SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                  FORM 10-Q


(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

              For the quarterly period ended March 31, 2004

                                     OR

[ ]  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 or other jurisdiction of                 (I.R.S. Employer
   incorporation or organization)                Identification No.)


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


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

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 such filing requirements for the past 90 days.

                              Yes [X]    No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                              Yes [ ]    No [X]

Number of Common Shares outstanding at May 11, 2004: 12,154,401 shares.


<PAGE>
                   GIANT INDUSTRIES, INC. AND SUBSIDIARIES
                                     INDEX


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

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

          Consolidated Balance Sheets March 31, 2004
          and December 31, 2003 (Unaudited)...........................   1

          Consolidated Statements of Earnings for the
          Three Months Ended March 31, 2004 and 2003 (Unaudited)......   2

          Consolidated Statements of Cash Flows for the Three
          Months Ended March 31, 2004 and 2003 (Unaudited)............   3

          Notes to Consolidated Financial Statements (Unaudited)......  4-36

Item 2  - Management's Discussion and Analysis of
          Financial Condition and Results of Operations............... 37-52

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

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

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

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

Item 2  - Changes in Securities, Use of Proceeds and
          Issuer Purchases of Equity Securities.......................  54

Item 4  - Submission of Matters to a Vote of Security Holders.........  54

Item 6  - Exhibits and Reports on Form 8-K............................  55

SIGNATURE.............................................................  58



<PAGE>
<TABLE>
                                           PART I
                                   FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

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

<CAPTION>
                                                          March 31, 2004   December 31, 2003
                                                          --------------   -----------------
<S>                                                           <C>              <C>
ASSETS
Current assets:
  Cash and cash equivalents.............................      $  70,281        $  27,263
  Receivables, net......................................         90,823           82,788
  Inventories...........................................        107,925          133,726
  Prepaid expenses and other............................          6,658            8,030

                                                              ---------        ---------
    Total current assets................................        275,687          251,807
                                                              ---------        ---------
Property, plant and equipment...........................        632,596          631,355
Less accumulated depreciation and amortization..........       (243,718)        (236,441)
                                                              ---------        ---------
                                                                388,878          394,914
                                                              ---------        ---------
Goodwill................................................         28,255           24,578
Assets held for sale....................................          1,318            3,351
Other assets............................................         26,241           25,004
                                                              ---------        ---------
                                                              $ 720,379        $ 699,654
                                                              =========        =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of long-term debt.....................      $  12,454        $  11,128
  Accounts payable......................................         98,649           86,651
  Accrued expenses......................................         59,002           56,629
                                                              ---------        ---------
    Total current liabilities...........................        170,105          154,408
                                                              ---------        ---------
Long-term debt, net of current portion..................        352,364          355,601
Deferred income taxes...................................         29,692           28,039
Other liabilities and deferred income...................         23,266           22,170
Commitments and contingencies (Note 12)
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, 12,621,081 and
    12,537,535 shares issued............................            126              126
  Additional paid-in capital............................         75,659           74,660
  Retained earnings.....................................        105,621          101,104
                                                              ---------        ---------
                                                                181,406          175,890
  Less common stock in treasury - at cost,
    3,751,980 shares....................................        (36,454)         (36,454)
                                                              ---------        ---------
    Total stockholders' equity..........................        144,952          139,436
                                                              ---------        ---------
                                                              $ 720,379        $ 699,654
                                                              =========        =========

See accompanying notes to consolidated financial statements.

                                             1
</TABLE>


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

<CAPTION>
                                                                       Three Months
                                                                      Ended March 31,
                                                                   ---------------------
                                                                      2004        2003
                                                                   ---------   ---------
<S>                                                                <C>         <C>
Net revenues..................................................     $ 541,596   $ 480,985
Cost of products sold (excluding depreciation
  and amortization)...........................................       461,374     410,097
                                                                   ---------   ---------
Gross margin..................................................        80,222      70,888
Operating expenses............................................        44,448      38,949
Depreciation and amortization.................................         9,145       9,114
Selling, general and administrative expenses..................         8,200       7,024
Net loss on disposal/write-down of assets.....................            14         410
                                                                   ---------   ---------
Operating income..............................................        18,415      15,391
Interest expense..............................................        (9,361)    (10,159)
Amortization of financing costs...............................          (958)     (1,192)
Interest and investment income................................            39          24
                                                                   ---------   ---------
Earnings from continuing operations before income taxes.......         8,135       4,064
Provision for income taxes....................................         3,618       1,681
                                                                   ---------   ---------
Earnings from continuing operations before cumulative
  effect of change in accounting principle....................         4,517       2,383

Discontinued operations, net of income tax benefit
  of $35......................................................             -         (53)

Cumulative effect of change in accounting principle,
  net of income tax benefit of $468 (Note 4)..................             -        (704)
                                                                   ---------   ---------
Net earnings..................................................     $   4,517   $   1,626
                                                                   =========   =========
Net earnings (loss) per common share:
  Basic
    Continuing operations.....................................     $    0.51   $    0.28
    Discontinued operations...................................             -       (0.01)
    Cumulative effect of change in accounting principle.......             -       (0.08)
                                                                   ---------   ---------
                                                                   $    0.51   $    0.19
                                                                   =========   =========
  Assuming dilution
    Continuing operations.....................................     $    0.50   $    0.28
    Discontinued operations...................................             -       (0.01)
    Cumulative effect of change in accounting principle.......             -       (0.08)
                                                                   ---------   ---------
                                                                   $    0.50   $    0.19
                                                                   =========   =========

See accompanying notes to consolidated financial statements.

                                             2
</TABLE>


<PAGE>
<TABLE>
                             GIANT INDUSTRIES, INC. AND SUBSIDIARIES
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           (Unaudited)
                                         (In thousands)
<CAPTION>
                                                                           Three Months
                                                                          Ended March 31,
                                                                      -----------------------
                                                                         2004          2003
                                                                      ---------     ---------
<S>                                                                   <C>           <C>
Cash flows from operating activities:
  Net earnings.....................................................   $   4,517     $   1,626
  Adjustments to reconcile net earnings to net
    cash provided by operating activities:
      Depreciation and amortization, including
        discontinued operations....................................       9,145         9,373
      Amortization of financing costs..............................         958         1,192
      Deferred income taxes........................................       2,477         1,410
      Deferred crude oil purchase discounts........................         750             -
      Cumulative effect of change in accounting principle, net.....           -           704
      Net loss on the disposal/write-down of assets
        included in continuing operations..........................          14           410
      Net gain on disposal of discontinued operations..............           -          (137)
      Other........................................................         114           124
      Changes in operating assets and liabilities:
        Increase in receivables....................................      (7,962)       (3,363)
        Decrease in inventories....................................      25,801         8,104
        Decrease in prepaid expenses and other.....................       1,251           544
        Increase in accounts payable...............................      11,999         6,681
        Increase in accrued expenses...............................       2,747         6,618
                                                                      ---------     ---------
Net cash provided by operating activities..........................      51,811        33,286
                                                                      ---------     ---------
Cash flows from investing activities:
  Capital expenditures.............................................      (3,213)       (5,272)
  Yorktown refinery acquisition contingent payments................      (4,049)       (3,986)
  Proceeds from sale of property, plant and equipment
    and other assets...............................................         560         2,608
                                                                      ---------     ---------
Net cash used by investing activities..............................      (6,702)       (6,650)
                                                                      ---------     ---------
Cash flows from financing activities:
  Payments of long-term debt.......................................      (2,007)       (3,381)
  Proceeds from line of credit.....................................           -        23,000
  Payments on line of credit.......................................           -       (33,000)
  Deferred financing costs.........................................        (182)          (14)
  Proceeds from exercise of stock options..........................          98             -
                                                                      ---------     ---------
Net cash used by financing activities..............................      (2,091)      (13,395)
                                                                      ---------     ---------
Net increase in cash and cash equivalents..........................      43,018        13,241
  Cash and cash equivalents:
    Beginning of period............................................      27,263        10,168
                                                                      ---------     ---------
    End of period..................................................   $  70,281     $  23,409
                                                                      =========     =========

Significant Noncash Investing and Financing Activities. On February 25, 2004, we contributed
49,046 newly issued shares of our common stock, valued at $900,000, to our 401(k) plan as a
discretionary contribution for the year 2003. On January 1, 2003, in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset Retirement Obligations,"
we recorded an asset retirement obligation of $2,198,000, asset retirement assets of $1,580,000
and related accumulated depreciation of $674,000. We also reversed a previously recorded asset
retirement obligation for $120,000, and recorded a cumulative effect adjustment of $1,172,000
($704,000 net of taxes). See Note 4.

See accompanying notes to consolidated financial statements.

                                             3
</TABLE>


<PAGE>
                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               (Unaudited)

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION:

ORGANIZATION

     Giant Industries, Inc., through our subsidiary Giant Industries
Arizona, Inc. and its subsidiaries, refines and sells petroleum products.
We do this:

     -  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 Phoenix Fuel Co., Inc. subsidiary distributes
commercial wholesale petroleum products primarily in Arizona.

     We have three business units:

     -  Our refining group,
     -  Our retail group, and
     -  Phoenix Fuel

     See Note 3 for a further discussion of business segments.

Basis of Presentation:

     The accompanying unaudited consolidated financial statements have
been prepared in accordance with accounting principles generally accepted
in the United States of America, hereafter referred to as generally
accepted accounting principles, for interim financial information and with
the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and notes required
by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments and
reclassifications considered necessary for a fair and comparable
presentation have been included. These adjustments and reclassifications
are of a normal recurring nature, with the exception of the cumulative
effect of a change in accounting for asset retirement obligations (see
Note 4) and discontinued operations (see Note 6). Operating results for
the three months ended March 31, 2004 are not necessarily indicative of
the results that may be expected for the year ending December 31, 2004.
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, 2003.

     In December 2003, the Accounting Standards Executive Committee
("AcSEC") of the American Institute of Certified Public Accountants
("AICPA") submitted an exposure draft of a proposed Statement of Position
("SOP"), "Accounting for Certain Costs Related to Property, Plant, and

                                     4


<PAGE>
Equipment" to the Financial Accounting Standards Board ("FASB") for
clearance. At March 31, 2004, and December 31, 2003, we had $9,492,000 and
$10,418,000, respectively, of deferred turnaround costs included in
property, plant and equipment on our balance sheet and classified as
machinery and equipment. In the current draft of the SOP, costs of planned
major maintenance activities are not considered a separate property, plant
and equipment asset or component. Those costs should be charged to expense
as incurred, except for acquisitions or replacements of components that
are capitalizable under the in-service stage guidance of this SOP. We
currently understand that the final SOP will be deferred indefinitely,
although the FASB and the Securities and Exchange Commission continue to
discuss the issues involved. We are evaluating the effect the SOP will
have on our financial position and results of operations, which may
include the expensing of certain deferred costs and expensing significant
portions of future turnaround costs as incurred.

     We have made certain reclassifications to our 2003 financial
statements and notes to conform to the financial statement classifications
used in the current year. These reclassifications relate primarily to
discontinued operations reporting. These reclassifications had no effect
on reported earnings or stockholders' equity.

































                                     5


<PAGE>
NOTE 2 - STOCK-BASED EMPLOYEE COMPENSATION:

     We have a stock-based employee compensation plan that is more fully
described in Note 18 to our Annual Report on Form 10-K for the year ended
December 31, 2003. We account 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. We use the intrinsic value method to account for stock-
based employee compensation. The following table illustrates the effect on
net earnings and net earnings per share as if we had applied the fair
value recognition provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation", to stock-based employee compensation.

<TABLE>
<CAPTION>
                                                   Three Months Ended
                                                        March 31,
                                                   ------------------
                                                     2004       2003
                                                   -------    -------
                                                      (In thousands,
                                                 except per share data)
<S>                                                <C>        <C>
Net earnings, as reported.......................   $ 4,517    $ 1,626
Add: Stock-based employee compensation
  expense included in reported net income,
  net of related tax effect.....................         -          -
Deduct: Total stock-based employee
  compensation expense determined under
  the fair value based method for all
  awards, net of related tax effect.............       (59)       (39)
                                                   -------    -------
Pro forma net earnings..........................   $ 4,458    $ 1,587
                                                   =======    =======

Net earnings per share:
  Basic - as reported...........................   $  0.51    $  0.19
                                                   =======    =======
  Basic - pro forma.............................   $  0.51    $  0.18
                                                   =======    =======
  Diluted - as reported.........................   $  0.50    $  0.19
                                                   =======    =======
  Diluted - pro forma...........................   $  0.49    $  0.18
                                                   =======    =======
</TABLE>









                                     6


<PAGE>
NOTE 3 - 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 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 Phoenix Fuel supplies the gasoline and diesel fuel our
retail group sells. We purchase general merchandise and food products from
various suppliers. At March 31, 2004, we operated 127 service stations
with convenience stores or kiosks.

PHOENIX FUEL

     Phoenix Fuel distributes commercial wholesale petroleum products. It
includes several lubricant and bulk petroleum distribution plants, an
unmanned fleet fueling operation, a bulk lubricant terminal facility, and
a fleet of finished product and lubricant delivery trucks. Phoenix Fuel
purchases petroleum fuels and lubricants from suppliers and to a lesser
extent from our refining group.

     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 SG&A expenses. Cost of products sold reflects current costs
adjusted, where appropriate, for LIFO and lower of cost or market
inventory adjustments.



                                     7


<PAGE>
     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.
















































                                     8


<PAGE>
     Disclosures regarding our reportable segments with a reconciliation
to consolidated totals for the three months ended March 31, 2004 and 2003,
are presented below.


<TABLE>
<CAPTION>
                                                          For the Three Months March 31, 2004
                                            ----------------------------------------------------------------
                                            Refining   Retail   Phoenix            Reconciling
                                              Group    Group      Fuel     Other      Items     Consolidated
                                            ----------------------------------------------------------------
                                                                     (In thousands)
<S>                                         <C>       <C>       <C>       <C>        <C>          <C>
Customer net revenues:
  Finished products:
    Four Corners operations..............   $ 86,029
    Yorktown operations..................    227,647
                                            --------
    Total................................   $313,676  $ 47,829  $122,862  $      -   $       -    $  484,367
  Merchandise and lubricants.............          -    30,844     7,336         -           -        38,180
  Other..................................     14,526     3,846       397       280           -        19,049
                                            --------  --------  --------  --------   ---------    ----------
    Total................................    328,202    82,519   130,595       280           -       541,596
                                            --------  --------  --------  --------   ---------    ----------
Intersegment net revenues:
  Finished products......................     55,958         -    12,295         -     (68,253)            -
  Other..................................      4,036         -         -         -      (4,036)            -
                                            --------  --------  --------  --------   ---------    ----------
    Total................................     59,994         -    12,295         -     (72,289)            -
                                            --------  --------  --------  --------   ---------    ----------
Total net revenues.......................    388,196    82,519   142,890       280     (72,289)      541,596

Net revenues of discontinued operations..          -         -         -         -           -             -
                                            --------  --------  --------  --------   ---------    ----------
Net revenues of continuing operations....   $388,196  $ 82,519  $142,890  $    280   $ (72,289)   $  541,596
                                            ========  ========  ========  ========   =========    ==========
Operating income (loss):
  Four Corners operations................   $  6,161
  Yorktown operations....................     14,435
                                            --------
Total operating income (loss)............   $ 20,596  $    988  $  2,113  $ (5,268)  $     (14)   $   18,415
Discontinued operations..................          -         -        -         -           -              -
                                            --------  --------  --------  --------   ---------    ----------
Operating income (loss)
  from continuing operations.............   $ 20,596  $    988  $  2,113  $ (5,268)  $     (14)   $   18,415
                                            --------  --------  --------  --------   ---------
Interest expense.........................                                                             (9,361)
Amortization of financing costs                                                                         (958)
Interest income..........................                                                                 39
                                                                                                  ----------
Earnings from continuing operations
  before income taxes....................                                                         $    8,135
                                                                                                  ==========
Depreciation and amortization:
  Four Corners operations................   $  3,979
  Yorktown operations....................      2,126
                                            --------
    Total................................   $  6,105  $  2,403  $    415  $    222   $       -    $    9,145
    Discontinued operations..............          -         -         -         -           -             -
                                            --------  --------  --------  --------   ---------    ----------
    Continuing operations................   $  6,105  $  2,403  $    415  $    222   $       -    $    9,145
                                            --------  --------  --------  --------   ---------    ----------
Total assets.............................   $441,787  $112,956  $ 72,404  $ 93,232   $       -    $  720,379
Capital expenditures.....................   $  2,616  $    258  $    328  $     11   $       -    $    3,213
Yorktown refinery acquisition
  contingent payment.....................   $  4,049  $      -  $      -  $      -   $       -    $    4,049
</TABLE>

                                     9


<PAGE>
<TABLE>
<CAPTION>
                                                          For the Three Months March 31, 2003
                                            ----------------------------------------------------------------
                                            Refining   Retail   Phoenix            Reconciling
                                              Group    Group      Fuel     Other      Items     Consolidated
                                            ----------------------------------------------------------------
<S>                                         <C>       <C>       <C>       <C>        <C>          <C>
Customer net revenues:
  Finished products:
    Four Corners operations..............   $ 78,551
    Yorktown operations..................    208,067
                                            --------
    Total................................   $286,618  $ 51,743  $102,635  $      -   $       -    $  440,996
  Merchandise and lubricants.............          -    30,934     6,010         -           -        36,944
  Other..................................      9,962     4,034       611        65           -        14,672
                                            --------  --------  --------  --------   ---------    ----------
    Total................................    296,580    86,711   109,256        65           -       492,612
                                            --------  --------  --------  --------   ---------    ----------
Intersegment net revenues:
  Finished products......................     46,013         -    12,634         -     (58,647)            -
  Other..................................      4,020         -         -         -      (4,020)            -
                                            --------  --------  --------  --------   ---------    ----------
    Total................................     50,033         -    12,634         -     (62,667)            -
                                            --------  --------  --------  --------   ---------    ----------
Total net revenues.......................    346,613    86,711   121,890        65     (62,667)      492,612

Net revenues of discontinued operations..          -    11,627         -         -           -        11,627
                                            --------  --------  --------  --------   ---------    ----------
Net revenues of continuing operations....   $346,613  $ 75,084  $121,890  $     65   $ (62,667)   $  480,985
                                            ========  ========  ========  ========   =========    ==========
Operating income (loss):
  Four Corners operations................   $  9,503
  Yorktown operations....................      8,358
                                            --------
Total operating income (loss)............   $ 17,861  $  1,033  $  1,606  $ (4,924)  $    (273)   $   15,303
Discontinued operations..................          -      (225)        -         -         137           (88)
                                            --------  --------  --------  --------   ---------    ----------
Operating income (loss)
  from continuing operations.............   $ 17,861  $  1,258  $  1,606  $ (4,924)  $    (410)   $   15,391
                                            --------  --------  --------  --------   ---------
Interest expense.........................                                                            (10,159)
Amortization of financing costs                                                                       (1,192)
Interest income..........................                                                                 24
                                                                                                  ----------
Earnings from continuing operations
  before income taxes....................                                                         $    4,064
                                                                                                  ==========
Depreciation and amortization:
  Four Corners operations................   $  3,981
  Yorktown operations....................      1,734
                                            --------
    Total................................   $  5,715  $  2,829  $    454  $    375   $       -    $    9,373
    Discontinued operations..............          -       259         -         -           -           259
                                            --------  --------  --------  --------   ---------    ----------
    Continuing operations................   $  5,715  $  2,570  $    454  $    375   $       -    $    9,114
                                            --------  --------  --------  --------   ---------    ----------
Total assets.............................   $429,325  $128,043  $ 70,828  $ 79,003   $       -    $  707,199
Capital expenditures.....................   $  4,787  $    254  $    205  $     26   $       -    $    5,272
Yorktown refinery acquisition
  contingent payment.....................   $  3,986  $      -  $      -  $      -   $       -    $    3,986
</TABLE>

                                     10


<PAGE>
NOTE 4 - ASSET RETIREMENT OBLIGATIONS:

     On January 1, 2003, we adopted SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 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. To initially recognize our ARO
liability, we capitalized the fair value, calculated as of the date the
liability would have been recognized were SFAS No. 143 in effect at that
time, of all ARO's that we identified,. In accordance with SFAS No. 143,
we also recognized the cumulative accretion and accumulated depreciation
from the date the liability would have been recognized had the provisions
of SFAS No. 143 been in effect, to January 1, 2003, the date we adopted
SFAS No. 143. As a result, on January 1, 2003, we recorded an ARO
liability of $2,198,000, ARC assets of $1,580,000 and related accumulated
depreciation of $674,000. We also reversed a previously recorded asset
retirement obligation of $120,000, and recorded a cumulative effect
adjustment of $1,172,000 ($704,000 net of taxes). Our legally restricted
assets that are set aside for purposes of settling ARO liabilities are
less than $500,000. These assets are set aside to fund costs associated
with the closure of certain solid waste management facilities.

     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 all 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.

     The following table reconciles the beginning and ending aggregate
carrying amount of our ARO's for the three months ended March 31, 2004 and
the year ended December 31, 2003.



                                     11


<PAGE>
<TABLE>
<CAPTION>
                                            March 31,     December 31,
                                              2004            2003
                                            ---------     ------------
                                                 (In thousands)
<S>                                          <C>             <C>
Liability beginning of year...........       $2,223          $2,198
Liabilities incurred..................            -               -
Liabilities settled...................          (34)           (146)
Accretion expense.....................           50             171
                                             ------          ------
Liability end of period...............       $2,239          $2,223
                                             ======          ======
</TABLE>

     The effect of the change on net earnings for the three months ended
March 31, 2004 and 2003 was approximately $47,000 or one-half of a cent
per share in each period, excluding the cumulative effect adjustment in
2003.


































                                     12


<PAGE>
NOTE 5 - Goodwill and Other Intangible Assets:

     At March 31, 2004 and December 31, 2003, we had goodwill of
$28,255,000 and $24,578,000, respectively.

     The changes in the carrying amount of goodwill for the three months
ended March 31, 2004 are as follows:

<TABLE>
<CAPTION>
                                         Refining    Retail    Phoenix
                                          Group      Group       Fuel      Total
                                         --------   -------    -------    -------
                                                    (In thousands)
<S>                                      <C>        <C>        <C>        <C>
Balance as of January 1, 2004..........  $ 5,379    $ 4,477    $14,722    $24,578
Yorktown refinery acquisition
  contingent consideration(a)..........    3,677          -          -      3,677
                                         -------    -------    -------    -------
Balance as of March 31, 2004..........   $ 9,056    $ 4,477    $14,722    $28,255
                                         =======    =======    =======    =======

(a) The Company incurred $4,049,000 under the earn-out provision of the Yorktown
    acquisition agreement in the first quarter of 2004. These earn-out payments
    are an additional element of cost that represents an excess of purchase price
    over the amounts assigned to the assets and liabilities assumed. We allocated
    $3,677,000 of this amount to goodwill and $372,000 to deferred taxes.
</TABLE>

     A summary of intangible assets that are included in "Other Assets" in
the Consolidated Balance Sheet at March 31, 2004 is presented below:

<TABLE>
<CAPTION>
                                              Gross                        Net
                                            Carrying     Accumulated    Carrying
                                              Value      Amortization     Value
                                            --------     ------------   --------
                                                        (In thousands)
<S>                                          <C>           <C>          <C>
Amortized intangible assets:
  Rights-of-way..........................    $ 3,564       $ 2,586      $   978
  Contracts..............................      1,370         1,020          350
  Licenses and permits...................      1,056           236          820
                                             -------       -------      -------
                                               5,990         3,842        2,148
                                             -------       -------      -------
Unamortized intangible assets:
  Liquor licenses........................      7,416             -        7,416
                                             -------       -------      -------
Total intangible assets..................    $13,406       $ 3,842      $ 9,564
                                             =======       =======      =======
</TABLE>

     Intangible asset amortization expense for the three months ended
March 31, 2004 and 2003 was $109,200 and $94,100, respectively.


                                     13


<PAGE>
NOTE 6 - DISCONTINUED OPERATIONS, ASSET DISPOSALS, AND ASSETS HELD FOR SALE:

     The following table contains information regarding our discontinued
operations, all of which are included in our retail group and include some
service station/convenience stores in both periods and our travel center
in 2003.

<TABLE>
<CAPTION>
                                                          Three Months Ended
                                                              March 31,
                                                          ------------------
                                                            2004      2003
                                                          --------  --------
                                                            (In thousands)
<S>                                                        <C>       <C>
Net revenues..........................................     $    -    $11,627

Net operating loss....................................     $    -    $  (225)
Gain on disposal......................................     $    -    $   137
Impairment and other write-downs......................     $    -    $     -
                                                           ------    -------
Loss before income taxes..............................     $    -    $   (88)
                                                           ------    -------

Net loss..............................................     $    -    $   (53)

Allocated goodwill included in gain on disposal.......     $    -    $    51
</TABLE>

     Included in "Assets Held for Sale" in the accompanying Consolidated
Balance Sheets are the following categories of assets.

<TABLE>
<CAPTION>
                                                          March 31,        December 31,
                                                            2004               2003
                                                          ---------        ------------
                                                                  (In thousands)
<S>                                                        <C>               <C>
Closed retail units...................................     $ 1,318           $ 1,755
Vacant land - industrial site.........................           -             1,596
                                                           -------           -------
                                                           $ 1,318           $ 3,351
                                                           =======           =======
</TABLE>

     All of these assets are or were being marketed for sale at the
direction of management. We expect to dispose of the remaining properties
within the next nine months.

     In the first quarter of 2004, we sold one closed retail unit, and in
the first quarter of 2003 we sold two retail units, one of which was
closed. The vacant land - industrial site has been reclassified out of
assets held for sale because it was not sold within 12 months.

     In the second quarter of 2004, we sold 40 acres of vacant land known
as the Jomax property for approximately $5,412,000, net of expenses. In
addition, we also sold two operating service station/convenience stores
for approximately $684,000, net of expenses.

                                     14


<PAGE>
NOTE 7 - EARNINGS PER SHARE:

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

<TABLE>
<CAPTION>
                                                        Three Months
                                                       Ended March 31,
                                                    ---------------------
                                                      2004        2003
                                                    ---------   ---------
Numerator                                               (In thousands)
<S>                                                 <C>         <C>
Earnings from continuing operations..............   $   4,517   $   2,383
Loss from discontinued operations................           -         (53)
Cumulative effect of change in
  accounting principle...........................           -        (704)
                                                    ---------   ---------
Net earnings.....................................   $   4,517   $   1,626
                                                    =========   =========
</TABLE>

<TABLE>
<CAPTION>
                                                        Three Months
                                                       Ended March 31,
                                                    ---------------------
                                                      2004        2003
                                                    ---------   ---------
Denominator
<S>                                                 <C>         <C>
Basic - weighted average shares outstanding......   8,822,787   8,571,779
Effect of dilutive stock options.................     269,947      42,861
                                                    ---------   ---------
Diluted - weighted average shares outstanding....   9,092,734   8,614,640
                                                    =========   =========
</TABLE>

<TABLE>
<CAPTION>
                                                        Three Months
                                                       Ended March 31,
                                                    ---------------------
                                                      2004        2003
                                                    --------    ---------
Basic Earnings (Loss) Per Share
<S>                                                 <C>         <C>
Earnings from continuing operations..............   $    0.51   $    0.28
Loss from discontinued operations................           -       (0.01)
Cumulative effect of change in
  accounting principle...........................           -       (0.08)
                                                    ---------   ---------
Net earnings.....................................   $    0.51   $    0.19
                                                    =========   =========
</TABLE>

                                     15


<PAGE>
<TABLE>
<CAPTION>
                                                        Three Months
                                                       Ended March 31,
                                                    ---------------------
                                                      2004        2003
                                                    ---------   ---------
Diluted Earnings (Loss) Per Share
<S>                                                 <C>         <C>
Earnings from continuing operations..............   $    0.50   $    0.28
Loss from discontinued operations................           -       (0.01)
Cumulative effect of change in
  accounting principle...........................           -       (0.08)
                                                    ---------   ---------
Net earnings.....................................   $    0.50   $    0.19
                                                    =========   =========
</TABLE>

     On February 25, 2004, we contributed 49,046 newly issued shares of
our common stock to our 401(k) plan as a discretionary contribution for
the year 2003.

     On May 3, 2004, we sold 3,000,000 shares of our common stock at
$18.50 per share in an underwritten public offering as part of a strategy
to reduce our outstanding long-term debt. In addition, on May 7, 2004, an
additional 283,300 shares of common stock were sold at the same price
pursuant to the underwriters' over-allotment option. See Note 13 for a
further discussion of these transactions.

     At March 31, 2004, there were 8,869,101 shares of our common stock
outstanding. There were no transactions subsequent to March 31, 2004,
except as described above, that if the transactions had occurred before
March 31,2004, would materially change the number of common shares or
potential common shares outstanding as of March 31, 2004.




















                                     16


<PAGE>
NOTE 8 - INVENTORIES:

     Our inventories consist of the following:

<TABLE>
<CAPTION>
                                         March 31, 2004    December 31, 2003
                                         --------------    -----------------
                                                    (In thousands)
<S>                                         <C>                 <C>
First-in, first-out ("FIFO") method:
  Crude oil............................     $ 41,708            $ 54,771
  Refined products.....................       68,460              68,622
  Refinery and shop supplies...........       11,163              11,306
  Merchandise..........................        2,750               2,946
Retail method:
  Merchandise..........................       11,831              11,579
                                            --------            --------
    Subtotal...........................      135,912             149,224
Adjustment for last-in,
  first-out ("LIFO") method............      (27,987)            (15,498)
                                            --------            --------
    Total..............................     $107,925            $133,726
                                            ========            ========
</TABLE>

     The portion of inventories valued on a LIFO basis totaled $70,122,000
and $89,239,000 at March 31, 2004 and December 31, 2003, respectively. The
data in the following paragraph will facilitate comparison with the
operating results of companies using the FIFO method of inventory
valuation.

     If inventories had been determined using the FIFO method at March 31,
2004 and 2003, net earnings and diluted earnings per share would have been
higher as follows:

<TABLE>
<CAPTION>
                                         March 31, 2004    March 31, 2003
                                         --------------    --------------
                                                    (In thousands)
<S>                                         <C>              <C>
Net earnings...........................     $7,493,000       $10,432,000
Diluted earnings per share.............     $     0.82       $      1.21
</TABLE>

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

                                     17


<PAGE>
     In the first quarter of 2004, we liquidated certain lower cost
refining crude oil LIFO inventory layers, which resulted in an increase in
our net earnings and related diluted earnings per share as follows:

<TABLE>
<CAPTION>
                                         March 31, 2004
                                         --------------
                                         (In thousands)
<S>                                        <C>
Net earnings...........................    $  538,000
Diluted earnings per share.............    $     0.06
</TABLE>

     The LIFO layers that were liquidated were deemed to be a permanent
liquidation due to the terms of our agreement with Statoil regarding the
ownership of crude oil under the agreement.

     There were no similar liquidations in 2003.



































                                     18


<PAGE>
NOTE 9 - DERIVATIVE INSTRUMENTS:

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

     In the first quarter of 2003, we entered into various crude oil
futures contracts in order to economically hedge crude oil inventories and
purchases for the Yorktown refinery operations. For the three months ended
March 31, 2003, we recognized losses on these contracts of approximately
$1,433,000 in cost of products sold. These transactions did not qualify
for hedge accounting in accordance with SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities," as amended, and
accordingly were marked to market each month. There were no similar
transactions in the first quarter of 2004, and there were no open crude
oil futures contracts or other commodity derivative contracts at March 31,
2004.


































                                     19


<PAGE>
NOTE 10 - PENSION AND POST-RETIREMENT BENEFITS:

     In December 2003, FASB revised SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," to enhance disclosures
of relevant accounting information by providing additional information on
plan assets, obligations, cash flows, and net cost. The components of the
Net Periodic Benefit Cost are as follows:

<TABLE>
<CAPTION>
                                             Cash Balance Plan          Retiree Medical Plan
                                        ---------------------------  ---------------------------
                                        Three Months Ended March 31  Three Months Ended March 31
                                        ---------------------------  ---------------------------
                                            2004         2003            2004         2003
                                          ---------    ---------       ---------    ---------
<S>                                       <C>          <C>             <C>          <C>
Service cost...........................   $ 345,005    $ 287,996       $  51,893    $  48,095
Interest cost..........................     134,294      132,739          48,673       44,403
Expected return on plan assets.........     (28,624)      (5,891)              -            -
Amortization of prior service costs....           -            -               -            -
Amortization of net (gain)/loss........           -            -           4,374        2,537
                                          ---------    ---------       ---------    ---------
Net Periodic Benefit Cost..............   $ 450,675    $ 414,844       $ 104,940    $  95,035
                                          =========    =========       =========    =========
</TABLE>

We previously disclosed in our financial statements for the year
ended December 31, 2003, that we expected to contribute $2,200,000 to our
Cash Balance Plan in 2004. Due to recent legislation, which affected the
calculation of our required contribution, we expect to contribute
$1,836,000 to the plan. As of March 31, 2004, we had not made any
contributions to the plan. We presently anticipate making the contribution
on or before September 15, 2004.




















                                     20


<PAGE>
NOTE 11 - LONG-TERM DEBT:

     Our long-term debt consisted of the following:

<TABLE>
<CAPTION>
                                                       March 31, 2004      December 31, 2003
                                                       --------------      -----------------
                                                                  (In thousands)
<S>                                                        <C>                 <C>
11% senior subordinated notes, due 2012, net
  of unamortized discount of $5,191 and $5,288,
  interest payable semi-annually......................     $194,809            $194,712
9% senior subordinated notes, due 2007,
  interest payable semi-annually......................      150,000             150,000
Senior secured revolving credit facility, due 2005,
  floating interest rate, interest payable monthly....            -                   -
Senior secured mortgage loan facility, due 2005,
  floating interest rate, principal and interest
  payable monthly.....................................       20,000              22,000
Other.................................................           10                  17
                                                           --------            --------
  Subtotal............................................      364,818             366,729
Less current portion..................................      (12,454)            (11,128)
                                                           --------            --------
  Total...............................................     $352,364            $355,601
                                                           ========            ========
</TABLE>

     Repayment of both the 11% and 9% senior subordinated notes
(collectively, the "Notes") is jointly and severally guaranteed on an
unconditional basis by our direct and indirect wholly owned 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.

     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 $100,000,000 three-year senior secured revolving
credit facility (the "Credit Facility") with a group of banks. The Credit
Facility is primarily a working capital and letter of credit facility.
There were no direct borrowings outstanding under this facility at March
31, 2004 and December 31, 2003, and there were approximately $37,361,000
at March 31, 2004 and $36,961,000 at December 31, 2003 of irrevocable
letters of credit outstanding, primarily to crude oil suppliers, insurance
companies and regulatory agencies.


                                     21


<PAGE>
     The interest rate applicable to the Credit Facility is tied to
various short-term indices. At March 31, 2004, this rate was approximately
4.9% per annum. We are required to pay a quarterly commitment fee of 0.50%
per annum of the unused amount of the facility.

     We also have a $40,000,000 three-year senior secured mortgage loan
facility (the "Loan Facility") with a group of financial institutions that
currently has a balance of $20,000,000. We have provided notice to the
lenders that we intend to prepay the remaining balance on July 14, 2004.
We intend to do this from cash on hand.

     The interest rate applicable to the Loan Facility is tied to various
short-term indices. At March 31, 2004, this rate was approximately 6.6%
per annum.

     On May 3, 2004, we sold $150,000,000 of 8% senior subordinated notes
due 2014 (the "8% Notes") and sold 3,000,000 shares of our common stock.
On May 7, 2004, we sold an additional 283,300 shares of our common stock.
With the proceeds of the note offering and cash on hand, we repurchased,
or will be redeeming, all of the 9% Notes, and with the proceeds of the
equity offering, we will be redeeming $51,171,000 aggregate principal
amount of our 11% Notes. See Note 13 for a further discussion of these
transactions.

     The Indenture supporting the 8% Notes contains covenants and
restrictions similar to, but less restrictive than, those applicable to
the Notes. We expect to be in compliance with these covenants going
forward.


























                                     22


<PAGE>
NOTE 12 - COMMITMENTS AND CONTINGENCIES:

     We have various legal actions, claims, assessments and other
contingencies arising in the normal course of our business, including
those matters described below, pending against us. Some of these matters
involve or may involve significant claims for compensatory, punitive or
other damages. These matters are subject to many uncertainties, and it is
possible that some of these matters could be ultimately decided, resolved
or settled adversely. 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 for a particular reporting period.

     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 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 speculative nature of remediation and
clean-up 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,
including changing interpretations of those laws.

ENVIRONMENTAL AND LITIGATION ACCRUALS

     As of March 31, 2004 and December 31, 2003, we had environmental
liability accruals of approximately $7,436,000 and $7,592,000,
respectively, which are summarized below, and litigation accruals in the
aggregate of $573,000 at March 31, 2004 and December 31, 2003. The
environmental accruals are recorded in the current and long-term sections
of our consolidated balance sheets and the litigation accruals are all
recorded as current liabilities.












                                     23


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

                                            December 31,   Increase                 March 31,
                                               2003       (Decrease)   Payments       2004
                                            ------------  ----------   --------     ---------
<S>                                          <C>          <C>          <C>          <C>
Yorktown 1991 Order.......................   $ 5,916      $     -      $  (150)     $ 5,766
Farmington Refinery.......................       570            -            -          570
Bloomfield Refinery.......................       267            -            -          267
Ciniza - Solid Waste Management Units.....       275            -            -          275
Ciniza - Land Treatment Facility..........       186            -            -          186
Ciniza Well Closures......................       140            -            -          140
Retail Service Stations - Various.........       146            -            -          146
East Outfall - Bloomfield.................        25            -            -           25
Bloomfield Tank Farm (Old Terminal).......        67            -           (6)          61
                                             -------      -------      -------      -------
   Totals.................................   $ 7,592      $     -      $  (156)     $ 7,436
                                             =======      =======      =======      =======
</TABLE>


     Approximately $7,064,000 of our environmental accruals are for the
following projects:

     -  certain environmental obligations assumed in connection with our
        acquisitions of the Yorktown refinery and the Bloomfield refinery,
     -  the remediation of the hydrocarbon plume that appears to extend no
        more than 1,800 feet south of our inactive Farmington refinery,
     -  the closure of certain solid waste management units at the Ciniza
        refinery, which is being conducted in accordance with the
        refinery's Resource Conservation and Recovery Act permit, and
     -  closure of the Ciniza refinery land treatment facility, including
        post-closure expenses.

     The remaining amount of the accruals relate to smaller remediation
and monitoring projects.

YORKTOWN ENVIRONMENTAL LIABILITIES

     We assumed certain liabilities and obligations in connection with our
purchase of the Yorktown refinery from BP. BP agreed to reimburse us in
specified amounts for some matters. 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 refinery or its operation. We agreed to reimburse BP for
losses incurred in connection with or related to liabilities and
obligations assumed by us. Certain environmental matters relating to the
Yorktown refinery are discussed below.


                                     24


<PAGE>
YORKTOWN CONSENT DECREE

     Environmental obligations assumed by us include BP's responsibilities
relating to the Yorktown refinery under a consent decree among various
parties covering many locations (the "Consent Decree"). Parties to the
Consent Decree include the United States, BP Exploration and Oil Co.,
Amoco Oil Company, and Atlantic Richfield Company. We assumed BP's
responsibilities as of January 18, 2001, the date the Consent Decree was
lodged with the court. As applicable to the Yorktown refinery, the Consent
Decree requires, among other things, reduction of NOx, SO2 and particulate
matter emissions and upgrades to the refinery's leak detection and repair
program. We estimate that we will incur capital expenditures of between
$20,000,000 and $27,000,000 to comply with the Consent Decree through
2006, although we believe we will incur most of those expenditures in 2005
and 2006. In addition, we estimate that we will incur operating expenses
associated with the requirements of the Consent Decree of between
$1,600,000 and $2,600,000 per year.

YORKTOWN 1991 ORDER

     In connection with the Yorktown acquisition, we also assumed BP's
obligations under an administrative order issued by EPA in 1991 under the
Resource Conservation and Recovery Act. The order requires an
investigation of certain areas of the refinery and the development of
measures to correct any releases of contaminants or hazardous substances
found in these areas. A Resource Conservation and Recovery Act Facility
Investigation and a Corrective Measures Study ("RFI/ CMS") has already
been prepared. It was revised by BP, in draft form, to incorporate
comments from EPA and the Virginia Department of Environmental Quality
("VDEQ"). A final RFI/ CMS has not yet been approved. The draft RFI/ 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 will be
addressed in the RFI/ CMS.

     EPA issued a proposed cleanup plan for public comment in December
2003. EPA will review all comments, will issue an approved RFI and CMS in
coordination with VDEQ, and will make a final remedy decision. We estimate
that expenses associated with the actions described in the proposed RFI/
CMS will cost from $19,000,000 to $21,000,000, and will be incurred over a
period of approximately 30 years. We believe that about $5,000,000 of this
amount will be incurred over an initial 3-year period, and additional
expenditures of about $5,000,000 will be incurred over the following 3-
year period. We may not be responsible, however, for all of these






                                     25


<PAGE>
expenditures due to the environmental reimbursement provisions included in
our purchase agreement with BP, as more fully discussed below.
Additionally, the facility's underground sewer system will be cleaned,
inspected and repaired as needed as part of the RFI/ CMS process. We
anticipate that this work will cost from $3,000,000 to $5,000,000 over a
period of three to five years, beginning around the time the construction
of the corrective action management unit and related remediation work is
completed in approximately 2007 or 2008. As of March 31, 2004, we have not
received the final remedy decision from EPA and therefore have not begun
any of the work under the administrative order.

CLAIMS FOR REIMBURSEMENT FROM BP

     BP has 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. In order to have a claim against
BP, however, the total of all our losses must exceed $5,000,000, in which
event our claim only relates to the amount exceeding $5,000,000. After
$5,000,000 is reached, our claim is limited to 50% of the amount by which
our losses exceed $5,000,000 until the total of all our losses exceeds
$10,000,000. After $10,000,000 is reached, our claim would be for 100% of
the amount by which our losses exceed $10,000,000. In applying these
provisions, losses amounting to a total of less than $250,000 arising out
of the same event are not added to any other losses for purposes of
determining whether and when the $5,000,000 or $10,000,000 has been
reached. After the $5,000,000 or $10,000,000 has been reached, BP has no
obligation to reimburse us for any losses amounting to a total of less
than $250,000 arising out of the same event. Except as specified in the
refinery purchase agreement, in order to seek reimbursement from BP, we
must notify BP of a claim within two years following the closing date.
Further, BP's total liability for reimbursement under the refinery
purchase agreement, including liability for environmental claims, is
limited to $35,000,000.

FARMINGTON REFINERY

     In 1973, we constructed the Farmington refinery that was operated
until 1982. In 1985, we became aware of soil and shallow groundwater
contamination at this facility. We hired environmental consulting firms to
investigate the contamination and undertake remedial action. The
consultants 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.






                                     26


<PAGE>
LEE ACRES LANDFILL

     The Farmington refinery property is located next to the Lee Acres
Landfill, a closed landfill formerly operated by San Juan County. The
landfill is situated on lands owned by the United States Bureau of Land
Management (the "BLM"). Industrial and municipal wastes were disposed of
in the landfill by numerous sources. While the landfill was operational,
we used it to dispose of office trash, maintenance shop trash, used tires
and water from the Farmington refinery's evaporation pond.

     The landfill was added to the National Priorities List as a
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") Superfund site in 1990. In connection with this listing, EPA
defined the site as the landfill and the landfill's associated groundwater
plume. EPA excluded any releases from the Farmington refinery itself from
the definition of the site. In May 1991, EPA notified us that we may be a
potentially responsible party under CERCLA for the release or threatened
release of hazardous substances, pollutants or contaminants at the
landfill.

     BLM made a proposed cleanup plan for the landfill available to the
public in 1996. Remediation alternatives examined by BLM in connection
with the development of its proposed plan ranged in projected cost from no
cost to approximately $14,500,000. BLM proposed the adoption of a remedial
action alternative that it believes would cost approximately $3,900,000 to
implement. BLM's $3,900,000 cost estimate is based on certain assumptions
that may or may not prove to be correct and is contingent on confirmation
that the remedial actions, once implemented, are adequately addressing
landfill contamination. For example, if assumptions regarding groundwater
mobility and contamination levels are incorrect, BLM is proposing to take
additional remedial actions with an estimated cost of approximately
$1,800,000.

     BLM has received public comment on its proposed plan. The final
remedy for the site, however, has not yet been selected. Although we were
given reason to believe that a final remedy would be selected in 2003,
that selection did not occur. We have been advised that the site remedy
may be announced in 2004. In 1989, one of our consultants estimated, based
on various assumptions, that our share of potential liability could be
approximately $1,200,000. This figure was based upon estimated landfill
remediation costs significantly higher than those being proposed by BLM.
The figure also was based on the consultant's evaluation of such factors
as available clean-up technology, BLM's involvement at the site and the
number of other entities that may have had involvement at the site, but
did not include an analysis of all of our potential legal defenses and
arguments, including possible setoff rights.

     Potentially responsible party liability is joint and several, which
means that a responsible party may be liable for all of the clean-up costs
at a site even though the party was responsible for only a small part of
the contamination. Although it is possible that we may ultimately incur
liability for clean-up costs associated with the landfill, a reasonable
estimate of the amount of this liability, if any, cannot be made at this
time for various reasons. These reasons include:


                                     27


<PAGE>
     -  the final site remedy has not been selected;

     -  a number of entities had involvement at the site;

     -  allocation of responsibility among potentially responsible parties
        has not yet been made; and

     -  potentially applicable factual and legal issues have not been
        resolved.

     We have not recorded a liability in relation to BLM's proposed plan
because the amount of any potential liability is currently not
determinable.

     BLM may assert claims against us and others for reimbursement of
investigative, cleanup and other costs incurred by BLM in connection with
the landfill and surrounding areas. We may assert claims against BLM in
connection with contamination that may be originating from the landfill.
Private parties and other governmental entities also may assert claims
against us, BLM, and others for property damage, personal injury and other
damages allegedly arising out of any contamination originating from the
landfill and the Farmington property. Parties also may request judicial
determination of their rights and responsibilities, and the rights and
responsibilities of others, in connection with the landfill and the
Farmington property. Currently, however, there is no outstanding
litigation against us by BLM or any other party.

BLOOMFIELD REFINERY

     In connection with the acquisition of the Bloomfield refinery, we
assumed certain environmental obligations including Bloomfield Refining
Company's ("BRC") obligations under an administrative order issued by EPA
in 1992 pursuant to the Resource Conservation and Recovery Act. The order
required BRC to investigate and propose measures for correcting any
releases of hazardous waste or hazardous constituents at or from the
Bloomfield refinery. EPA has delegated its oversight authority over the
order to NMED's Hazardous Waste Bureau ("HWB"). In December 2002, HWB and
OCD approved a cleanup plan for the refinery, subject to various actions
to be taken by us to implement the plan. We estimate that remediation
expenses associated with the cleanup plan will be approximately $267,000,
and that these expenses will be incurred through approximately 2018.

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 June


                                     28


<PAGE>
2001. Bioventing involves pumping air into the soil to stimulate bacterial
activity which in turn consumes hydrocarbons. 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 June 2002. We anticipate that we will incur about
$50,000 in soil remediation expenses through 2005 in connection with the
bioventing plan and approximately $20,000 to continue groundwater
monitoring and testing until natural attenuation has completed the process
of groundwater remediation.

NOTICES OF VIOLATION AT FOUR CORNERS REFINERIES

     In June 2002, we received a draft compliance order from the New
Mexico Environment Department ("NMED") in connection with alleged
violations of air quality regulations at the Ciniza refinery. These
alleged violations relate to an inspection completed in April 2001.

     In August 2002, we received a compliance order from NMED in
connection with alleged violations of air quality regulations at the
Bloomfield refinery. These alleged violations relate to an inspection
completed in September 2001.

     In the second quarter of 2003, EPA informally told us that it also
intended to allege air quality violations in connection with the 2001
inspections at both refineries. We have since participated in joint
meetings with NMED and EPA. These discussions have included alleged
violations through December 31, 2003, in addition to matters relating to
the 2001 inspections. In the first quarter of 2004, we were informally
advised that potential penalties could amount to between $3,000,000 and
$5,000,000. We have accrued significantly less than these amounts because
settlement discussions with NMED and EPA are ongoing. These discussions
may result in reductions in the amount of potential penalties. In lieu of
fines and as part of an administrative settlement, we expect that EPA and
NMED may require us to undertake certain environmentally beneficial
projects, known as supplemental environmental projects. We have not yet
determined the nature or scope of any work that may be required in lieu of
fines.

     In the first quarter of 2004, EPA told us that any administrative
settlement also must be consistent with the consent decrees EPA has
entered with other refiners as part of its national refinery enforcement
program. In these other settlements, EPA generally has required that the
refiner:

     -  implement controls to reduce emissions of nitrogen oxide, sulfur
        dioxide, and particulate matter from the largest emitting process
        units;

     -  upgrade leak-detection and repair practices;

     -  minimize the number and severity of flaring events; and


                                     29


<PAGE>
     -  adopt strategies to ensure compliance with benzene waste
        requirements.

     We are continuing joint settlement discussions with NMED and EPA.

Jet Fuel Claim

     In February 2003, we filed a complaint against the United States in
the United States Court of Federal Claims related to military jet fuel
that we sold to the Defense Energy Support Center ("DESC") from 1983
through 1994. We asserted that the U.S., acting through DESC, underpaid
for the jet fuel by about $17,000,000. Our claims include a request that
we be made whole in connection with payments that were less than the fair
market value of the fuel, as well as a request that we be reimbursed for
the value of transporting the fuel in some contracts, as well as for
certain additional costs of complying with the government's special
requirements. The U.S. has said that it may counterclaim and assert, based
on its interpretation of the contracts, that we owe additional amounts of
between $2,100,000 and $4,900,000. The U.S. denied all liability in a
motion for partial summary judgment filed in the second quarter of 2003.
In July 2003, we responded to the U.S.'s motion and filed our own cross-
motion for partial summary judgment. All legal briefs on the U.S.'s motion
and our cross-motion were filed with the court by November 2003. In the
first quarter of 2004, the United States Court of Appeals for the Federal
Circuit agreed to hear appeals in other jet fuel cases. The issues before
the Court of Appeals in these cases are almost identical to the issues in
our case. The judge in our case has halted any further action, pending a
guiding decision by the Court of Appeals. We are awaiting further action
by the court. Due to the preliminary nature of this matter, there can be
no assurance that we will ultimately prevail on our claims or the U.S.'s
potential counterclaim, nor is it possible to predict when any payment
will be received if we are successful. Accordingly, we have not recorded a
receivable for these claims or a liability for any potential counterclaim.

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 wells. MTBE contamination primarily
results from leaking underground or aboveground storage tanks. We are a
defendant in three MTBE lawsuits filed in the fourth quarter of 2003. The
plaintiffs are two Virginia county boards of education and a Virginia
county water authority. The suits allege MTBE contamination of water wells
owned and operated by the plaintiffs. 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.




                                     30


<PAGE>
Yorktown Power Outage Claim

     On April 28, 2003, a breaker failure disrupted operations at the
electric generation plant that supplies our Yorktown refinery with power.
As a result of the failure, the refinery suffered a complete loss of power
and shut down all processing units. By the middle of May 2003, the
refinery was operating at full capacity. We incurred costs of
approximately $1,254,000 as a result of the loss of power, all of which we
expensed in the second quarter of 2003. Reduced production also resulted
in a loss of earnings. We are pursuing reimbursement from the power
station owner. We are currently unable to determine the probability of
recovery of any amounts related to this claim, so we have not recorded any
receivables related to this claim.

Former CEO Matters

     On March 29, 2002, the board of directors terminated James E. Acridge
as our President and Chief Executive Officer, and replaced him as our
Chairman of the Board. Mr. Acridge's term of office as a director expired
on April 29, 2004. On July 22, 2002, Mr. Acridge filed a lawsuit in the
Superior Court of Arizona for Maricopa County against a number of our
officers and directors. The lawsuit was also filed against unidentified
accountants, auditors, appraisers, attorneys, bankers and professional
advisors. Mr. Acridge alleged that the defendants wrongfully interfered
with his employment agreement and caused the board to fire him. The
complaint sought unspecified damages to compensate Mr. Acridge for the
defendants' alleged wrongdoing, as well as punitive damages, and costs and
attorneys' fees. The complaint also stated that Mr. Acridge intended to
initiate a separate arbitration proceeding against us, alleging that we
breached his employment agreement and violated an implied covenant of good
faith and fair dealing. The court subsequently ruled that the claims
raised in Mr. Acridge's lawsuit were subject to arbitration and the
lawsuit was dismissed. Arbitration proceedings have not been initiated.
Subsequent to the filing of the claims, Mr. Acridge filed for bankruptcy.
The trustee appointed in the Chapter 11 bankruptcy proceeding has
questioned whether the Superior Court should have stayed the lawsuit until
after the arbitration was completed instead of dismissing it. Regardless,
we believe that the officers and directors sued by Mr. Acridge are
entitled to indemnification from us in connection with the defense of, and
any liabilities arising out of, the claims alleged by Mr. Acridge.

     We have an outstanding loan to Mr. Acridge in the principal amount of
$5,000,000. In the fourth quarter of 2001, we established a reserve for
the entire amount of the loan plus interest accrued through December 31,
2001. The loan was subsequently written off, at which time the reserve was
removed.

     In addition to Mr. Acridge's personal bankruptcy filing, Pinnacle
Rodeo LLC, Pinnacle Rawhide LLC, and Prime Pinnacle Peak Properties, Inc.,
three entities originally controlled by Mr. Acridge, have commenced
Chapter 11 bankruptcy proceedings. A Chapter 11 trustee has been appointed



                                     31


<PAGE>
in these cases. The four bankruptcy cases are administered together. We
have filed proofs of claim in the bankruptcy proceedings seeking to
recover amounts we believe are owed to us by Mr. Acridge, and the other
entities, including amounts relating to the outstanding $5,000,000 loan.
We also filed a complaint in the Acridge bankruptcy proceeding on July 31,
2003 in which we sought a determination that certain of the amounts we
believe are owed to us by Mr. Acridge are not dischargeable in bankruptcy.
The court has entered a default against Mr. Acridge in connection with our
complaint. The court, however, has not yet ruled on whether we are
entitled to receive any of the damages that we have requested. Even if the
court decides that we can receive damages, we do not know whether we would
be able to recover any of these damages from Mr. Acridge.

     The official committee of unsecured creditors for the bankruptcy
cases filed a plan of reorganization on November 7, 2003. The plan
describes a process for the liquidation of the estates and the payment of
liquidation proceeds to creditors. It will only become effective if
approved by the bankruptcy court. Under the committee's plan, we would
make a payment, which would have no material effect on the Company's
financial statements, for the benefit of unsecured creditors in the
Acridge estate. Additionally, we would give up all of our claims against
the estates, with the exception of a claim for our share of any assets of
the Acridge estate that have not yet been identified. In return, the four
estates would release us from all of their claims against us, if any. The
plan would not preclude us from pursuing our non-dischargeability
complaint against Mr. Acridge.

     In 2003, the trustee for the Acridge estate asked the bankruptcy
court to permit him to engage in discovery to determine whether any claims
against us, or persons or entities associated with us, may exist. The
bankruptcy court authorized the Acridge trustee to take the deposition of
three of our officers or directors and to obtain documents from them. The
discovery authorized by the bankruptcy court was completed in the second
quarter of 2004.

     In order for the committee's plan to be approved, the committee must
first obtain bankruptcy court approval of a disclosure statement which
describes the plan and the process by which creditors can vote on the
plan. The Acridge trustee and the unsecured creditors committee are
working on a summary to be included in the disclosure statement containing
each of their positions on whether the committee's plan should be
approved. We anticipate that this statement may be sent out in the second
or third quarter of 2004.

     The trustee in the Prime Pinnacle proceeding filed a separate plan of
reorganization. The Prime Pinnacle trustee initially indicated that he was
going to object to the proof of claim that we filed in the Prime Pinnacle
proceeding. In addition, the Prime Pinnacle trustee indicated that he was
going to evaluate any possible preferential or fraudulent transfer of
assets from Prime Pinnacle to us in satisfaction of debts owed by Mr.
Acridge or his other entities. An agreement was subsequently reached



                                     32


<PAGE>
between the Prime Pinnacle trustee, the unsecured creditors committee, and
us. The committee agreed to carve out the Prime Pinnacle estate from the
Committee's plan. We agreed not to receive any distribution on our
unsecured claim against the Prime Pinnacle estate. The Prime Pinnacle
trustee agreed to incorporate the terms of the Committee's settlement with
us in the Prime Pinnacle plan and to release us from any claims the Prime
Pinnacle estate may have against us. The Prime Pinnacle trustee's
agreement to release us and our agreement not to receive a distribution
from the Prime Pinnacle estate are both conditioned upon the entry of a
final court order, which is not subject to appeal, confirming the
unsecured creditors committee's plan. The Prime Pinnacle plan, which
reflects these agreements, has been approved by the bankruptcy court.










































                                     33


<PAGE>
NOTE 13 - SUBSEQUENT EVENTS

CINIZA REFINERY INCIDENT:

     On April 08, 2004, a fire occurred at our Ciniza refinery in the
alkylation unit that produces high octane blending stock for gasoline. The
refinery is located near Gallup, New Mexico, and has a crude oil
throughput capacity of 20,800 barrels per day and a total capacity
including natural gas liquids of 26,000 barrels per day. The alkylation
unit has throughput capacity of 1,800 barrels per day. Emergency personnel
responded immediately and contained the fire to the alkylation unit,
although there also was some damage to ancillary equipment and to two
adjacent units. Four of our employees were injured and transported to an
Albuquerque hospital. Presently, three have been released and one is in
intensive care.

     As a result of the fire, we temporarily shut down all of the
operating units at the Ciniza refinery. At present, we do not believe
there is significant damage to any of the refinery units other than the
alkylation unit. The fire is currently under investigation by various
governmental agencies. We also are conducting our own investigation with
the assistance of an independent refinery expert to determine the cause of
the fire and the extent of the damage.

     We had previously scheduled a major repair and upgrade shutdown
(known as a "turnaround"), which was to commence at the refinery on April
17, 2004, and some of the turnaround team already was on site at the
refinery when the fire occurred. In order to minimize the disruption to
the refinery's operations, we accelerated the turnaround. This allowed us
to work on the necessary repairs to the alkylation unit during the
turnaround period when the refinery was not operating anyway. The
turnaround has been completed.

     Based upon a preliminary internal investigation, we currently
estimate that the cost to repair the damage caused by the fire will be in
the range of $4,000,000 to $6,000,000 and that repairs should be completed
before the end of June. To the extent additional damage is discovered
during the completion of our investigation, including portions of the unit
currently unavailable, or during completion of repairs, the cost to repair
could increase or repairs could take longer to complete. We have property
insurance coverage that should cover a significant portion of the repair
costs and also could receive proceeds from business interruption insurance
if the waiting period under the policy is exceeded. We also have worker's
compensation insurance.

     Prior to the fire, we were producing approximately 18,000 barrels per
day at Ciniza and approximately 10,000 barrels per day at the Bloomfield
refinery, which also is located in the Four Corners area. During the
turnaround, we increased the output of our Bloomfield refinery by
approximately 6,000 barrels per day. In addition, following the
turnaround, at both Bloomfield and Ciniza, we will be processing the



                                     34


<PAGE>
excess inventory we accumulated prior to and during the turnaround. The
Bloomfield refinery has a crude oil throughput capacity of 16,000 barrels
per day and a total capacity including natural gas liquids of 16,600
barrels per day. After the turnaround, the Ciniza refinery can operate at
full capacity while repairs to the alkylation unit are completed if we
purchase high octane blending components from outside sources.
Alternatively, Ciniza can sell the intermediate feedstocks processed by
the unit to third parties for final processing.

NEW MEXICO RETAIL STORE SAFETY REGULATIONS

     In May 2004, the Occupational Health and Safety Bureau of the New
Mexico Environment Department issued regulations that require additional
security measures in the convenience store industry. These requirements
relate to exterior lighting, late night security, employee training, door
and window signage, and security surveillance systems. These regulations
are subject to legal challenge. If these regulations go into effect in
their current form, however, our New Mexico retail stores could incur
additional costs to comply. For example, one way to comply with the late
night security requirements of the regulations is to have two employees on
duty between the hours of 5:00 p.m. and 5:00 a.m.  We estimate that having
two employees at all of our stores during late night hours could increase
our payroll costs between $1,000,000 and $1,500,000 annually. Alternately,
we could add security enclosures to our stores at an estimated one-time
cost of approximately $2,250,000. We do not anticipate we would incur any
significant costs to comply with the other requirements of these
regulations. We are evaluating our options for complying with these
regulations.

REFINANCING:

     On April 13, 2004, we made an offer to purchase for cash all
$150,000,000 aggregate principal amount outstanding of our 9% senior
subordinated notes due 2007 (the "9% Notes") at a price of 103.375% of
their principal amount, plus accrued interest. The offer included a
consent solicitation, which expired on April 26, 2004. The offer was
subject to our successful completion of a new offering of senior
subordinated notes.

     At the expiration of the consent period, the holders of $116,115,000
of our 9% Notes had tendered into the tender offer. The tender offer
expired on May 10, 2004. On May 11, 2004, we provided irrevocable notice
to the trustee to redeem the rest of the 9% Notes that were not tendered
when the tender offer expired. The redemption will occur on June 11, 2004.

     On April 28, 2004, we priced our offering of $150,000,000 aggregate
principal amount of 8% senior subordinated notes due 2014 at a discount to
yield 8-1/4%. The offering closed on May 3, 2004, with net proceeds before
expenses to us of approximately $147,466,500. We are using all of the net
proceeds of the new senior subordinated notes offering, together with cash
on hand, to settle the tender offer and to redeem all 9% Notes that remain
outstanding after the expiration of the tender offer. Such proceeds are
being held by the trustee in a separate redemption account pending the
funding of the redemption.

                                     35


<PAGE>
     On May 3, 2004, we issued 3,000,000 shares of our common stock at a
public offering price of $18.50 per share. In connection with the
offering, we granted the underwriters an option for a period of 30 days
from the initial offering to purchase up to an additional 450,000 shares
of common stock to cover over-allotments, if any. On May 7, 2004, the
underwriters purchased an additional 283,300 shares pursuant to their
over-allotment option. The net proceeds of the two sales were
approximately $51,171,000. We are using all of the net proceeds of the
common stock offering to redeem a portion of our outstanding 11% senior
subordinated notes due 2012 (including interest to the date of redemption
and the redemption premium) through the exercise of the "equity clawback"
provisions of the indenture governing the notes. The redemption date is
June 17, 2004. The proceeds from the common stock offering are being held
by the trustee in a separate redemption account pending the funding of the
redemption.

     In addition, we have given notice to the lenders under our Loan
Facility and expect to prepay this facility from cash on hand on July 14,
2004. We also are currently renegotiating our Credit Facility.



































                                     36


<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 Phoenix Fuel. The
refining group operates two refineries in the Four Corners area of New
Mexico and one refinery in Yorktown, Virginia. The refining group sells
its products to wholesale distributors and retail chains. Our retail group
operated 127 service stations at March 31, 2004. The retail group sells
its petroleum products and merchandise to consumers located in New Mexico,
Arizona and southern Colorado. Phoenix Fuel distributes commercial
wholesale petroleum products primarily in Arizona.

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

     -  Increasing gross margins through management of inventories and
        taking advantage of sales and purchasing opportunities, while
        minimizing or reducing 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, between now and the end of 2008.

     -  Improving our overall financial health and flexibility by reducing
        our debt and overall cost of capital, including our interest and
        financing costs, and maximizing our return on capital employed.

     -  Evaluating opportunities for growth by acquisition.

CRITICAL ACCOUNTING POLICIES

     A critical step in the preparation of our financial statements is the
selection and application of accounting principles, policies, and
procedures that affect the amounts that are reported. In order to apply
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.

                                     37


<PAGE>
     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, 2003. The following accounting
policies are considered critical due to the uncertainties, judgments,
assumptions and estimates involved:

     -  accounting for contingencies, including environmental remediation
        and litigation liabilities,
     -  assessing the possible impairment of long-lived assets,
     -  accounting for asset retirement obligations, and
     -  accounting for our pension and post-retirement benefit plans.

There have been no changes to these policies in 2004.

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 and in our Annual Report on Form
10-K for the year ended December 31, 2003 in Item 8 and Note 3 to our
Consolidated Financial Statements in Part I, Item 1.

     Below is operating data for our operations:

<TABLE>
<CAPTION>
                                                       Three Months
                                                      Ended March 31,
                                                  ----------------------
                                                    2004          2003
                                                  --------      --------
<S>                                               <C>           <C>
Refining Group Operating Data:
  Four Corners Operations:
    Crude Oil/NGL  Throughput (BPD)..........       28,280        31,146
    Refinery Sourced Sales Barrels (BPD).....       27,615        31,534
    Average Crude Oil Costs ($/Bbl)..........     $  32.61      $  31.21
    Refining Margins ($/Bbl).................     $   8.35      $   8.32
  Yorktown Operations:
    Crude Oil/NGL  Throughput (BPD)..........       61,200        56,256
    Refinery Sourced Sales Barrels (BPD).....       63,824        59,389
    Average Crude Oil Costs ($/Bbl)..........     $  32.68      $  32.85
    Refining Margins ($/Bbl).................     $   5.55      $   4.25
Retail Group Operating Data:
(Continuing operations only)
  Fuel Gallons Sold (000's)..................       37,681        35,118
  Fuel Margins ($/gal).......................     $ 0.1617      $ 0.1538
  Merchandise Sales ($ in 000's).............     $ 30,844      $ 28,558
  Merchandise Margins........................         26.9%         30.1%
  Operating Retail Outlets at Period End:
    Continuing Operations....................          127           127
    Discontinued Operations..................            -             8
Phoenix Fuel Operating Data:
  Fuel Gallons Sold (000's)..................      112,844       103,037
  Fuel Margins ($/gal).......................     $ 0.0529      $ 0.0474
  Lubricant Sales ($ in 000's)...............     $  6,875      $  5,615
  Lubricant Margins..........................         13.1%         16.2%
</TABLE>

                                     38


<PAGE>
     We believe the comparability of our continuing results of operations
for the three months ended March 31, 2004 with the three months ended
March 31, 2003 was affected by, among others, the following factors:

     -  Stronger net refining margins for our refineries in 2004,
        primarily for our Yorktown refinery, due to, among other things:

        -  Increased finished product demand,
        -  Increased sales in our Tier 1 market,
        -  Reduced imports of foreign gasoline, due to a reduction in
           gasoline sulfur limits,
        -  Elimination of MTBE in Connecticut, New York, and California, and
        -  Tight finished product supply in certain of our market areas.

     -  The processing of lower priced acidic crude oils at our
        Yorktown refinery, including crude oil purchased under our supply
        agreement with Statoil that began deliveries in late February
        2004.

     -  A processing unit turnaround at our Yorktown refinery in 2003,
        which resulted in the refinery being out of operation from March
        21, 2003 to April 16, 2003.

     -  Continued reduced production at our Four Corners refineries
        because of lower crude oil receipts due to supplier production
        problems and reduced supply availability.

     -  Stronger finished product sales volumes and margins for our
        Phoenix Fuel operations, due to, among other things:

        -  Increased finished product demand,
        -  An expanded customer base, and
        -  Tight finished product supplies in our Phoenix market.

     -  Lower merchandise margins for our retail group.

     EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

     Our earnings from continuing operations before income taxes increased
$4,071,000 for the three months ended March 31, 2004, compared to the same
period in 2003. This increase was primarily due to the following three
factors:

     -  An increase in operating earnings from our Yorktown refinery of
        $6,077,000.
     -  A 12% increase in Phoenix Fuel's fuel margins, along with a 10%
        increase in fuel volumes sold by Phoenix Fuel.
     -  An 8% decrease in interest expense.

     Factors negatively affecting our earnings include:

     -  A 14% increase in operating expenses.
     -  An 11% decline in our Four Corners refineries' fuel volumes sold.
     -  A 17% increase in our selling, general and administrative costs.
     -  A 10% decline in our retail group's merchandise margin.

                                     39


<PAGE>
     YORKTOWN REFINERY

     Our Yorktown refinery operated at an average throughput rate of
approximately 61,200 barrels per day in the first quarter of 2004,
compared to 56,300 barrels per day in the first quarter of 2003. Refining
margins for the first quarter of 2004 were $5.55 per barrel and were $4.25
for the first quarter of 2003.

     Revenues for our Yorktown refinery increased in the first quarter of
2004 primarily due to a 9% increase in finished product volumes sold, with
weighted average selling prices up approximately 1%. The volume increase
was due in part to the process unit turnaround begun in the first quarter
of 2003.

     Cost of products sold for our Yorktown refinery increased in the
first quarter of 2004 primarily due to the increase in finished product
volumes sold, offset, in part, by slightly lower average crude oil costs,
losses incurred in the first quarter of 2003 on various crude oil futures
contracts used to economically hedge Yorktown's crude oil inventories and
crude oil purchases and the liquidation of certain crude oil LIFO
inventory layers.

     In late February 2004, we began receiving supplies of acidic crude
oil under a long-term supply agreement with Statoil, which contributed to
our lower average crude oil costs.

     Yorktown's refining margins improved in the first quarter of 2004 due
to the factors previously discussed.

     Operating expenses for our Yorktown refinery increased in the first
quarter of 2004 due in part to the following:

     -  Higher maintenance costs primarily related to tank inspections and
        repairs and coker unit repairs.
     -  Higher operating costs, related in part to certain environmental
        expenditures.
     -  Higher chemical and catalyst costs, primarily related to higher
        cost catalyst required to meet more stringent sulfur reduction
        requirements.
     -  Higher payroll and related costs, due in part to the
        capitalization of certain wages in the first quarter of 2003 and
        increased group medical insurance premiums and workers
        compensation costs.

     Depreciation and amortization expense for our Yorktown refinery
increased in the first quarter of 2004 due in part to the amortization of
certain refinery turnaround costs incurred in 2003.

     FOUR CORNERS REFINERIES

     Our Four Corners refineries operated at an average throughput rate of
approximately 28,300 barrels per day in the first quarter of 2004 and
31,100 barrels per day in the first quarter of 2003. Refining margins for
the first quarter of 2004 were $8.35 per barrel and were $8.32 for the
first quarter of 2003.

                                     40


<PAGE>
     Revenues for our Four Corners refineries decreased in the first
quarter of 2004 primarily due to an 11% decrease in finished product
volumes sold, offset in part by a 4% increase in finished product selling
prices. Sales volumes were reduced because of lower crude oil supplies due
to the reasons previously discussed.

     Cost of products sold for our Four Corners refineries decreased in the
first quarter of 2004 primarily due to the decrease in finished product
volumes sold, offset in part by a 4% increase in average crude oil costs.

     Our Four Corners refining margins were relatively flat period to
period.

     Operating expenses for our Four Corners refineries increased in the
first quarter of 2004, primarily due to increased purchased fuel costs for
the Ciniza refinery related to an 18% increase in volume and higher costs.

     Depreciation and amortization expense for our Four Corners refineries
increased slightly in the first quarter of 2004.

     RETAIL GROUP

     Average gasoline and diesel margins for our retail group were $0.162
per gallon for the first quarter of 2004 and were $0.154 per gallon for
the first quarter of 2003. Gasoline and diesel fuel volumes sold for the
first quarter of 2004 increased approximately 2%. Average merchandise
margins for our retail group were 26.9% in the first quarter of 2004 and
were 30.1% in the first quarter of 2003.

     Revenues for our retail group increased in the first quarter of 2004
primarily due to a 3% increase in finished product selling prices and 2%
increase in finished product volumes sold.

     Cost of products sold for our retail group increased in the first
quarter of 2003 primarily due to a 3% increase in finished product
purchase prices and 2% increase in finished product volumes sold.

     Our retail fuel margins improved 5% in the first quarter of 2004 due
to a combination of factors, including:

     -  more effectively managing our fuel pricing, and
     -  more favorable market conditions.

     Our retail merchandise margins declined 10% in the first quarter of
2004 due to, among other things, a reduction in rebates in the first
quarter of 2004 as compared to the first quarter of 2003.

     Operating expenses for our retail group increased in the first
quarter of 2004 primarily due to higher payroll and related costs and
increased occupancy costs.

     Depreciation expense for our retail group declined in the first
quarter of 2004 primarily due to some retail assets becoming fully
depreciated.

                                     41


<PAGE>
     PHOENIX FUEL

     Gasoline and diesel fuel volumes sold by Phoenix Fuel increased by
10% in the first quarter of 2004. Average gasoline and diesel fuel margins
for Phoenix Fuel were $0.053 per gallon for the first quarter of 2004 and
were $0.047 per gallon for the first quarter of 2003.

     Revenues for Phoenix Fuel increased in the first quarter of 2004
primarily due to a 10% increase in finished product volumes sold and a 6%
increase in finished product selling prices. Finished product sales
volumes increased due to the factors previously discussed.

     Cost of products sold for Phoenix Fuel increased in the first quarter
of 2004 due to the increase in finished product volumes sold and a 6%
increase in finished product purchase prices.

     Phoenix Fuel's finished product margins increased during the first
quarter by approximately 12% as a result of the favorable market
conditions previously discussed.

     Operating expenses for Phoenix Fuel increased in the first quarter of
2004 due to higher payroll and related costs due to higher sales volumes,
and higher fuel and repair and maintenance costs due to expanded fleet
operations, also related to higher sales volumes.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES FROM CONTINUING OPERATIONS

     For the three months ended March 31, 2004, SG&A expenses increased
approximately $1,176,000 or 17% due to:

     -  Accruals for management incentive bonuses,
     -  Increased lease expense due to the sale and leaseback of our
        corporate headquarters building,
     -  Increases to our vacation pay accrual, and
     -  Accruals for costs associated with complying with the
        Sarbanes-Oxley Act.

     These increases were partially offset by a reduction in costs related
to our self-insured health plan due to improved claims experience.

     INTEREST EXPENSE FROM CONTINUING OPERATIONS

     For the three months ended March 31, 2004, interest expense decreased
approximately $798,000 or 8%. The decrease was primarily due to interest
incurred on borrowings under our revolving credit facility in the first
quarter of 2003. We had no borrowings under this facility in the first
quarter of 2004. In addition, interest expense was reduced due to the
payoff in 2003 of certain capital lease obligations and the reduction of
our mortgage loan facility principal balance.

     INCOME TAXES FROM CONTINUING OPERATIONS

     The effective tax rate for the three months ended March 31, 2004 was
approximately 44.5% and was approximately 41.4% for the three months ended
March 31, 2003. The difference in the effective rates is due to an
increase in the income tax reserve and additional state income taxes.

                                     42


<PAGE>
DISCONTINUED OPERATIONS

     Discontinued operations include the operations of some of our retail
service station/convenience stores and our travel center, which was sold
on June 19, 2003. See Note 6 to our Consolidated Financial Statements
included in Part I, Item 1 for additional information relating to these
operations.

OUTLOOK

     Overall, we believe that our current refining fundamentals are more
positive now than the same time last year. Fuel margins for our retail
group are stronger now than they were this time last year, with same store
fuel and merchandise volumes above the prior year's levels. Merchandise
margins are, however, lower than they were this time last year. Phoenix
Fuel currently continues to see growth in both wholesale and unmanned
fleet fueling volumes with stronger margins than the same time last year.
The businesses we are in, however, are very volatile and there can be no
assurance that currently existing conditions will continue for any of our
business segments.


LIQUIDITY AND CAPITAL RESOURCES

     CAPITAL STRUCTURE

     At March 31, 2004, we had long-term debt of $352,364,000, net of the
current portion of $12,454,000. At December 31, 2003 we had long-term debt
of $355,601,000, net of the current portion of $11,128,000. Both of these
amounts include:

     -  $150,000,000 of 9% Senior Subordinated Notes due 2007, and
     -  $200,000,000 of 11% Senior Subordinated Notes due 2012.

     As discussed below, we recently completed offerings of $150,000,000
of 8% Senior Subordinated Notes due 2014 and 3,283,300 shares of common
stock. The proceeds from the note offering and cash on hand are being used
to repurchase or redeem the 9% Notes, and the proceeds from the common
stock offering are being used to redeem a portion of the 11% Notes.

     We also have a $100,000,000 revolving credit facility. The credit
facility is primarily a working capital and letter of credit facility. At
March 31, 2004, we had no direct borrowings outstanding under this
facility and $37,361,000 of letters of credit outstanding. At December 31,
2003, we had no direct borrowings outstanding under this facility and
$36,961,000 of letters of credit outstanding.

     We also have a mortgage loan facility that had a balance of
$20,000,000 at March 31, 2004 and $22,000,000 at December 31, 2003. We
have given notice to the lenders and expect to prepay this facility from
cash on hand on July 14, 2004.

     At March 31, 2004, our long-term debt was 70.9% of total capital. At
December 31, 2003, it was 71.8%. Our net debt (long-term debt less cash
and cash equivalents) to total capitalization percentage at March 31,
2004, was 66.1%. At December 31, 2003, this percentage was 70.2%.

                                     43


<PAGE>
     The indentures governing our notes and our credit facility and loan
facility contain restrictive covenants and other terms and conditions that
if not maintained, if violated, or if certain conditions are met, could
result in default, affect our ability to borrow funds, make certain
payments, or engage in certain activities. A default under any of the
notes, the credit facility or the loan 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 and loan facility could proceed against
the collateral granted to them to secure that debt. If those lenders
accelerate the payment of the credit facility and loan 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, the credit
facility and the loan facility may be affected by many events beyond our
control, and we cannot provide assurance that our operating results will
be sufficient to allow us to comply with the covenants.

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

     We presently have senior subordinated ratings of "B3" from Moody's
Investor Services and "B-" from Standard & Poor's. Moody's Investor
Services recently confirmed its "B3" rating. Standard and Poor's also
reaffirmed its ratings but revised the outlook to positive from negative.

     As is discussed in more detail in Note 13 to our Consolidated
Financial Statements included in Part I, Item 1, we are in the process of
completing a refinancing of a portion of our long-term debt. As part of
the refinancing, we have done, or are in the process of doing, the
following:

     -  A tender offer and consent solicitation of our 9% senior
        subordinated notes due 2007.
     -  A redemption of the 9% notes not tendered in the tender offer.
     -  The sale of $150,000,000 of 8% senior subordinated notes due 2014.
     -  The sale of 3,283,300 shares of our common stock.
     -  The prepayment of the outstanding balance on our mortgage loan
        facility.
     -  The renegotiation of our revolving credit facility.

     This refinancing should reduce our annual interest expense by
approximately $10,600,000 in comparison to the 2003 level, assuming no
future borrowings on our revolving credit facility.

     In connection with these transactions, we incurred certain costs
which will be expensed in the second quarter of 2004, along with the
write-off of previously deferred financing costs and original issue
discounts. When we prepay our mortgage loan in July 2004, we will write-
off additional deferred financing costs. We estimate these costs and
write-offs at between $15,000,000 and $17,000,000.

                                     44


<PAGE>
     We also incurred additional costs that will be deferred and amortized
over the term of the 8% Notes.

     We have not yet completed the renegotiation of our revolving credit
facility and do not yet know the total cost of renegotiating the facility.
We do not, however, expect it to be material.

     CASH FLOW FROM OPERATIONS

     Our operating cash flows increased by $18,525,000 for the three
months ended March 31, 2004 compared to the three months ended March 31,
2003. This resulted primarily from increases in the first quarter of 2004
in cash provided by working capital items and an increase in net earnings
before depreciation and amortization, amortization of financing costs,
deferred income taxes, and deferred crude oil purchase discounts.

     WORKING CAPITAL

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

     Working capital at March 31, 2004 consisted of current assets of
$275,687,000 and current liabilities of $170,105,000, or a current ratio
of 1.62:1. At December 31, 2003, the current ratio was 1.63:1, with
current assets of $251,807,000 and current liabilities of $154,408,000.

     Current assets increased in the first quarter of 2004 by $23,880,000,
primarily due to increases in cash and cash equivalents and accounts
receivable. These increases were offset, in part, by decreases in
inventories.

     Accounts receivable increased in the first quarter of 2004 primarily
due to higher trade receivables, due in part to higher finished product
selling prices.

     Inventories decreased in the first quarter of 2004 primarily due to:

     -  Decreases in onsite crude oil volumes at our Yorktown refinery,
        and
     -  Decreases in Four Corners, Phoenix Fuel and terminal refined
        product volumes.

     These decreases were offset, in part, by:

     -  Increases in crude oil and refined product prices,
     -  Increases in crude oil volumes at the Four Corners refineries, and
     -  Increases in refined product volumes at Yorktown.

                                     45


<PAGE>
     Current liabilities increased in the first quarter of 2004 by
$15,697,000, primarily due to increases in accounts payable and accrued
expenses. Accounts payable increased in the first quarter of 2004
primarily due to higher raw material and finished product costs.

     Accrued expenses increased in the first quarter of 2004 primarily as
a result of:

     -  Higher fuel taxes payable,
     -  Higher accrued interest payable,
     -  Higher accruals for payroll and related costs, and
     -  Higher income tax accruals.

     These increases were offset in part by reductions in certain accruals
due to the payment of management incentive and other bonuses and 401(k)
matching and discretionary contributions.

     CAPITAL EXPENDITURES AND RESOURCES

     Net cash used in investing activities for capital expenditures
totaled approximately $3,213,000 for the three months ended March 31, 2004
and $5,272,000 for the three months ended March 31, 2003. Expenditures for
2004 primarily were for operational and environmental projects for the
refineries, Phoenix Fuel and retail operations. Expenditures for 2003
primarily were for turnaround expenditures at the Yorktown refinery and
operational and environmental projects for the refineries and retail
operations.

     We received proceeds of approximately $560,000 from the sale of
property, plant and equipment and other assets in the first quarter of
2004 and $2,608,000 in the first quarter of 2003. Proceeds received in
2004 primarily were from the sale of one closed service
station/convenience store. Proceeds received in 2003 were primarily from
the sale of three service station/convenience stores.

     In the second quarter of 2004, we sold 40 acres of vacant land known
as the Jomax property for approximately $5,412,000, net of expenses. In
addition, we also sold two operating service station/convenience stores
for approximately $684,000, net of expenses.

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

     As part of the Yorktown acquisition, we agreed to pay earn-out
payments, up to a maximum of $25,000,000, to the sellers, beginning in
2003 and concluding at the end of 2005 based upon certain market value
factors. For the three months ended March 31, 2004, we paid $4,049,000 in
earn-outs under the purchase agreement. In the first quarter of 2003, we
made similar payments of $3,986,000. Total earn-out payments through March
31, 2004 were $12,903,000.


                                     46


<PAGE>
     On April 8, 2004, we had a fire in the alkylation unit at our Ciniza
refinery, requiring us to temporarily shutdown all of the operating units
at the refinery. See Note 13 to our Consolidated Financial Statements
included in Part I, Item 1 for a further discussion of this matter.

     The Ciniza refinery was scheduled to commence a major repair and
upgrade shutdown (known as a "turnaround") on April 17, 2004. As a result
of the fire discussed above, the turnaround was accelerated. We have
completed the turnaround. See Note 13 to our Consolidated Financial
Statements in Part I, Item 1 for a further discussion of this matter.

     We continue to investigate other capital improvements to our existing
facilities. The amount of capital projects that are actually undertaken in
2004 will depend on, among other things, general business conditions and
results of operations.

     DIVIDENDS

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

     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.

     In the first quarter of 2003, we entered into various crude oil
futures contracts in order to economically hedge crude oil inventories and
purchases for the Yorktown refinery operations. For the three months ended
March 31, 2003, we recognized losses on these contracts of approximately
$1,433,000 in cost of products sold. These transactions did not qualify
for hedge accounting in accordance with SFAS No. 133 "Accounting for
Derivative Instruments and Hedging Activities," as amended, and
accordingly were marked to market each month. There were no similar
transactions in the first quarter of 2004, and there were no open crude
oil futures contracts or other commodity derivative contracts at March 31,
2004.

     Our credit facility is floating-rate debt tied to various short-term
indices. As a result, our annual interest costs associated with this debt
may fluctuate. At March 31, 2004, there were no direct borrowings
outstanding under this facility.


                                     47


<PAGE>
     Our loan facility is floating-rate debt tied to various short-term
indices. As a result, our annual interest costs associated with this debt
may fluctuate. At March 31, 2004, there was $20,000,000 outstanding under
this facility. The potential increase in annual interest expense from a
hypothetical 10% adverse change in interest rates on these borrowings at
March 31, 2004, would be approximately $20,500. We expect to repay the
outstanding balance of the loan facility on July 14, 2004.

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

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

     ENVIRONMENTAL, HEALTH AND SAFETY

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

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

     Future expenditures related to compliance with environmental, health
and safety laws and regulations, the investigation and remediation of
contamination, and the defense or settlement of governmental or private
party claims and lawsuits cannot be reasonably quantified in many



                                     48


<PAGE>
circumstances for various reasons. These reasons include the speculative
nature of remediation and clean up cost estimates and methods, imprecise
and conflicting data regarding the hazardous nature of various types of
substances, the number of other potentially responsible parties involved,
various defenses that may be available to us, and changing environmental,
health and safety laws, regulations, and their respective interpretations.
We cannot provide assurance that compliance with such laws or regulations,
such investigations or cleanups, or such enforcement proceedings or
private-party claims will not have a material adverse effect on our
business, financial condition or results of operations.

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

     -  the installation and operation of refinery equipment, pollution
        control systems and other equipment not currently possessed by us;
     -  the acquisition or modification of permits applicable to our
        activities; and
     -  the initiation or modification of clean up activities.

     OTHER

     The Occupational Health and Safety Bureau of the New Mexico
Environment Department has issued safety regulations that could require us
to incur additional expenses for security at our retail stores. For a
detailed discussion of this matter, see Note 13 to our Consolidated
Financial Statements, captioned "Subsequent Events".

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

     As a result of the declining production of crude oil in the Four
Corners area in recent years, we have not been able to cost-effectively
obtain sufficient amounts of crude oil to operate our Four Corners
refineries at full capacity. Crude oil utilization rates for our Four
Corners refineries have declined from approximately 67% for 2003 to
approximately 60% for the first three months of 2004. Our current



                                     49


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

     -  evaluating potentially economic sources of crude oil produced
        outside the Four Corners area, including ways to reduce raw
        material transportation costs to our refineries,
     -  evaluating ways to encourage further production in the Four
        Corners area,
     -  changes in operation/configuration of equipment at one or both
        refineries to further the integration of the two refineries, and
        reduce fixed costs, and
     -  with sufficient further decline in raw material supply, the
        temporary, partial or permanent discontinuance of operations at
        one or both refineries.

     None of these options, however, may prove to be economically viable.
We cannot assure you that the Four Corners crude oil supply for our Ciniza
and Bloomfield refineries will continue to be available at all or on
acceptable terms for the long term. 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.

     We are aware of a number of actions, proposals or industry
discussions regarding product pipeline projects that could impact portions
of our marketing areas. The completion of some or all of these projects
would result in increased competition by increasing the amount of refined
products potentially available in our markets, as well as improving
competitor access to these areas. It also could result in new
opportunities for us, as we are a net purchaser of refined products in
some of these areas. We have been informed that the Longhorn Pipeline
project that runs from Houston, Texas to El Paso, Texas and connects the
Chevron pipeline to the Albuquerque area and to the Kinder-Morgan pipeline
to the Phoenix and Tucson, Arizona markets will begin filling the pipeline
in May 2004 and has a planned starting date of June 2004. In view of past
postponements of previously announced start-up dates, we do not know if
the Longhorn Pipeline will begin operation in June 2004 or at all.

     Our refining activities are conducted at our two refinery locations
in New Mexico and the Yorktown refinery in Virginia. These refineries
constitute a significant portion of our operating assets, and the two New
Mexico refineries supply a significant portion of our retail operations.
As a result, our operations would be significantly interrupted 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.

                                     50


<PAGE>
     FORWARD-LOOKING STATEMENTS

     This report includes forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities and
Exchange Act of 1934. These statements are included throughout this
report, including in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations." These
statements relate to projections of capital expenditures and other
financial items. These statements also relate to our business strategy,
goals and expectations concerning our market position, future operations,
acquisitions, dispositions, margins, profitability, liquidity and capital
resources. We have used the words "believe," "expect," "anticipate,"
"estimate," "could," "plan," "intend," "may," "project," "predict," "will"
and similar terms and phrases to identify forward-looking statements in
this report.

     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.

     Actual results and trends in the future may differ materially
depending on a variety of important factors. These important factors
include the following:

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

     -  our ability to negotiate new crude oil supply contracts;

     -  the risk that our long-term crude oil supply agreement with
        Statoil will not supply a significant portion of the crude oil
        needs of our Yorktown refinery over the term of the agreement, and
        will not reduce our crude oil costs, improve our high-value
        product output, contribute significantly to higher earnings,
        improve our competitiveness, or reduce the impact of crude oil
        markets' pricing volatility;

     -  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;

     -  competitive pressures from existing competitors and new entrants,
        including the potential effects of various pipeline projects and
        various actions that have been undertaken to increase the supply
        of refined products to El Paso, Texas;

     -  volatility in the difference, or spread, between market prices for
        refined products and crude oil and other feedstocks;


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<PAGE>
     -  the risk that our operations will not remain competitive and
        realize acceptable sales volumes and margins in those markets
        where they currently do so;

     -  our ability to adequately control operating expenses, including
        the cost to comply with the Sarbanes-Oxley Act, and non-
        essential capital expenditures;

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

     -  state, federal or tribal legislation or regulation, or findings by
        a regulator with respect to existing operations, including the
        impact of government-mandated specifications for gasoline and
        diesel fuel on our operations;

     -  unplanned or extended shutdowns in refinery operations;

     -  the risk that we will not be able to repair and start-up the
        alkylation unit at the Ciniza refinery before the end of June.

     -  the risk that we will not remain in compliance with covenants, and
        other terms and conditions, contained in our notes, credit
        facility and loan 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; 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 entity by the previous statements. Forward-looking statements we
make represent our judgment on the dates such statements are made. We
assume no obligation to update any information contained in this report or
to publicly release the results of any revisions to any forward-looking
statements to reflect events or circumstances that occur, or that we
become aware of, after the date of this report.

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

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


ITEM 4. CONTROLS AND PROCEDURES

     (a)  Evaluation of Disclosure Controls and Procedures

          The Company's management, with the participation of the
Company's Chief Executive Officer and Chief Financial Officer, evaluated
the effectiveness of the Company's 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 the
Company's 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

          During the first quarter of 2004, Deloitte & Touche informed us
that they had identified two reportable conditions in the design of our
internal controls. The conditions, which were not material weaknesses,
were related to our corporate accounting review process and our
information systems.

          In respect to our corporate accounting review processes, certain
analyses are prepared outside of our corporate accounting department, and
are provided to our corporate accounting department as the basis for
significant accounting adjustments or account balances. Certain audit
adjustments were necessary to correctly state accounts related to vacation
pay and loan fee amortization. Other analyses required extensive review of
amounts recorded. We have implemented and continue to implement corrective
actions and organizational changes to correct this condition.

          With regard to our information systems, we have been advised to
improve our general computer controls related to program changes and
access security. In addition, we have been advised to prepare and
implement a plan to replace our VAX processing platform, which processes
invoicing, crude leasing accounting, drivers' payroll and tank inventory
because it is no longer supported by the vendor and poses processing
continuity risks. We believe we have mitigating controls and procedures in
place, have implemented password policies and have plans for the
remediation of VAX issues on a short-term basis. In addition, we expect to
implement a new processing platform.

           We do not yet know whether the mitigating controls and
procedures and the corrective actions and organizational changes will be
adequate.



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<PAGE>
                                PART II

                           OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     We are a party to ordinary routine litigation incidental to our
business. We also incorporate by reference the information regarding
contingencies in Notes 12 and 13 to the Consolidated Financial Statements
set forth in Part I, Item 1, and the discussion of certain contingencies
contained in Part I, Item 2, under the heading "Liquidity and Capital
Resources - Other."


ITEM 2.  CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF
         EQUITY SECURITIES

     On April 13, 2004, we made an offer to purchase for cash all
$150,000,000 aggregate principal amount outstanding of our 9% senior
subordinated notes due 2007 (the "9% notes"). The offer included a consent
solicitation for amendments to the indenture governing the notes. In the
consent solicitation, we asked the holders of the notes to consent to
proposed amendments to the indenture governing the notes to eliminate
substantially all of the restrictive covenants in the indenture. The
consent solicitation expired on April 26, 2004, and on that date we had
received sufficient consents to make the proposed amendments. As a result,
on April 26, 2004, we executed a supplemental indenture implementing the
proposed amendments. The amendments became operative on May 3, 2004, when
we repurchased the notes tendered through that date and paid the
consideration for the consents.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Our annual meeting of stockholders was held on April 29, 2004.
Proxies for the meeting were solicited under Regulation 14A. There were no
matters submitted to a vote of security holders other than the election of
two directors and approval of auditors as specified in our Proxy
Statement. There was no solicitation in opposition to management's
nominees to the Board of Directors.

     Larry L. DeRoin was elected as a director of the Company. The vote
was as follows:

Shares Voted "For"   Shares Voted "Withholding"
------------------   --------------------------
    7,333,786                215,884

     Richard T. Kalen, Jr. was elected as a director of the Company. The
vote was as follows:

Shares Voted "For"   Shares Voted "Withholding"
------------------   --------------------------
    7,171,949                377,721


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<PAGE>
     Deloitte & Touche LLP was ratified as independent auditors for the
Company for the year ending December 31, 2004. The vote was as follows:

Shares Voted "For"     Shares Voted "Against"   Shares Voted "Abstaining"
------------------     ----------------------   -------------------------
    7,079,378                 17,838                    452,454

     In addition to the two directors elected above, other members of our
Board of Directors include Fred L. Holliger, Chairman, Anthony J.
Bernitsky, Brooks J. Klimley, George M. Rapport and Donald M. Wilkinson.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits:

      4.1   Supplemental Indenture to Indenture dated as of August 26,
            1997 for $150,000,000 9% Senior Subordinated Notes due 2007,
            dated as of February 10, 1998, between DeGuelle Oil Company,
            as additional Subsidiary Guarantor, and The Bank of New York,
            as Trustee. Incorporated by reference to Exhibit 4.4 to
            Amendment No. 3 to the Company's Registration Statement on
            Form S-3 under the Securities Act of 1933 as filed April 23,
            2004, File No. 333-113590.

      4.2   Supplemental Indenture to Indenture dated as of August 26,
            1997 for $150,000,000 9% Senior Subordinated Notes due 2007,
            dated as of December 1, 2000, between Giant Pipeline Company,
            as additional Subsidiary Guarantor, and The Bank of New York,
            as Trustee. Incorporated by reference to Exhibit 4.5 to
            Amendment No. 3 to the Company's Registration Statement on
            Form S-3 under the Securities Act of 1933 as filed April 23,
            2004, File No. 333-113590.

      4.3   Supplemental Indenture, dated as of April 2, 2002, among Giant
            Industries, Inc., the Subsidiary Guarantors and The Bank of
            New York relating to the 9% Senior Subordinated Notes due
            2007. Incorporated by reference to Exhibit 4.6 to Amendment
            No. 3 to the Company's Registration Statement on Form S-3
            under the Securities Act of 1933 as filed April 23, 2004, File
            No. 333-113590.

      4.4   Supplemental Indenture to Indenture dated as of August 26,
            1997 for $150,000,000 9% Senior Subordinated Notes due 2007,
            dated as of May 10, 2002, among Giant Yorktown, Inc. and Giant
            Yorktown Holding Company, as additional Subsidiary Guarantors,
            and The Bank of New York, as Trustee. Incorporated by
            reference to Exhibit 4.7 to Amendment No. 3 to the Company's
            Registration Statement on Form S-3 under the Securities Act of
            1933 as filed April 23, 2004, File No. 333-113590.




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<PAGE>
      4.5   Supplemental Indenture dated as of April 26, 2004, among Giant
            Industries, Inc., the Subsidiary Guarantors listed as
            signatories thereto, and the Bank of New York, as Trustee.
            Incorporated by reference to Exhibit 99.1 to the Company's
            Current Report on Form 8-K, dated April 28, 2004, File No.
            1-10398.

      4.6*  Indenture, dated as of May 3, 2004, among Giant, as Issuer,
            the Subsidiary Guarantors, as guarantors, and The Bank of New
            York, as Trustee, Providing for Issuance of Notes in Series.

      4.7*  Supplemental Indenture, dated as of May 3, 2004, among Giant,
            as Issuer, the Subsidiary Guarantors, as guarantors, and The
            Bank of New York, as Trustee, relating to $150,000,000 of 8%
            Senior Subordinated Notes due 2014.

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

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

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

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

     *Filed herewith.

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

     (i)   On February 9, 2004, we filed a Form 8-K dated February 9,
           2004, containing a press release announcing the signing of a
           crude oil supply agreement with Statoil Marketing and Trading
           (USA), Inc.

     (ii)  On March 8, 2004, we filed a Form 8-K dated March 8, 2004,
           containing a press release detailing our earnings for the three
           and twelve months ended December 31, 2003.

     (iii) On March 15, 2004, we filed a Form 8-K dated March 15, 2004,
           containing a press release announcing the filing of a Form S-3
           universal shelf registration with the Securities and Exchange
           Commission.

     (iv)  On April 8, 2004, we filed a Form 8-K dated April 8, 2004,
           containing a press release announcing that a fire had occurred
           at our Ciniza refinery.


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<PAGE>
     (v)   On April 29, 2004, we filed a Form 8-K dated April 29, 2004,
           containing (1) a supplemental indenture to our $150,000,000
           senior subordinated notes due 2007, (2) a press release about
           our tender offer and consent solicitation, (3) a press release
           about the pricing of our common stock offering, and (4) a press
           release about the pricing of our offering of 8% senior
           subordinated notes due 2014.

     (vi)  On May 13, 2004, we filed a Form 8-K dated May 13, 2004,
           containing a press release detailing our earnings for the three
           months ended March 31, 2004.










































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<PAGE>
                                SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report on Form 10-Q for the quarter
ended March 31, 2004 to be signed on its behalf by the undersigned
thereunto duly authorized.

                         GIANT INDUSTRIES, INC.


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

Date: May 14, 2004




































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