------  ----------
<S>                                                 <C>         <C>         <C>         <C>
Denominator

Basic - weighted average shares outstanding......   14,601,212  13,611,847  14,594,953  13,137,526
Effect of dilutive stock options.................       73,589     174,937      73,203     187,160
Effect of dilutive restricted stock grants.......       11,518           -       9,749           -
                                                    ----------  ----------  ----------  ----------
Diluted - weighted average shares outstanding....   14,686,319  13,786,784  14,677,905  13,324,686
                                                    ==========  ==========  ==========  ==========
</TABLE>

<TABLE>
<CAPTION>
                                                     Three Months Ended      Nine Months Ended
                                                       September 30,           September 30,
                                                    ---------------------  ---------------------
                                                       2006        2005       2006       2005
                                                    ----------  ---------  ----------  ---------
<S>                                                 <C>         <C>        <C>         <C>
Basic earnings per share
Earnings from continuing operations..............   $     3.02  $    3.43  $     5.55  $    5.88
Earnings from discontinued operations............            -          -           -          -
                                                    ----------  ---------  ----------  ---------
Net earnings.....................................   $     3.02  $    3.43  $     5.55  $    5.88
                                                    ==========  =========  ==========  =========
</TABLE>

                                  20


<PAGE>
<TABLE>
<CAPTION>
                                                     Three Months Ended      Nine Months Ended
                                                       September 30,           September 30,
                                                    ---------------------  ---------------------
                                                       2006        2005       2006       2005
                                                    ----------  ---------  ----------  ---------
<S>                                                 <C>         <C>        <C>         <C>
Diluted earnings per share
Earnings from continuing operations..............   $     3.00  $    3.38  $     5.51  $    5.80
Earnings from discontinued operations............            -          -           -          -
                                                    ----------  ---------  ----------  ---------
Net earnings.....................................   $     3.00  $    3.38  $     5.51  $    5.80
                                                    ==========  =========  ==========  =========
</TABLE>

     In March 2006, we contributed 25,115 newly issued shares of our
common stock, valued at $1,465,000, to our 401(k) plan as a discretionary
contribution for the year 2005. In March 2005, we issued 1,000,000 shares
of common stock in an underwritten public offering and received proceeds
of approximately $22,349,000, net of expenses. In April 2005, we
contributed 34,196 newly issued shares of our common stock, valued at
$972,000, to our 401(k) plan as a discretionary contribution for the year
2004. In September 2005, we issued 1,000,000 shares of our common stock
and received approximately $52,057,000, net of expenses.






























                                  21


<PAGE>
NOTE 9 - BUSINESS SEGMENTS:

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

REFINING GROUP

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

RETAIL GROUP

     Our retail group operates service stations, which include
convenience stores or kiosks. Our service stations sell various grades of
gasoline, diesel fuel, general merchandise, including tobacco and
alcoholic and nonalcoholic beverages, and food products to the general
public. Our refining group or our wholesale group supplies the gasoline
and diesel fuel that our retail group sells. We purchase general
merchandise and food products from various suppliers. At September 30,
2006, our retail group operated 153 service stations with convenience
stores or kiosks. These service stations include 12 service stations
acquired in the 2005 acquisition of Dial Oil and 21 operating service
stations acquired from Amigo Petroleum Company ("Amigo") in August 2006.
See Note 11, "Acquisitions", for further discussion of this acquisition.

WHOLESALE GROUP

     Our wholesale group consists of Phoenix Fuel, Dial Oil (which was
acquired on July 12, 2005), and two bulk petroleum distribution plants
acquired from Amigo in August 2006. See Note 11, "Acquisitions", for
further discussion of this 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 Oil
transaction were transferred for reporting purposes from the wholesale
group to our retail group. We purchase petroleum fuels and lubricants
from suppliers and to a lesser extent from our refining group.



                                  22


<PAGE>
OTHER

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

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

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

     Disclosures regarding our reportable segments with a reconciliation
to consolidated totals for the three and nine months ended September 30,
2006 and 2005, are presented below. The tables pertaining to the three
and nine months ended September 30, 2006 include the results of Dial Oil,
which was acquired on July 12, 2005, and Amigo, the assets of which were
acquired in August 2006. See Note 11, "Acquisitions", for further
disclosures. The tables pertaining to the three and nine months ended
September 30, 2005 include the results of Dial Oil, which was acquired on
July 12, 2005, but do not include the results of Amigo, the assets of
which were acquired in August 2006. See Note 11, "Acquisitions", for
further disclosures.

     We have also reclassed the tables pertaining to the three and nine
months ended September 30, 2005 to conform to the current year
presentation because the results of 12 service stations that were part of
the Dial Oil acquisition are currently reported in the results of
operations pertaining to our retail segment but were previously reported
in our wholesale segment. These reclassifications had no affect on our
results of operations.

















                                  23


<PAGE>
<TABLE>
<CAPTION>
                                                  As of and for the Three Months Ended September 30, 2006
                                            -------------------------------------------------------------------
                                            Refining     Retail   Wholesale           Reconciling
                                             Group       Group**    Group***  Other      Items     Consolidated
                                            -------------------------------------------------------------------
                                                                     (In thousands)
<S>                                         <C>         <C>       <C>       <C>       <C>         <C>
Customer net revenues:
  Finished products:
    Four Corners operations..............   $  170,452
    Yorktown operations..................      505,436
                                            ----------
      Total..............................   $  675,888  $131,723  $284,942  $      -  $       -   $1,092,553
  Merchandise and lubricants.............            -    43,175    20,416         -          -       63,591
  Other..................................        3,232     5,387     1,095        90          -        9,804
                                            ----------  --------  --------  --------  ---------   ----------
      Total..............................      679,120   180,285   306,453        90          -    1,165,948
                                            ----------  --------  --------  --------  ---------   ----------
Inter-segment net revenues:
  Finished products......................      130,180         -    41,906         -   (172,086)           -
  Merchandise and lubricants.............            -         -        41         -        (41)           -
  Other..................................        5,302         -       155         -     (5,457)           -
                                            ----------  --------  --------  --------  ---------   ----------
      Total..............................      135,482         -    42,102         -   (177,584)           -
                                            ----------  --------  --------  --------  ---------   ----------
Total net revenues from
  continuing operations..................   $  814,602  $180,285  $348,555  $     90  $(177,584)  $1,165,948
                                            ==========  ========  ========  ========  =========   ==========
Operating income/(loss):
  Four Corners operations................   $   24,572
  Yorktown operations*...................         (802)
                                            ----------
      Total operating (loss)/income
        before corporate allocation......   $   23,770  $  8,212  $  5,202  $ (8,784) $  46,500   $   74,900
Corporate allocation.....................       (4,076)   (2,719)   (1,091)    7,886          -            -
                                            ----------  --------  --------  --------  ---------   ----------
  Operating income/(loss) from
    continuing operations................   $   19,694  $  5,493  $  4,111  $   (898) $  46,500       74,900
                                            ==========  ========  ========  ========  =========
Interest expense.........................                                                             (5,153)
Amortization of financing costs..........                                                               (399)
Investment and other income..............                                                              1,156
                                                                                                  ----------
Earnings from continuing operations
  before income taxes....................                                                         $   70,504
                                                                                                  ==========
Depreciation and amortization:
  Four Corners operations................   $    4,229
  Yorktown operations....................        4,644
                                            ----------
      Total from continuing operations...   $    8,873  $  1,944  $    844  $    311  $      -    $   11,972
                                            ==========  ========  ========  ========  ========    ==========
Total assets.............................   $  768,471  $136,413  $162,110  $ 56,865  $      -    $1,123,859
Capital expenditures.....................   $   49,141  $  2,663  $    744  $    395  $      -    $   52,943

  *Excludes $46,050,000 gain from insurance settlement due to fire.
 **Includes the results of 12 convenience stores acquired in the Dial Oil acquisition and 21 operating
   convenience stores that were acquired from Amigo in August 2006.
***Includes the results of two bulk petroleum distribution plants that were acquired from Amigo in August 2006.
</TABLE>

                                  24


<PAGE>
<TABLE>
<CAPTION>
                                           As of and for the Three Months Ended September 30, 2005 (Reclassed)
                                            ----------------------------------------------------------------
                                            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..............   $158,251
    Yorktown operations..................    483,941
                                            --------
      Total..............................   $642,192  $108,276  $270,449  $      -   $       -    $1,020,917
  Merchandise and lubricants.............          -    40,527    15,135         -           -        55,662
  Other..................................      3,520     4,050     1,009        67           -         8,646
                                            --------  --------  --------  --------   ---------    ----------
      Total..............................    645,712   152,853   286,593        67           -     1,085,225
                                            --------  --------  --------  --------   ---------    ----------
Intersegment net revenues:
  Finished products......................     95,704         -    21,978         -    (117,682)            -
  Merchandise and lubricants.............          -         -        14         -         (14)            -
  Other..................................      5,026         -       127         -      (5,153)            -
                                            --------  --------  --------  --------   ---------    ----------
      Total..............................    100,730         -    22,119         -    (122,849)            -
                                            --------  --------  --------  --------   ---------    ----------
Total net revenues from
  continuing operations..................   $746,442  $152,853  $308,712  $     67   $(122,849)   $1,085,225
                                            ========  ========  ========  ========   =========    ==========
Operating income (loss):
  Four Corners operations................   $ 32,968
  Yorktown operations....................     52,288
                                            --------
      Total operating income (loss)
        before corporate allocation......   $ 85,256  $  4,377  $  7,577  $(11,698)  $  (1,055)   $   84,457
Corporate allocation.....................     (6,073)   (3,820)   (1,304)   11,197           -             -
                                            --------  --------  --------  --------   ---------    ----------
  Operating income (loss) from
    continuing operations................   $ 79,183  $    557  $  6,273  $   (501)  $  (1,055)       84,457
                                            ========  ========  ========  ========   =========
Interest expense.........................                                                             (5,783)
Costs associated with early
  debt extinguishment....................                                                                 17
Amortization of financing costs..........                                                               (398)
Investment and other income..............                                                                479
                                                                                                  ----------
Earnings from continuing operations
  before income taxes....................                                                         $   78,772
                                                                                                  ==========
Depreciation and amortization:
  Four Corners operations................   $  4,267
  Yorktown operations....................      2,653
                                            --------
      Total from continuing operations...   $  6,920  $  2,155  $    696  $    202   $       -    $    9,973
                                            ========  ========  ========  ========   =========    ==========
Total assets.............................   $585,563  $104,302  $173,983  $110,597   $       -    $  974,445
Capital expenditures.....................   $ 27,692  $  1,221  $    528  $    252   $       -    $   29,693

*Includes the results of 12 convenience stores acquired in the Dial Oil acquisition.
</TABLE>

                                  25


<PAGE>
<TABLE>
<CAPTION>
                                                   As of and for the Nine Months Ended September 30, 2006
                                            -------------------------------------------------------------------
                                            Refining     Retail   Wholesale           Reconciling
                                             Group       Group**    Group***  Other      Items     Consolidated
                                            -------------------------------------------------------------------
                                                                     (In thousands)
<S>                                         <C>         <C>       <C>       <C>       <C>         <C>
Customer net revenues:
  Finished products:
    Four Corners operations..............   $  485,409
    Yorktown operations..................    1,290,186
                                            ----------
      Total..............................   $1,775,595  $350,020  $835,398  $      -  $       -   $2,961,013
  Merchandise and lubricants.............            -   119,677    58,001         -          -      177,678
  Other..................................       17,043    15,073     3,221       224          -       35,561
                                            ----------  --------  --------  --------  ---------   ----------
      Total..............................    1,792,638   484,770   896,620       224          -    3,174,252
                                            ----------  --------  --------  --------  ---------   ----------
Inter-segment net revenues:
  Finished products......................      343,762         -    98,643         -   (442,405)           -
  Merchandise and lubricants.............            -         -        59         -        (59)           -
  Other..................................       16,410         -       601         -    (17,011)           -
                                            ----------  --------  --------  --------  ---------   ----------
      Total..............................      360,172         -    99,303         -   (459,475)           -
                                            ----------  --------  --------  --------  ---------   ----------
Total net revenues from
  continuing operations..................   $2,152,810  $484,770  $995,923  $    224  $(459,475)  $3,174,252
                                            ==========  ========  ========  ========  =========   ==========
Operating income/(loss):
  Four Corners operations................   $   71,180
  Yorktown operations*...................      (17,018)
                                            ----------
      Total operating (loss)/income
        before corporate allocation......   $   54,162  $ 13,901  $ 12,904  $(23,279) $  83,044   $  140,732
Corporate allocation.....................      (10,542)   (7,399)   (2,997)   20,938          -            -
                                            ----------  --------  --------  --------  ---------   ----------
  Operating income/(loss) from
    continuing operations................   $   43,620  $  6,502  $  9,907  $ (2,341) $  83,044      140,732
                                            ==========  ========  ========  ========  =========
Interest expense.........................                                                            (14,014)
Amortization of financing costs..........                                                             (1,197)
Investment and other income..............                                                              3,838
                                                                                                  ----------
Earnings from continuing operations
  before income taxes....................                                                         $  129,359
                                                                                                  ==========
Depreciation and amortization:
  Four Corners operations................   $   12,186
  Yorktown operations....................       11,060
                                            ----------
      Total from continuing operations...   $   23,246  $  6,070  $  2,396  $    796  $      -    $   32,508
                                            ==========  ========  ========  ========  ========    ==========
Total assets.............................   $  768,471  $136,413  $162,110  $ 56,865  $      -    $1,123,859
Capital expenditures.....................   $  173,202  $  4,474  $  2,988  $    898  $      -    $  181,562

   *Excludes $82,003,000 gain from insurance settlement due to fire.
 **Includes the results of 12 convenience stores acquired in the Dial Oil acquisition and 21 operating
   convenience stores that were acquired from Amigo in August 2006.
***Includes the results of two bulk petroleum distribution plants that were acquired from Amigo in August 2006.
</TABLE>

                                  26


<PAGE>
<TABLE>
<CAPTION>
                                             As of and for the Nine Months Ended September 30, 2005 (Reclassed)
                                            ----------------------------------------------------------------
                                            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..............   $  428,402
    Yorktown operations..................    1,193,325
                                            ----------
      Total..............................   $1,621,727  $248,404  $624,253  $      -   $       -    $2,494,384
  Merchandise and lubricants.............            -   108,139    33,785         -           -       141,924
  Other..................................        9,415    12,109     2,099       378           -        24,001
                                            ----------  --------  --------  --------   ---------    ----------
      Total..............................    1,631,142   368,652   660,137       378           -     2,660,309
                                            ----------  --------  --------  --------   ---------    ----------
Intersegment net revenues:
  Finished products......................      206,956         -    55,823         -    (262,779)            -
  Merchandise and lubricants.............            -         -        14         -         (14)            -
  Other..................................       14,491         -       127         -     (14,618)            -
                                            ----------  --------  --------  --------   ---------    ----------
      Total..............................      221,447         -    55,964         -    (277,411)            -
                                            ----------  --------  --------  --------   ---------    ----------
Total net revenues from
  continuing operations..................   $1,852,589  $368,652  $716,101  $    378   $(277,411)   $2,660,309
                                            ==========  ========  ========  ========   =========    ==========
Operating income (loss):
  Four Corners operations................   $   58,978
  Yorktown operations....................       97,250
                                            ----------
      Total operating income (loss)
        before corporate allocation......   $  156,228  $  5,812  $ 14,091  $(25,298)  $   2,875    $  153,708
Corporate allocation.....................      (13,184)   (7,918)   (2,626)   23,728           -             -
                                            ----------  --------  --------  --------   ---------    ----------
Total operating income (loss) after
  corporate allocation...................      143,044    (2,106)   11,465    (1,570)      2,875       153,708
Discontinued operations (gain)...........            -        (2)        -         -         (22)          (24)
                                            ----------  --------  --------  --------   ---------    ----------
  Operating income (loss) from
    continuing operations................   $  143,044  $ (2,108) $ 11,465  $ (1,570)  $   2,853       153,684
                                            ==========  ========  ========  ========   =========
Interest expense.........................                                                              (19,159)
Costs associated with early
  debt extinguishment....................                                                               (2,082)
Amortization of financing costs..........                                                               (2,398)
Investment and other income..............                                                                  967
                                                                                                    ----------
Earnings from continuing operations
  before income taxes....................                                                           $  131,012
                                                                                                    ==========
Depreciation and amortization:
  Four Corners operations................   $   12,438
  Yorktown operations....................        7,949
                                            ----------
      Total from continuing operations...   $   20,387  $  7,892  $  1,582  $    574   $       -    $   30,435
                                            ==========  ========  ========  ========   =========    ==========
Total assets.............................   $  585,563  $104,302  $173,983  $110,597   $       -    $  974,445
Capital expenditures.....................   $   51,416  $  3,231  $  1,562  $  1,181   $       -    $   57,390

*Includes the results of 12 convenience stores acquired in the Dial Oil acquisition.
</TABLE>

                                  27



<PAGE>
NOTE 10 - COMMITMENTS AND CONTINGENCIES:

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

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

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

ENVIRONMENTAL AND LITIGATION ACCRUALS

     We expense or capitalize environmental expenditures depending on the
circumstances:

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

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

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


                                  28


<PAGE>
     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 September 30, 2006 and December 31, 2005, we had environmental
liability accruals of approximately $4,432,000 and $4,941,000,
respectively, which are summarized below, and litigation accruals in the
aggregate of approximately $265,000 and $990,000, respectively.
Environmental accruals are recorded in the current and long-term sections
of our Condensed Consolidated Balance Sheets. Litigation accruals are
recorded in the current section of our Consolidated Balance Sheets.

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

                                           December 31,   Increase              September 30,
                                               2005      (Decrease)   Payments      2006
                                           ------------  ----------   --------  -------------
<S>                                          <C>           <C>          <C>        <C>
Yorktown Refinery........................... $ 3,540       $    -       $ (461)    $ 3,079
Bloomfield Refinery.........................     229            -            -         229
Farmington Refinery.........................     570            -            -         570
Bloomfield Tank Farm (Old Terminal).........      42            -          (10)         32
Bloomfield - River Terrace..................      46           (5)         (41)          -
Other Projects..............................     514          138         (130)        522
                                             -------       ------       ------     -------
   Totals..................................  $ 4,941       $  133       $ (642)    $ 4,432
                                             =======       ======       ======     =======
</TABLE>


                                  29


<PAGE>
     Approximately $3,910,000 of our environmental accrual is for the
following projects discussed below:

     - $3,079,000 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

     - $32,000 for remediation of hydrocarbon contamination on and
       adjacent to the 5.5 acres that we own in Bloomfield, New Mexico.

     The remaining $522,000 of the accrual relates to:

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

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

     - miscellaneous remediation projects.

YORKTOWN ENVIRONMENTAL LIABILITIES

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

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

YORKTOWN 1991 ORDER

     In connection with the Yorktown acquisition, we assumed BP's
obligations under an administrative order issued in 1991 by the
Environmental Protection Agency ("EPA") under the Resource Conservation
and Recovery Act("RCRA"). The order requires an investigation of certain
areas of the refinery and the development of measures to correct any
releases of contaminants or hazardous substances found in these areas. A
RCRA Facility Investigation was conducted and approved conditionally by






                                  30


<PAGE>
EPA in 2002. Following the investigation, a Risk Assessment/Corrective
Measures Study ("RA/CMS") was finalized in 2003, which summarized the
remediation measures agreed upon by us, EPA, and the Virginia Department
of Environmental Quality ("VDEQ"). The RA/CMS proposes investigation,
sampling, monitoring, and cleanup measures, including the construction of
an on-site corrective action management unit that would be used to
consolidate hazardous solid materials associated with these measures.
These proposed actions relate to soil, sludge, and remediation wastes
relating to solid waste management units. Groundwater in the aquifers
underlying the refinery, and surface water and sediment in a small pond
and tidal salt marsh on the refinery property, also are addressed in the
RA/CMS.

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

     Our most current estimate of expenses associated with the consent
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
$12,000,000 and $16,000,000 of this amount will be incurred over an
initial four-year period, and additional expenditures of between
approximately $12,000,000 and $16,000,000 will be incurred over the
following four-year period, with the remainder 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 $3,079,000 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, 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 seven to eight years after EPA approves our clean-up plan
and authorizes its implementation.





                                  31


<PAGE>
BLOOMFIELD REFINERY ENVIRONMENTAL OBLIGATIONS

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

FARMINGTON REFINERY MATTERS

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

BLOOMFIELD TANK FARM (OLD TERMINAL)

     We have discovered hydrocarbon contamination adjacent to a 55,000
barrel crude oil storage tank that was located in Bloomfield, New Mexico.
We believe that all or a portion of the tank and the 5.5 acres we own on
which the tank was located may have been a part of a refinery owned by
various other parties, that to our knowledge, ceased operations in the
early 1960s. We received approval to conduct a pilot bioventing project
to address remaining contamination at the site, which was completed in
2001. Based on the results of the pilot project, we submitted a
remediation plan to OCD proposing the use of bioventing to address the
remaining contamination. This remediation plan was approved by OCD in
2002. We will continue remediation until natural attenuation has
completed the process of groundwater remediation. As of September 30,
2006, we had $32,000 recorded as an environmental liability for this
project.







                                  32


<PAGE>
YORKTOWN CONSENT DECREE

     In connection with the acquisition of the Yorktown refinery, we
assumed BP's responsibilities related to the Yorktown refinery under a
consent decree among various parties covering many locations (the
"Consent Decree"). We have substantially completed the modifications
required by the Consent Decree, and have expended approximately
$24,000,000 in connection with this matter through the third quarter of
2006. We expect to spend approximately $1,000,000 through 2008 in
connection with our remaining obligations under the Consent Decree. Since
our expenditures for this matter do not involve soil removal or similar
cleanup activities, we have not recorded an environmental liability for
this project and will capitalize or expense expenditures when incurred.
For a further discussion of this matter, refer to Note 17, "Commitments
and Contingencies", in our Consolidated Financial Statements included in
our Annual Report on Form 10-K for the year ended December 31, 2005.

BLOOMFIELD REFINERY - NMED DRAFT ORDER

     On June 21, 2006, we received a draft administrative compliance
order from 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 OCD.

     The draft order was open for public comments for 60 days. We
submitted comments during the public comment period. NMED will issue a
response to all written comments but has not yet done so. We anticipate





                                  33


<PAGE>
further discussions with NMED prior to issuance of a final order. We
currently do not know the nature and extent of any cleanup actions that
may be required under the final order and, accordingly, have not recorded
a liability for this matter.

BLOOMFIELD REFINERY - OCD COMPLIANCE ORDER

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

FOUR CORNERS REFINERIES - SETTLEMENT AGREEMENTS

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

     Our settlement does not require us to undertake soil removal or
similar cleanup activities and, accordingly, we have not recorded an
environmental liability for this matter and will capitalize or expense
expenditures when incurred. For a further discussion of this matter,
refer to Note 17, "Commitments and Contingencies", in our Consolidated
Financial Statements included in our Annual Report on Form 10-K for the
year ended December 31, 2005 (the "Form 10-K"). The estimated compliance
costs contained in the Form 10-K were the best estimates available at
that time. The costs that we actually incur, however, may be
substantially different from 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 operational options.





                                  34


<PAGE>
BLOOMFIELD REFINERY - EPA COMPLIANCE ORDER

     On October 12, 2005, we received an Administrative Compliance Order
from EPA in connection with a compliance evaluation inspection at the
Bloomfield refinery in 2000 and a follow-up inspection in early 2001. We
send waste water from the refinery's process units through an oil-water
separator, a series of aeration ponds that continue the treatment and
processing of oily water, and a series of evaporation ponds, before the
water is injected into a permitted deep well. EPA alleged that benzene
levels in the aeration ponds exceed permissible RCRA levels. EPA also
alleged that we failed to make a RCRA hazardous waste determination in
connection with waste water going into the aeration ponds. In May 2006, we
reached a settlement with EPA in the form of a consent agreement and paid
a civil penalty of $75,000. The settlement requires that we make equipment
modifications to reduce benzene levels in the waste water coming from the
refinery's process units. We currently estimate that we will incur capital
expenditures of approximately $3,400,000 to comply with the settlement,
the majority of which will be incurred in 2007. Since the settlement does
not require us to undertake any cleanup activities, we have not recorded
an environmental liability for this matter.

MTBE LITIGATION

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

YORKTOWN REFINERY FIRE INCIDENT (2005)

     As previously discussed in our Annual Report on Form 10-K for 2005
and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2006
and June 30, 2006, a fire occurred at our Yorktown refinery on November
25, 2005. Repairs related to this fire were completed in April 2006.



                                  35


<PAGE>
     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
September 30, 2006, we had received $75,740,000 of insurance proceeds
consisting of $26,800,000 for property claims and $49,840,000 for
business interruption claims. For the nine months ended September 30,
2006, we recorded a gain of $82,003,000 as a result of insurance
recoveries received related to the fire. Included in this gain was a
$13,260,000 receivable due from the insurance carriers which was received
in October 2006. The total amount received in connection with the
Yorktown fire was $89,000,000. No more proceeds will be received as all
of our claims have been resolved with our insurance carriers.

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. The
affected unit remains shut down, although the rest of the refinery is
operating at normal levels. We currently estimate that repairs to the
unit will cost approximately $20 million and should be completed by mid-
February 2007. Until the unit is repaired, we will sell more heating oil
than otherwise would be the case, which is currently 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 after the policy's 45-day waiting period is
exceeded. As of September 30, 2006, we wrote-off approximately $5,000,000
of property, plant and equipment to accounts receivable in connection
with the fire.























                                  36


<PAGE>
NOTE 11 - ACQUISITIONS:

     In July 2005, we acquired 100% of the common shares of Dial Oil. In
accordance with the conclusion of the allocation period for this
acquisition provided for by SFAS 141, "Business Combinations", we
recorded a $598,000 reduction in goodwill with a corresponding increase
of $180,000 in intangible assets, $139,000 in fixed assets and $279,000
in other miscellaneous assets and liabilities.

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

     In August 2006, we acquired certain assets from Amigo. We funded
this acquisition with cash on hand. These acquired assets include twenty-
five convenience stores, two bulk petroleum distribution plants, and a
transportation fleet. 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. The pro forma effect of the
acquisition on Giant's results of operations is immaterial.





























                                  37


<PAGE>
NOTE 12 - SUBSEQUENT EVENT:

     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. We currently estimate
that repairs to the affected units will cost approximately $9 million and
should be completed by 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.

     As a result of the fire, all of the refinery's units were shut down
for safety reasons. During the restart of the other units at the
refinery, the fluid catalytic cracker ("FCC") was damaged. The FCC is a
unit that alters the molecular composition of materials sent into the
unit in order to produce gasoline, diesel, fuel oil, heating oil, and
other products. We currently estimate that the repairs to the FCC will
cost less than $1,000,000 and are expected to be completed shortly. We
anticipate returning the refinery to normal operations, other than the
alkylation unit, by next week.



































                                  38


<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 153 service stations as of September 30, 2006. This
includes 12 service stations acquired in the Dial Oil Co. ("Dial Oil")
transaction on July 12, 2005, whose results of operations had previously
been included in the wholesale group from the date of the acquisition,
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 distributes commercial wholesale petroleum
products primarily in Arizona and New Mexico.

     In order to maintain and improve our financial performance, we are
focused on several critical and challenging objectives. 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:

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

     - minimizing operating expenses and capital expenditures;

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

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

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

     - evaluating opportunities for internal growth and growth by
       acquisition.

     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




                                  39


<PAGE>
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 compliance with the pre-merger notification
requirements of the Hart-Scott-Rodino Act, and approval by our
stockholders. The transaction is not subject to any financing conditions.

     In connection with the transaction, the parties received a request
from the Federal Trade Commission ("FTC") for additional information. The
parties are working cooperatively with the FTC staff and intend to
respond to the request in a timely manner. The transaction is currently
expected to close in the first quarter of 2007.

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

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

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





                                  40


<PAGE>
     -  assessing the possible impairment of long-lived assets;

     -  accounting for asset retirement obligations;

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

     -  accounting for inventories.

     There have been no changes to these policies in 2006.














































                                  41


<PAGE>
RESULTS OF OPERATIONS

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

     Below is operating data for our operations:

<TABLE>
<CAPTION>
                                                          Three Months Ended      Nine Months Ended
                                                            September 30,           September 30,
                                                        ---------------------   ---------------------
                                                           2006        2005        2006        2005
                                                        ---------   ---------   ---------   ---------
<S>                                                     <C>         <C>         <C>         <C>
Refining Group Operating Data:
  Four Corners Operations:
    Crude Oil/NGL Throughput (BPD)..............          26,572      29,867      28,108      29,500
    Refinery Sourced Sales Barrels (BPD)........          27,102      29,096      27,547      29,002
    Average Crude Oil Costs ($/Bbl).............        $  70.50    $  60.59    $  66.87    $  53.30
    Refining Margins ($/Bbl)....................        $  18.31    $  18.08    $  16.97    $  13.21

  Yorktown Operations:
    Crude Oil/NGL Throughput (BPD)..............          70,751      68,201      56,367      67,472
    Refinery Sourced Sales Barrels (BPD)........          68,360      70,936      54,626      68,430
    Average Crude Oil Costs ($/Bbl).............        $  68.92    $  58.05    $  66.65    $  50.75
    Refining Margins ($/Bbl)....................        $   3.81    $  11.25    $   3.40    $   8.52

Retail Group Operating Data:(1)(2)
(Continuing operations only)
  Fuel Gallons Sold (000's).....................          52,426      48,210     147,709     129,090
  Fuel Margins ($/gal)..........................        $   0.25    $   0.20    $   0.19    $   0.16
  Merchandise Sales ($ in 000's)................        $ 43,175    $ 40,527    $119,677    $108,139
  Merchandise Margins...........................              27%         27%         27%         27%
  Operating Retail Outlets at Period End........             153         136         153         136

Wholesale Group Operating Data:
    Fuel Gallons Sold (000's)...................         150,278     138,126     440,256     379,336
    Fuel Margins ($/gal)........................        $   0.07    $   0.08    $   0.06    $   0.07
    Lubricant Sales ($ in 000's)................        $ 18,388    $ 14,081    $ 51,802    $ 31,520
    Lubricant Margins...........................              14%         21%         14%         16%

(1) Includes statistics for 12 retail stores acquired in the Dial Oil transaction on July 12, 2005.
(2) Includes 21 operating stores acquired from Amigo in August 2006 for the three and nine months
    ended September 30, 2006.
</TABLE>







                                  42


<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      Nine Months Ended
                                                            September 30,           September 30,
                                                        ---------------------   ---------------------
                                                           2006        2005        2006        2005
                                                        ---------   ---------   ---------   ---------
<S>                                                     <C>         <C>         <C>         <C>
AVERAGE PER BARREL
------------------
Four Corners Operation
  Net sales...........................................  $   92.44   $   83.48   $   87.89   $   70.60
  Less cost of products...............................      74.13       65.40       70.92       57.39
                                                        ---------   ---------   ---------   ---------
  Refining margin.....................................  $   18.31   $   18.08   $   16.97   $   13.21
                                                        =========   =========   =========   =========
Yorktown Operation
  Net sales...........................................  $   75.24   $   72.52   $   73.87   $   61.42
  Less cost of products...............................      71.43       61.27       70.47       52.90
                                                        ---------   ---------   ---------   ---------
  Refining margin.....................................  $    3.81   $   11.25   $    3.40   $    8.52
                                                        =========   =========   =========   =========
Consolidated
  Net sales...........................................  $   80.12   $   75.71   $   78.57   $   64.15
  Less cost of products...............................      72.20       62.47       70.62       54.24
                                                        ---------   ---------   ---------   ---------
  Refining margin.....................................  $    7.92   $   13.24   $    7.95   $    9.91
                                                        =========   =========   =========   =========
</TABLE>












                                  43


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

Four Corners Operations
  Average sales price per produced barrel sold..........  $   92.44   $   83.48   $    87.89   $    70.60
  Times refinery sourced sales barrels per day..........     27,102      29,096       27,547       29,002
  Times number of days in period........................         92          92          273          273
                                                          ---------   ---------   ----------   ----------
  Refined product sales from produced products
    sold* (000's).......................................  $ 230,488   $ 223,462   $  660,962   $  558,979
                                                          =========   =========   ==========   ==========

Yorktown Operations
  Average sales price per produced barrel sold..........  $   75.24   $   72.52   $    73.87   $    61.42
  Times refinery sourced sales barrels per day..........     68,360      70,936       54,626       68,430
  Times number of days in period........................         92          92          273          273
                                                          ---------   ---------   ----------   ----------
  Refined product sales from produced products
    sold* (000's).......................................  $ 473,193   $ 473,274   $1,101,616   $1,147,411
                                                          =========   =========   ==========   ==========

Consolidated (000's)
  Sum of refined product sales from produced
    products sold*......................................  $ 703,681   $ 696,736   $1,762,578   $1,706,390
  Purchased product, transportation and other revenues..    110,921      49,706      390,232      146,199
                                                          ---------   ---------   ----------   ----------
  Net revenues..........................................  $ 814,602   $ 746,442   $2,152,810   $1,852,589
                                                          =========   =========   ==========   ==========

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
















                                  44


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

Four Corners Operations
  Average cost of products per produced barrel sold...  $   74.13   $   65.40   $    70.92   $    57.39
  Times refinery sourced sales barrels per day........     27,102      29,096       27,547       29,002
  Times number of days in period......................         92          92          273          273
                                                        ---------   ---------   ----------   ----------
  Cost of products for produced products
    sold (000's)......................................  $ 184,835   $ 175,065   $  533,342   $  454,388
                                                        =========   =========   ==========   ==========

Yorktown Operations
  Average cost of products per produced barrel sold...  $   71.43   $   61.27   $    70.47   $    52.90
  Times refinery sourced sales barrels per day........     68,360      70,936       54,626       68,430
  Times number of days in period......................         92          92          273          273
                                                        ---------   ---------   ----------   ----------
  Cost of products for produced products
    sold (000's)......................................  $ 449,232   $ 399,855   $1,050,912   $  988,246
                                                        =========   =========   ==========   ==========

Consolidated (000's)
  Sum of refined cost of produced products sold.......  $ 634,067   $ 574,920   $1,584,254   $1,442,634
  Purchased product, transportation and other
    cost of products sold.............................    103,507      41,174      366,710      121,835
                                                        ---------   ---------   ----------   ----------
  Total cost of products sold (excluding
    depreciation and amortization)....................  $ 737,574   $ 616,094   $1,950,964   $1,564,469
                                                        =========   =========   ==========   ==========
</TABLE>















                                  45


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

Fuel sales........................................   $ 151,969   $ 123,916   $ 403,045   $ 294,410
Less cost of fuel sold............................     138,815     114,179     374,960     273,134
                                                     ---------   ---------   ---------   ---------
Fuel margin.......................................   $  13,154   $   9,737   $  28,085   $  21,276
Number of gallons sold............................      52,426      48,210     147,709     129,090
Fuel margin per gallon............................   $    0.25   $    0.20   $    0.19   $    0.16

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

Fuel sales........................................   $ 151,969   $ 123,916   $ 403,045   $ 294,410
Excise taxes included in sales....................     (20,246)    (15,640)    (53,025)    (46,006)
                                                     ---------   ---------   ---------   ---------
Fuel sales, net of excise taxes...................     131,723     108,276     350,020     248,404
Merchandise sales.................................      43,175      40,527     119,677     108,139
Other sales.......................................       5,387       4,050      15,073      12,109
                                                     ---------   ---------   ---------   ---------
Net revenues......................................   $ 180,285   $ 152,853   $ 484,770   $ 368,652
                                                     =========   =========   =========   =========
Reconciliation of fuel cost of products sold to
total cost of products sold (excluding
depreciation and amortization) (000's)

Fuel cost of products sold........................   $ 138,815   $ 114,179   $ 374,960   $ 273,134
Excise taxes included in cost of products sold....     (20,246)    (15,640)    (53,025)    (46,006)
                                                     ---------   ---------   ---------   ---------
Fuel cost of products sold, net of excise taxes...     118,569      98,539     321,935     227,128
Merchandise cost of products sold.................      31,320      29,535      86,849      78,817
Other cost of products sold.......................       4,163       3,065      11,588       9,494
                                                     ---------   ---------   ---------   ---------
Total cost of products sold (excluding
  depreciation and amortization)..................   $ 154,052   $ 131,139   $ 420,372   $ 315,439
                                                     =========   =========   =========   =========

(1) Includes 12 retail stores acquired in the Dial Oil transaction on July 12, 2005.
(2) Includes 21 operating stores acquired from Amigo in August 2006 for the three and nine
    months ended September 30, 2006.
</TABLE>

                                  46


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

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

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

Fuel sales........................................   $ 375,004   $ 325,784   $1,075,755   $  799,579
Less cost of fuel sold............................     364,420     314,182    1,047,400      773,571
                                                     ---------   ---------   ----------   ----------
Fuel margin.......................................   $  10,584   $  11,602   $   28,355   $   26,008
Number of gallons sold............................     150,278     138,126      440,256      379,336
Fuel margin per gallon............................   $    0.07   $    0.08   $     0.06   $     0.07

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

Fuel sales........................................   $ 375,004   $ 325,784   $1,075,755   $  799,579
Excise taxes included in sales....................     (48,156)    (33,357)    (141,714)    (119,503)
                                                     ---------   ---------   ----------   ----------
Fuel sales, net of excise taxes...................     326,848     292,427      934,041      680,076
Lubricant sales...................................      18,389      14,081       51,802       31,520
Other sales.......................................       3,318       2,204       10,080        4,505
                                                     ---------   ---------   ----------   ----------
Net revenues......................................   $ 348,555   $ 308,712   $  995,923   $  716,101
                                                     =========   =========   ==========   ==========
Reconciliation of fuel cost of products sold to
total cost of products sold (excluding
depreciation and amortization) (000's)

Fuel cost of products sold........................   $ 364,420   $ 314,182   $1,047,400   $  773,571
Excise taxes included in cost of products sold....     (48,156)    (33,357)    (141,714)    (119,503)
                                                     ---------   ---------   ----------   ----------
Fuel cost of products sold, net of excise taxes...     316,264     280,825      905,686      654,068
Lubricant cost of products sold...................      15,796      11,461       44,748       26,787
Other cost of products sold.......................       1,089         259        3,637          724
                                                     ---------   ---------   ----------   ----------
Total cost of products sold (excluding
  depreciation and amortization)..................   $ 333,149   $ 292,545   $  954,071   $  681,579
                                                     =========   =========   ==========   ==========

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

                                  47


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

Net revenues - Refinery Group.....................   $  814,602  $  746,442  $2,152,810  $1,852,589
Net revenues - Retail Group.......................      180,285     152,853     484,770     368,652
Net revenues - Wholesale Group....................      348,555     308,712     995,923     716,101
Net revenues - Other..............................           90          67         224         378
Eliminations......................................     (177,584)   (122,849)   (459,475)   (277,411)
                                                     ----------  ----------  ----------  ----------
Total net revenues reported in Condensed
  Consolidated Statements of Operation............   $1,165,948  $1,085,225  $3,174,252  $2,660,309
                                                     ==========  ==========  ==========  ==========
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).......   $  737,574  $  616,094  $1,950,964  $1,564,469
Cost of products sold - Retail Group
  (excluding depreciation and amortization).......      154,052     131,139     420,372     315,439
Cost of products sold - Wholesale Group
  (excluding depreciation and amortization).......      333,149     292,545     954,071     681,579
Eliminations......................................     (177,584)   (122,849)   (459,475)   (277,411)
Other.............................................        4,940       3,479      13,458      11,006
                                                     ----------  ----------  ----------  ----------
Total cost of products sold (excluding
  depreciation and amortization) reported in
  Condensed Consolidated Statements of Operations.   $1,052,131  $  920,408  $2,879,390  $2,295,082
                                                     ==========  ==========  ==========  ==========
</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





                                  48


<PAGE>
financial measures to help analyze and compare companies in the industry
on the basis of operating performance. These financial measures should not
be considered as alternatives to segment operating income, revenues, costs
of sales and operating expenses or any other measure of financial
performance presented in accordance with accounting principles generally
accepted in the United States of America.

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

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

- the processing of relatively high cost feedstocks in a
  declining crude oil and finished products market, particularly
  late in the quarter;

        - the purchase of relatively higher priced crude oil because a
          supplier had a disruption in its operations;

        - relatively higher costs that began in the late spring for a
          blending component; and

        - delays in putting the ultra low sulfur diesel ("ULSD")
          unit into operation.

     This factor was partially offset by the following positive
     factors:

     -  stronger net refining margins for our Four Corners refineries for
        the three months ended in September 2006, due to, among other
        things:

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

     -  a recorded pre-tax gain of $46,050,000 as a result of insurance
        proceeds received related to the fire at our Yorktown refinery in
        2005.

     We believe the comparability of our continuing results of operations
for the nine months ended September 30, 2006 with the same period in 2005
was affected by, among others, the following factor:

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

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




                                  49


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

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

- the processing of relatively high cost feedstocks in a
  declining crude oil and finished products market, particularly
  late in the period;

        - the purchase of relatively higher priced crude oil because a
          supplier had a disruption in its operations;

        - relatively higher costs that began in the late spring for a
          blending component; and

        - delays in putting the ULSD unit into operation.

     This factor was partially offset by the following positive factors:

     -  stronger net refining margins for our Four Corners refineries for
        the nine months ended September 2006, due to, among other
        things:

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

     -  a recorded pre-tax gain of $82,003,000 as a result of insurance
        proceeds received related to the fire at our Yorktown refinery in
        2005.

     EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

     Our earnings from continuing operations before income taxes
decreased $8,268,000 and $1,653,000 for the three and nine months ended
September 30, 2006, respectively, compared to the same periods in 2005.
As noted above, this decrease was primarily due to an operating loss
recorded by our Yorktown refinery operations, 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 70,751 barrels per day in the third quarter of 2006
compared to 68,201 barrels per day in the third quarter of 2005. For the
nine months ended September 30, 2006 and 2005, the average throughput
rate was 56,367 and 67,472 barrels per day, respectively.




                                  50


<PAGE>
     Refining margins for the third quarter of 2006 were $3.81 per barrel
and were $11.25 per barrel for the third quarter of 2005. This decrease
in refining margins was due primarily to the following:

     - the processing of relatively high cost feedstocks in a
       declining crude oil and finished products market, particularly
       late in the quarter;

     - the purchase of relatively higher priced crude oil because a
       supplier had a disruption in its operations;

     - relatively higher costs that began in the late spring for a
       blending component; and

     - delays in putting the ULSD unit into operation.

     Refining margins for the nine months ended September 30, 2006 and
2005 were $3.40 per barrel and $8.52 per barrel, respectively. This
decrease in refining margins was due primarily to the following:

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

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

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

     - the processing of relatively high cost feedstocks in a
       declining crude oil and finished products market, particularly
       late in the period;

     - the purchase of relatively higher priced crude oil because a
       supplier had a disruption in its operations;

     - relatively higher costs that began in the late spring for a
       blending component; and

     - delays in putting the ULSD unit into operation.

     Revenues for our Yorktown refinery increased for the three and nine
months ended September 30, 2006 primarily due to an increase in finished
product prices.

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



                                  51


<PAGE>
     Depreciation and amortization expense for our Yorktown refinery
increased for the three and nine months ended September 30, 2006 due to
depreciation of additional assets that were put into service during the
first nine months of 2006.

     FOUR CORNERS REFINERIES

     Our Four Corners refineries operated at an average throughput rate
of approximately 26,572 barrels per day in the third quarter of 2006,
compared to 29,867 barrels per day in the third quarter of 2005. For the
nine months ended September 30, 2006 and 2005, the average throughput
rate was 28,108 and 29,500 barrels per day, respectively.

     Refining margins for the third quarter of 2006 were $18.31 per
barrel and were $18.08 per barrel for the third quarter of 2005. Refining
margins for the nine months ended September 30, 2006 and 2005 were $16.97
per barrel and $13.21 per barrel, respectively.

     Revenues for our Four Corners refineries increased for the three and
nine months ended September 30, 2006 primarily due to an increase in
finished product prices.

     Operating expenses for our Four Corners refineries increased for the
three and nine months ended September 30, 2006 primarily due to higher
employee costs, higher costs associated with purchased fuels, catalysts
and chemicals, and additional outside services used in connection with
our operations.

     Depreciation and amortization expense for our Four Corners
refineries decreased slightly for the three and nine months ended
September 30, 2006 as compared to the same period in 2005 due to certain
assets being fully depreciated in 2006.

     RETAIL GROUP

     Our retail group currently includes 12 convenience stores acquired
in the Dial Oil 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 and nine months ended September 30, 2005 do not include Amigo's 21
operating convenience stores.

     Average fuel margins were $0.25 per gallon for the three months
ended September 30, 2006 as compared to $0.20 per gallon for the same
period in 2005. Average fuel margins were $0.19 per gallon for the nine
months ended September 30, 2006 as compared to $0.16 per gallon for the
same period in 2005. Our retail fuel margin per gallon increased slightly
for the three and nine months ended September 30, 2006 due to higher
finished product sales prices as a result of increased demand.

     Fuel volumes sold for the three and nine months ended September 30,
2006 increased as compared to the same period a year ago due primarily to



                                  52


<PAGE>
favorable market conditions, improved demand over the same period in
2005, and the addition of Amigo's 21 convenience stores that were
acquired in August 2006.

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

     Revenues for our retail group increased for the three and nine
months ended September 30, 2006, compared to the same periods in 2005,
primarily due to an increase in fuel selling prices, an increase in fuel
volumes sold, and the addition of Amigo's 21 convenience stores that were
acquired in August 2006.

     Operating expenses increased for the three and nine months ended
September 30, 2006 as compared with the same periods in 2005, primarily
due to the addition of Amigo's 21 operating convenience stores that were
acquired in August 2006 and higher bank charges as a result of higher
fuel volumes and prices.

     Depreciation and amortization expense decreased for the three months
ended September 30, 2006 as compared to the same period in 2005 due to
certain assets being fully depreciated in 2006. Depreciation and
amortization expense decreased for the nine months ended September 30,
2006 as compared to the same period in 2005 due to a reduction in
amortization for our leasehold improvements and due to certain assets
being fully depreciated in 2006.

     WHOLESALE GROUP

     Our wholesale group includes Phoenix Fuel, Dial Oil's wholesale
business, and two bulk petroleum plants that were acquired from Amigo in
August 2006. Since the Amigo plants were acquired in the third quarter of
2006, the comparative statistics for the three and nine months ended
September 30, 2005 do not include the results of these plants.

     Average gasoline and diesel fuel margins for our wholesale group
were $0.07 per gallon for the three months ended September 30, 2006 as
compared to $0.08 for the same period in 2005. Average gasoline and
diesel fuel margins for our wholesale group were $0.06 per gallon for the
nine months ended September 30, 2006 as compared to $0.07 for the same
period in 2005. The decrease in average gasoline and diesel fuel margins
for the three and nine months ended September 30, 2006 was due primarily
to less favorable market conditions.

     Fuel volumes for the three and nine months ended September 30, 2006
increased as compared to the same period in 2005 primarily due to the
addition of Dial Oil's and Amigo's business to our operations and
favorable market conditions.

     Revenues for our wholesale group increased for the three and nine
months ended September 30, 2006 primarily due to higher price per gallon
sold, the addition of Dial Oil's business and Amigo's assets to our
operations, and favorable market conditions.


                                  53


<PAGE>
     Operating expenses for our wholesale group increased for the three
and nine months ended September 30, 2006 primarily due to higher fuel
costs, higher employee payroll and benefit costs, and the addition of
Dial Oil's business and Amigo's assets to our operations.

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

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

     For the three months ended September 30, 2006, selling, general and
administrative expenses decreased by approximately $2,595,000 as compared
to the same period in 2005 due primarily to lower management incentive
bonus accruals and lower supplemental retirement benefit accruals in the
period. For the nine months ended September 30, 2006, selling, general
and administrative expenses increased by approximately $975,000 as
compared to the same period in 2005 due primarily to higher employee and
outside services costs and the addition of Dial Oil's operations to our
business, partially offset by lower management incentive bonus accruals.

     INTEREST EXPENSE FROM CONTINUING OPERATIONS

     For the three and nine months ended September 30, 2006, interest
expense decreased approximately $630,000 and $5,145,000, respectively, as
compared to the same period in 2005. These decreases were primarily due
to an increase in interest capitalized to our long-term construction
projects, and a reduction in our long-term debt, which was part of our
debt reduction strategy implemented beginning in 2002.

     INCOME TAXES FROM CONTINUING OPERATIONS

     The effective tax rates for the three months ended September 30,
2006 and 2005 were approximately 37.5% and 40.8%, respectively. The
effective tax rates for the nine months ended September 30, 2006 and 2005
were approximately 37.4% and 41.0%, 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.

     DISCONTINUED OPERATIONS

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



                                  54


<PAGE>
OUTLOOK

     We currently believe that our refining fundamentals, overall, are
weaker now as compared to the same time last year due, in part, to the
narrowing of crack spreads from the post hurricane period of a year ago.
Further, we believe that our refining operations will be negatively
impacted as a result of the recent fires until our units become fully
operational. Same store fuel volumes for our retail group currently are
above the prior year's levels, however, fuel margins are lower. In
addition, same store merchandise sales for our retail group are above the
prior year's level, while same store merchandise margins have remained
stable. The wholesale group currently is experiencing stable margins and
volumes as compared to the same time last year. Our businesses are,
however, very volatile and there can be no assurance that currently
existing conditions will continue for any of our business segments.

LIQUIDITY AND CAPITAL RESOURCES

     CAPITAL STRUCTURE

     At September 30, 2006, we had long-term debt of $275,251,000. At
December 31, 2005, we had long-term debt of $274,864,000. There was no
current portion of long-term debt outstanding at September 30, 2006 or at
December 31, 2005.

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

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

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

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

     At September 30, 2006, our long-term debt was 36.3% of total
capital. At December 31, 2005, it was 40.7%. Our net debt (long-term debt
less cash and cash equivalents) to total net capitalization (long-term
debt less cash and cash equivalents plus total stockholders' equity)
percentage at September 30, 2006, was 31.6%. At December 31, 2005, this
percentage was 21.7%.

     The indentures governing our notes and our credit facility contain
restrictive covenants and other terms and conditions that if not
maintained, if violated, or if certain conditions are met, could result
in default, affect our ability to borrow funds, make certain payments, or





                                  55


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

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

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

     CASH FLOW FROM OPERATIONS

     Our operating cash flow decreased by $40,615,000 for the nine months
ended September 30, 2006 compared to the nine months ended September 30,
2005. This decrease primarily resulted from a decrease in our operating
income as a result of the 2005 Yorktown fire. Our 2006 operating income
includes an $82,000,000 gain from our settlement of claims with our
insurance carriers in connection with the fire, of which $26,800,000
pertains to proceeds received for property damage, which is included in
"investing activities".

     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, however,
the transaction with Western is expected to close in the first quarter of
2007.



                                  56


<PAGE>
     Working capital at September 30, 2006 consisted of current assets of
$410,282,000 and current liabilities of $226,143,000 or a current ratio
of 1.81:1. At December 31, 2005, the current ratio was 2.12:1, with
current assets of $442,355,000 and current liabilities of $208,508,000.

     CAPITAL EXPENDITURES AND RESOURCES

     During 2006, we currently expect to spend $230,800,000 on capital
expenditures, excluding any acquisitions. Net cash used in investing
activities for purchases of property, plant and equipment totaled
approximately $181,562,000 for the nine months ended September 30, 2006
and $48,390,000 for the nine months ended September 30, 2005.
Expenditures made in 2006 primarily were for operational and
environmental projects for the refineries.

     We received proceeds of approximately $2,957,000 from the sale of
property, plant and equipment and other assets in the first nine months
of 2006 and $2,213,000 for the same period in 2005. In addition, we
received $26,800,000 of insurance proceeds for property claims filed as a
result of the fire at our Yorktown refinery that occurred in the fourth
quarter of 2005. We also have received $48,940,000 of insurance proceeds
for claims filed under our business interruption insurance coverage in
connection with the fire. In October 2006, we received an additional
$13,260,000 of insurance proceeds for property and business interruption
claims. The total amount received in connection with the Yorktown fire
was $89,000,000. No more proceeds will be received in connection with the
2005 fire at our Yorktown refinery as all of our claims have been
resolved with our insurance carriers.

     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 2006, and in future years, will depend on, among
other things, general business conditions and results of operations, 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.





                                  57


<PAGE>
     RISK MANAGEMENT

     We are exposed to various market risks, including changes in certain
commodity prices and interest rates. To manage these normal business
exposures, we may, from time to time, use commodity futures and options
contracts to reduce price volatility, to fix margins in our refining and
marketing operations, and to protect against price declines associated
with our crude oil and finished products inventories. Our policies for the
use of derivative financial instruments set limits on quantities, require
various levels of approval, and require review and reporting procedures.
We do not have any open positions related to this matter at September 30,
2006. 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 September 30, 2006, there were no direct borrowings
outstanding under this facility.

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

     We recently renewed our property insurance coverage and our business
interruption insurance coverage. Due primarily to the fires experienced
at our refineries in 2005 and 2006, the cost of such coverage increased
by approximately $12,000,000. In addition, our deductibles were increased
and the waiting period for business interruption coverage was lengthened.
We also agreed with our insurance carriers that the maximum amount that
we can recover for the fires that occurred at Yorktown and Ciniza in 2006
is an aggregate of $30,000,000 unless we agree to an additional increase
in our recently revised insurance premiums.

     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 health,
safety and the environment affect nearly all of our operations. As is the
case with other companies engaged in similar industries, we face
significant exposure from actual or potential claims and lawsuits,
brought by either governmental authorities or private parties, alleging
non-compliance with environmental, health, and safety laws and





                                  58


<PAGE>
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.

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

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

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






                                  59


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

     -  the initiation or modification of cleanup activities.

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

     In August 2006, we entered into a final administrative consent order
with EPA, pursuant to which we will implement the agreed-upon corrective
action measures to address certain contaminants at our Yorktown refinery.
For a further discussion of this matter, see Note 10 to our Condensed
Consolidated Financial Statements, captioned "Commitments and
Contingencies".

     OTHER

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

     As a result of the declining production of crude oil in the Four
Corners area in recent years, we have not been able to cost-effectively
obtain sufficient amounts of crude oil to operate our Four Corners
refineries at full capacity. Crude oil utilization rates for our Four
Corners refineries have declined from approximately 67% for 2003 to
approximately 61% for the first nine months of 2006. Our current
projections of Four Corners crude oil production indicate that our crude
oil demand will exceed the crude oil supply that is available from local
sources for the foreseeable future and that our crude oil capacity
utilization rates at our Four Corners refineries will continue to decline
unless circumstances change.

     On August 1, 2005, we acquired an idle crude oil pipeline system
that originates near Jal, New Mexico and is connected to a company-owned
pipeline network that directly supplies crude oil to the Bloomfield and
Ciniza refineries. When operational, the pipeline will have sufficient
crude oil transportation capacity to allow us to again operate both
refineries at maximum rates. In order to operate the pipeline, we will
have to obtain approximately 750,000 barrels of linefill.

     Startup of the pipeline is subject to, among other things, a final
engineering evaluation of the system. The hydrotesting of the pipeline




                                  60


<PAGE>
was completed in July 2006, and we currently are continuing to do the
work necessary to re-commission the line. As a result of project delays,
it currently is anticipated that the pipeline will become operational in
February 2007 with new crude oil at the refineries by the end of the
first 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
adverse effect on our Four Corners refinery operations and on our overall
operations.

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


                                  61


<PAGE>
     EPA has issued rules pursuant to the Clean Air Act that require
refiners to reduce the sulfur content of gasoline and diesel fuel. Some
refiners began producing gasoline that satisfies low sulfur gasoline
standards in 2004, with most refiners required to be in full compliance
for all production in 2006. Most refiners also were required to begin
producing highway diesel fuel that satisfies ultra low sulfur diesel
standards by June 2006. All refiners and importers must be in full
compliance with the new standards by the end of 2010. Our Yorktown and
Ciniza refineries did not begin producing ultra low sulfur diesel fuel by
the June 2006 start date. In May 2006, however, we received temporary
relief from EPA that allowed us, subject to certain conditions, to remain
in compliance with the low sulfur diesel standards. We subsequently
determined that we could comply with the ultra low sulfur standards
applicable to our Ciniza refinery without the temporary relief granted by
EPA. We also determined that we did not need the relief that EPA had
previously granted to our Ciniza and Bloomfield refineries under the
geographic phase-in area provisions of the agency's low sulfur gasoline
regulations. In September 2006, EPA approved our requests to vacate both
the temporary relief granted to our Ciniza refinery under the ultra low
sulfur diesel program and the relief that our Ciniza and Bloomfield
refineries had received under the geographic phase-in area provisions of
the low sulfur gasoline program. For a further discussion of matters
relating to our production of gasoline and diesel fuel in relation to
EPA's low sulfur standards, refer to the discussion under Risk Factors in
Item 1A in Part II of this Report on Form 10-Q.

     In August 2006, Congress passed the Pension Protection Act of 2006
(the "Pension Act"), which was signed into law by the President. We
currently believe the Pension Act will have minimal impact on our benefit
programs.

     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





                                  62


<PAGE>
obligation to publicly update these forward-looking statements to reflect
new information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events might or might
not occur. Actual results and trends in the future may differ materially
depending on a variety of important factors.

     These important factors include the following:

     - the risk that the Western transaction will not close on schedule
       or at all;

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

     - our ability to negotiate new crude oil supply contracts;

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

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

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

     - our ability to adequately control capital and operating expenses;

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

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

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

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




                                  63


<PAGE>
     - unplanned or extended shutdowns in refinery operations;

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

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

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

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

     - unexpected environmental remediation costs;

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

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

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

     - the risk that 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 and costs associated with reducing the
       sulfur content of motor fuel) or that we will be unable to
       complete such projects (including motor fuel sulfur reduction
       projects) by applicable regulatory compliance deadlines;

     - the risk that our 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 qualify to produce diesel credits under
       EPA's low sulfur program;

     - the risk that EPA will deny our request to utilize gasoline
       credits generated in 2006 at our Ciniza and Bloomfield
       refineries;



                                  64


<PAGE>
     - the risk that the value of the diesel credits that we expect to
       generate at our Ciniza and Bloomfield refineries will not exceed
       the cost of purchasing the gasoline credits we may need as a
       result of vacating the election by our Ciniza and Bloomfield
       refineries under EPA's geographic phase-in area regulations (the
       "GPA Election");

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

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

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

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

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

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

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

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

     - 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;


                                  65


<PAGE>
     - the risk that repairs to the units at our Yorktown and Ciniza
       refineries damaged by fire in 2006 will cost more to repair than
       currently estimated or take longer than currently estimated;

     - 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 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.

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.




                                  66


<PAGE>
                                PART II

                           OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

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

ITEM 1A.  RISK FACTORS

     An investment in our common shares involves risk. A discussion of
these risks can be found in our Annual Report on Form 10-K for the year
ended December 31, 2005 (the "Form 10-K") and our Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2006 and June 30, 2006
(collectively, the "Forms 10-Q"). Set forth below are material changes
that have occurred to the risk factors disclosed in the Form 10-K and the
Forms 10-Q. Before investing in our shares, you should carefully consider
the specific factors described below and in the Form 10-K and the Forms
10-Q, together with the cautionary statements under the caption "Forward-
Looking Statements" in Item 2 of this Report, and the other information
included in this report.

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

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

     We assumed certain liabilities and obligations in connection with
our purchase of the Yorktown refinery in 2002 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 indemnify BP for losses incurred in
connection with or related to the liabilities and obligations we have
assumed. We only have limited indemnification rights against BP.




                                  67


<PAGE>
     Environmental obligations assumed by us include BP's responsibilities
related to the Yorktown refinery under a consent decree among various
parties covering many locations (the "Consent Decree"). As applicable to
the Yorktown refinery, the Consent Decree requires, among other things, a
reduction of nitrous oxides, sulfur dioxide, and particulate matter
emissions and upgrades to the refinery's leak detection and repair
program. We have substantially completed the modifications required by the
Consent Decree, and have expended approximately $24,000,000 through the
third quarter of 2006. We expect to expend approximately $1,000,000
through 2008 for the remaining equipment modifications. We do not
anticipate any significant increase in current operating expenses when all
equipment modifications required by the Consent Decree are completed.

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

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

     Our most current estimate of expenses associated with the order is
between 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 $12,000,000 and $16,000,000 of this amount will be
incurred over an initial four-year period, and additional expenditures of
between approximately $12,000,000 and $16,000,000 will be incurred over the
following four-year period, with the remainder 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




                                  68


<PAGE>
changes in costs of labor and materials. We may be able to receive
reimbursement for some of the expenditures associated with the plan due to
the environmental reimbursement provisions included in the purchase agreement
for the refinery.

     As part of the consent order cleanup plan, 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 seven to eight years after EPA approves our clean-up plan
and authorizes its implementation.

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

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

     As previously mentioned in our Annual Report on Form 10-K for the
year ended December 31, 2005 and our Quarterly Reports on Form 10-Q for
the quarters ended March 31, 2006 and June 30, 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 September 30, 2006, we had received
$75,740,000 of insurance proceeds consisting of $26,800,000 for property
claims and $49,840,000 for business interruption claims. For the nine
months ended September 30, 2006, we recorded a gain of $82,003,000 as a
result of insurance recoveries received related to the fire. Included in
this gain was $13,260,000 of receivable from the insurance carriers. The
$13,260,000 proceeds were received in October 2006. No more proceeds will
be received in connection with the 2005 fire at our Yorktown refinery as
all of our claims have been resolved with our insurance carriers.

     On September 30, 2006, a fire occurred at our Yorktown refinery in
the processing unit required to produce ultra low sulfur diesel fuel. The
affected unit remains shut down, although the rest of the refinery is
operating at normal levels. We currently estimate that repairs to the




                                  69


<PAGE>
unit will cost approximately $20 million and should be complete by mid-
February 2007. Until the unit is repaired, we will sell more heating oil
than otherwise would be the case, which is currently 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 after the policy's 45-day
waiting period is exceeded. As of September 30, 2006, we wrote-off
$5,000,000 of property, plant and equipment to accounts receivable in
connection with the 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. We currently estimate
that repairs to the affected units will cost approximately $9 million and
should be completed by 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.

     As a result of the fire, all of the refineries' units were shut down
for safety reasons. During the restart of the other units, the fluid
catalytic cracker ("FCC") was damaged. The FCC is a unit that alters the
molecular composition of materials sent into the unit in order to produce
gasoline, diesel, fuel oil, heating oil, and other products. We currently
estimate that the repairs to the FCC will cost less than $1,000,000 and
are expected to be completed shortly. We anticipate returning the
refinery to normal operations, other than the alkylation unit, by next
week.

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

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



                                  70


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

     We currently anticipate that we will spend between approximately
$190,000,000 to $220,000,000 to comply with EPA's low sulfur standards at
our Yorktown refinery. Through September 30, 2006, we have spent
approximately $91,000,000 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.

     In our Form 10-Q for the period ending June 30, 2006, we estimated
that we would spend between approximately $40,000,000 to $55,000,000 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. Through September 30, 2006, we
have spent approximately $38,000,000 at our Four Corners refineries.
There are a number of factors that could affect our cost of compliance
with the low sulfur standards. In particular, 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.

     The ultra low sulfur diesel units at our Ciniza and Yorktown
refineries have been completed, and we believe insurance proceeds, less our
$1,000,000 deductible, will cover the repairs necessary at our Yorktown
refinery following the September 2006 fire in the Yorktown ultra low sulfur
diesel unit. We are making ultra low sulfur diesel at our Bloomfield
refinery, but may make additional modifications related to the production
of this fuel in the future. In addition, we are planning to make additional
modifications at all of our refineries to produce low sulfur gasoline.

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

                                  71


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

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

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

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

     EPA imposed a number of conditions on us in return for relieving us
from the June 1, 2006 deadline. These conditions include a requirement that




                                  72


<PAGE>
we must produce specified volumes of ultra low sulfur highway diesel at
each refinery. Additionally, in order to satisfy a Yorktown condition, we
have been purchasing diesel credits in connection with diesel fuel
production that does not satisfy the ultra low sulfur diesel standards. We
have spent approximately $1,000,000 on credits to date.

     Although we began producing ultra low sulfur diesel fuel at our
Yorktown refinery in early August, on September 30, 2006, a fire occurred
in the Yorktown ultra low sulfur diesel processing unit. The affected
unit has been shut down, and the rest of the refinery continues to
operate at normal levels. This temporary closure of the ultra low sulfur
diesel processing unit will affect our ability to satisfy the EPA
condition that we produce specified volumes of ultra low sulfur diesel
fuel, which could require that we purchase more diesel credits for use at
Yorktown in the future. At this time we cannot estimate whether we will
be required by EPA to purchase additional diesel credits or whether EPA
will impose any new or modified conditions.

     We may sell more high sulfur heating oil and less diesel fuel at
Yorktown than otherwise would be the case as a result of the Yorktown
compliance plan, including the additional conditions imposed on us by EPA
as a result of our failing to meet the June 1, 2006 ultra low sulfur
diesel requirements. We also are selling more high sulfur heating oil and
less diesel fuel at Yorktown than otherwise would be the case as a result
of the temporary closure of the ultra low sulfur diesel processing unit.
At most times, high sulfur heating oil sells for a lower margin than ultra
low sulfur diesel fuel. This may have an impact on our results of
operation.

     Our Ciniza refinery began producing ultra low sulfur diesel fuel in
mid-June. Our Bloomfield refinery began producing ultra low sulfur diesel
prior to June 1, 2006.

     After evaluating our operations at the Ciniza and Bloomfield
refineries, in August 2006, we asked EPA to vacate our GPA Election, as
well as the associated temporary relief from the June 1, 2006 deadline
that we received for our Ciniza refinery. In September 2006 EPA granted
our requests to vacate. We believe that, as a result of the granting of
our requests, we will have additional operational flexibility at our
Ciniza and Bloomfield refineries, as well as the potential to generate
diesel credits. In general, diesel credits can be generated, and sold to
others, if more ultra low sulfur diesel fuel is produced at a refinery
than is required by the applicable standards. We believe we should be
able to generate diesel credits at Ciniza and Bloomfield through 2009. We
will, however, need to use gasoline credits at our Ciniza and Bloomfield
refineries to satisfy the low sulfur gasoline standards that, as a result
of vacating our GPA Election, will apply to our GPA sales beginning in
2007.

     We will need to use gasoline credits until refinery modifications
are completed at both refineries that would enable all of their gasoline




                                  73


<PAGE>
production to satisfy the low sulfur standards. These modifications are
currently planned to be completed in 2007. If our planned refinery
modifications do not reduce gasoline sulfur levels to the required
standards, it is possible that some third party gasoline credits would
have to be purchased even after such modifications are completed.

     Both our Ciniza and Bloomfield refineries have generated gasoline
credits in connection with 2005 operations. We may be able to use these
2005 credits to satisfy the low sulfur gasoline standards until the
planned refinery modifications are completed. If these credits are
insufficient, we would need to purchase gasoline credits from third
parties. We have also petitioned EPA to recognize that we generated
additional credits in 2006. We do not know whether they will grant our
request.

     We anticipate that the potential value of the diesel credits that we
expect to generate at Ciniza and Bloomfield as a result of vacating our
GPA Election will exceed the cost of purchasing gasoline credits. There
can be no assurance, however, that we will qualify to produce diesel
credits, or that EPA will agree that we have generated 2006 gasoline
credits. There can also be no assurance that the value of any diesel
credits that we generate will exceed the cost of any gasoline credits
that we may need to purchase as, among other things, we expect the market
price of gasoline and diesel credits to fluctuate. It is possible that
the net effect of these purchases and sales could have a material
positive or negative effect on our operations.





























                                  74


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

(a)  Exhibits:

      2.1   Agreement and Plan of Merger, dated August 26, 2006, among
            Giant Industries, Inc., Western Refining, Inc. and New
            Acquisition Corporation. Incorporated by reference to Exhibit
            2.1 to the Company's Current Report on Form 8-K dated August
            30, 2006.

      2.2   Amendment No. 1 to Agreement and Plan of Merger, dated
            November 12, 2006, among Giant Industries, Inc., Western
            Refining, Inc. and New Acquisition Corporation. Incorporated
            by reference to Exhibit 2.1 to the Company's Current Report
            on Form 8-K dated November 13, 2006.

     10.1   Consulting and Non-Competition Agreement, dated August 26,
            2006, between Fred L. Holliger and Western Refining, Inc.
            Incorporated by reference to Exhibit 10.1 to the Company's
            Current Report on Form 8-K dated August 30, 2006.

     10.2   Amendment No. 2 to Consulting Agreement, dated November 12,
            2006, between Fred L. Holliger and Western Refining, Inc.
            Incorporated by reference to Exhibit 10.1 to the Company's
            Current Report on Form 8-K dated November 13, 2006.

     10.3*  First Amendment to the Giant Industries, Inc. and Affiliated
            Companies Deferred Compensation Plan, dated November 13,
            2006.

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


                                  75


<PAGE>
     (ii)  On August 30, 2006, we filed a Form 8-K dated August 30, 2006,
           relating to the acquisition of us by Western Refining, Inc.
           ("Western").

     (iii) On October 12, 2006, we filed a Form 8-K dated October 12,
           2006, containing a press release relating to the Western
           transaction.

     (iv)  On November 13, 2006, we filed a Form 8-K dated November 13,
           2006, regarding the amendment of the terms of the Western
           transaction.

     (v)   On November 14, 2006, we filed a Form 8-K dated November 14,
           2006, containing a press release detailing our earnings for
           the quarter ended September 30, 2006.








































                                  76


<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 September 30, 2006 to be signed on its behalf by the undersigned
thereunto duly authorized.

                        GIANT INDUSTRIES, INC.


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

Date: November 14, 2006





































                                  77
48